The Next Tycoon of Teen

As the co-inventor of DirectX, Eric Engstrom helped transform the way people use PCs. Now he's trying to do the same thing for the way teen-agers use wireless.

It's hard to imagine a company further removed from Microsoft than Wildseed, a tiny wireless data start-up. In a lot of ways, though, former Microsoft executive-turned-Wildseed CEO Eric Engstrom is trying to pull off a repeat performance.

Microsoft's DirectX operating system, which Engstrom is credited with co-fathering during his Microsoft tenure, turned Windows from a work tool into a fun multimedia platform. Now Engstrom wants to turn the stodgy mobile phone into a multimedia and Internet device. While others have tried to do the same thing, Engstrom said Wildseed plans to make one that people will actually want to use.

As if that weren't challenge enough, Engstrom also wants to push his new wireless data technology on youth, a demographic characterized by its fickleness and financial stinginess.

“Look at youth today and how savvy they are,” Engstrom said. “Sure, kids will buy CDs, but they are more likely to download MP3s from the Internet for free. We have to find something really compelling to get them to pay for wireless data.”

Wildseed — formerly known as GiTWiT — is approaching the wireless data sector with the novel idea of making the phone fit the user experience instead of forcing the user to experience content within the restricted confines of today's phones. Wildseed's basic technology is the “smart skin,” a highly adaptable taco-shaped shell designed to fit over a specially made handset. The skin incorporates both hardware and software, which syncs up with the handset's wireless data connection and microbrowser.

But most important, each skin is intended to have a unique brand of content and applications related to that content. Gaming skins would have controllers built into their surfaces and would automatically load bookmarks to online gaming sites and chat rooms. A celebrity-branded skin would include ring tones and screen savers as well as links to fan sites. The possibilities and permutations are endless, Engstrom said.

“Nike does the same thing,” he said. “They make essentially the same shoe across whole product lines. They have the same soles but are all different styles and colors. Among all those choices is a shoe that someone wants. It's a brilliant business model.”

It's a far cry from developing multimedia drivers for an operating system. The whole business hinges on wireless carriers agreeing to sell the handsets and vendors agreeing to manufacture them. Engstrom is confident that carriers will come over and that vendors will follow once they get the working skins in front of them. The skins will be sold independently of the carriers, but they still will collect a portion of the revenue on every skin sold.

In addition, the carriers also get to collect the revenue from the subscription to the wireless Internet necessary to use the skin. The only commitment they have to make is to sell the handsets, and the rest takes care of itself, Engstrom said.

Wildseed was founded as GiTWiT two years ago with seed funding from Ignition Partners, a Seattle area venture capital group composed of former Microsoft executives and wireless bigwigs. Engstrom had just come off eight years at Microsoft, supervising DirectX and its numerous offspring and caring for MSN in its troubled adolescence. Engstrom decided he wanted a new challenge and started talking to his former Microsoft colleagues at Ignition, which was looking to invest in numerous wireless ventures. Ignition partner Steve Hooper, former CEO of Nextlink Communications and AT&T Wireless, said GiTWiT was more than another over-hyped wireless data play that lacked focus.

“They wanted a software genius and someone who really understood the youth market and what it wanted,” Hooper said. “[Engstrom] fit both profiles.”

Even Hooper, who has witnessed much transformation in the wireless industry, was shocked to see the idea that emerged a year later. But he said he wholly embraces the smart skins concept and believes it has the potential to become a dominant technology in the wireless market.

But any analyst can tell you that youth is a hard market to crack, and half-hearted attempts at hip branding typically don't work. So in a mature market, how do you market to the immature?

That's a question all carriers have been grappling with for the last year or more as penetration in the core adult consumer and business base peaks. It's not that younger customers aren't buying mobile phones and burning up minutes. They just aren't doing it in very predictable ways — at least ways that carriers can tap into.

“When you're marketing to this age group you run into problems,” said Michael Doherty, a senior wireless analyst for Ovum. “As soon as you figure out what's cool, it isn't cool anymore. [Wildseed] appears to be occupying an interesting little niche area. It makes sense, but they have to be careful. If I'm branding a skin with Britney Spears' image, I'm paying X millions of dollars for the rights. I had better be sure it will be successful.”

By all accounts, kids are early adopters — the ones who don't frown on new technology and who drive innovative uses of the stuff. But youth aren't diving into the wireless Internet — at least not in the U.S. In fact, almost all U.S. 2G wireless data offerings have been a flop, and the ones that have seen success — like Blackberry mobile messaging — aren't focused at youth at all.

The problem is that wireless data offerings targeted at youth are in the same handsets and browsers targeted at business users. In fact, before Wildseed began its smart skin project, the company was developing wireless Web content. Its founders abandoned that effort after realizing the limitations of today's business-oriented devices. Engstrom drew parallels to Windows, which before DirectX was simply a work tool. By creating DirectX, Windows all of sudden could be used for activities other than work, opening the operating system to a wealth of gaming, video and multimedia applications. The same thing can be done with the mobile handset, he said.

Wildseed's first skins and handsets will be available later this year, and the company plans to make several significant announcements over the next few months. Engstrom, however, is keeping quiet about the company's talks with carriers and the content of its first skins.

While it will release the first skins itself, Wildseed eventually will form partnerships with major consumer corporations and organizations for branding. The result could be hundreds of different skins, tailored not only to different trends but to different regions. Engstrom admitted that the youth market may not find every one of them appealing and that they will go in and out of vogue as trends change, but he said he is counting on that type of schizophrenic behavior to keep the company going.

“I love it when people tell me that young people are too fickle to market to,” Engstrom said. “Their fickleness is the whole basis of our business.”