Sunday, December 27, 2009

Year in Review: Smart phones - with apps - rule

Led by the iPhone and the BlackBerry family of devices, the smart phone market expanded beyond its roots as a corporate tool or early-adopter plaything.

A ChangeWave Research survey of consumers in September found that 39 percent owned a smart phone and 11 percent were planning to buy one in the next 90 days. Another study by the NPD Group found that smart phones represented 28 percent of all cell phone purchases in the second quarter, up from 12 percent at the end of 2007.

For many cell phone users now, the issue is not if they will upgrade to a smart phone but when.

"Smart phones were just a gee-whiz gadget a few years ago, but now you have a herding situation where people are asking each other, 'What kind of smart phone do you have?' " said J. Gerry Purdy, chief mobile analyst for research firm Frost & Sullivan.

This shift has touched off a frenzy among mobile software developers, hardware manufacturers and cellular carriers, all eager to cash in.

Computer manufacturers such as Dell and Acer joined the fray, releasing smart phones in 2009. U.S. market leader Research in Motion Ltd. cranked out even more BlackBerry devices, including its second touch-screen model, the Storm 2.

Established players made aggressive bids to turn around their businesses using flashy handsets sporting new operating systems. Palm released its webOS operating system with the Palm Pre in June. Motorola produced the Cliq and the Droid, which both run on Google's Android operating system.

Google on board

Android had one of the largest growth spurts this year, going from one device in 2008 to eight handsets available in the United States this year. A Google-branded device, the Nexus One, is reportedly set to hit the market in early January. Google's Matt Waddell, chief of staff for mobile and developer products, said Google developed Android because the smart phone has become a key access point for Web information.

But he said smart phones - with their array of sensors and tools like GPS, a compass, a camera and Internet connections - enable a new way of interacting with and searching your environment.

"The smart phone is the most personal of computers," Waddell said. "When you combine that with a rich set of sensors on the device, you can do things that you couldn't do on the phone before."

Cell phone operators also are on board with smart phones, expanding the number of devices they carry. Verizon Wireless joined T-Mobile and Sprint in supporting Android, which is fast becoming a contender in the smart phone race.

AT&T, which boasts the most smart phones of any carrier, said about 42 percent of its subscribers in the third quarter owned smart phones, up from 13 percent at the end of 2007 and 27 percent at the end of last year.

Terry Stenzel, AT&T vice president and general manager for Northern California/Reno, said users have embraced the ease of use and utility of smart phones. He credits Apple for leading users into the smart phone market and convincing them they have the power of a computer in their pocket.

"Apple took the fear away from the device, and when you take the fear away, people want to use it and they will use it," Stenzel said.

Stenzel said AT&T's network has experienced a 5,000 percent increase in data usage in the past two years. And as of the third quarter, 60 percent of connections to AT&T's Wi-Fi network are made via smart phones instead of laptops as they traditionally have been.

New hardware was only part of the equation for smart phones in 2009. A key factor was also the rise of mobile applications, made popular through Apple's App Store.

Though the App Store opened in July of last year, it was in 2009 when the store - and the whole notion of buying apps for phones - gained critical momentum, fueled by Apple's ubiquitous "There's an app for that" advertising campaign.

By mid-January, there were 15,000 apps with 500 million downloads recorded. In September, Apple posted its 2 billionth download, and by November, there were more than 100,000 apps in the store.

"The iPhone was a great device, but it was the store and the software development kit that really changed things," said Cassidy Lackey, vice president of mobile app developer Handmark. "Now everyone is playing catch-up with the store experience, and they're all fighting for developers."

Most competing platforms rolled out their answer to the App Store in 2009. BlackBerry created App World, while Microsoft introduced Windows Marketplace for Mobile. Nokia opened its Ovi store, joining the Android Market, which started in October 2008.

Huge market

The stores have united hardware and software in a way that's never been done before, giving customers easy access to a wealth of programs for their phones. It's also helped softwaremakers boost their revenue. Gamemaker Tapulous of Palo Alto reported recently that it's making nearly $1 million a month from sales of its iPhone applications.

Smart phones also got a boost from the rise of social networking. According to Forrester Research, 65 million people now access Facebook via a mobile device, compared with 8 million a year ago.

"Social media and texting require a smart phone," said Jack Gold, an analyst with J. Gold Associates. "You can't do that on dumb phone. And because people are so dependent on those things, that's why people have moved to these smart devices."

Stenzel, the AT&T executive, said it will be only a matter of time before people stop calling them smart phones altogether.

"There won't be anything else, because it will be what everyone wants and needs," he said. "If you don't have a smart phone, you won't be in the mainstream."

E-mail Ryan Kim at rkim@sfchronicle.com.

This article appeared on page DC - 1 of the San Francisco Chronicle

I feel I should sub-title this post "Ben Got An iPhone for Xmas"

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