Cashing in on cell phone applications
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With the development of 3G technology in the world's biggest cell phone market, Chinese telecom operators and cell phone manufacturers are competing for the tech-savvy users and software developers alike.
Thirty-five-year-old Zhu Lianxing is a prime example. When the founder of 139.me, a leading software development team in Baoding, a prefecture-level city in Hebei Province, went to an Apple's iPhone Developer Program in June 2008, there were only about 1,500 software applications at the time, he said.
"I realized it might be an opportunity," he said in his current office located in the Zhongguancun area of Beijing.
Zhu, who graduated from Hebei University, formed a team of four developers when he came back from Apple's iPhone program and still remembers their first work, Love Forecaster. "It's a simple application used for predicting women's menstrual cycles," he said.
Since then Zhu's team has developed more than 30 applications from games to interpreters such as Colorful Aquarium, Water Cube and Abc Interpreter.
Feeding fish and a business
"Our most popular work is Colorful Aquarium, a fish feeding simulator on iPhone and iTouch. It was released last June and has had more than 1.5 million downloads around the world," Zhu said. "We recently designed a new version for iPad, which will be officially released this Saturday."
His team has grown from four to more than 20 full-time staff, and Zhu moved his headquarters from Baoding to Beijing January 1.
"There are more software talents and business opportunities in Beijing. It's a new start," he said.
Zhu said their team's income comes mainly from application sales at the online Apple App Store. Apple keeps 30 percent of its business revenues and gives the rest to developers.
"For example, we charge $3 for Colorful Aquarium, and we can get $2 for each download," he said.
Zhu said most of their earnings come from the United States and Europe. "We design applications in accordance with foreign customers' tastes, because downloads from China account for less than 1 percent of the total," he said.
The competition has become fiercer with a growing number of application developers. Currently there are more than 150,000 applications sold through Apple App.
Zhu said they focus more on analyzing Western customers' interests. "The money isn't coming as easily as before. We need to attract it from an ocean of competing applications."
Biting into the Apple
Thanks to millions of developers like Zhu, Apple grabbed nearly one third of the $4.2 billion spent on mobile applications in 2009, according to figures from Gartner, a US technology research firm.
Mobile phone giants such as Nokia and Samsung as well as Chinese telecom operators also want to emulate Apple's success in the world's largest cell phone market.
China Mobile was the first to build its application store, Mobile Market in August, followed by China Telecom's eStore March 17 and China Unicom's Unistore later this year.
"The voice sector is becoming less significant for the operator's profits, and we are optimistic about value-added services and data services in the era of 3G networking," said Wang Jianzhou, president of China Mobile on the sidelines of the annual session of the Chinese People's Political Consultative Conference in March.
Nokia's Ovi Store started a beta testing phase in China last October, and then the company announced the launch of a joint mobile phone application store MM-Ovi with China Mobile March 25, the first joint-brand mobile application store in the world. Samsung also introduced its application store to China March 19.
"Releasing application stores can stimulate handset sales because future competition relies more on handset services," said Zhu.
Zhang Yanan, an analyst from Analysys International, said Chinese application stores are still in their primary stages.
"China Mobile began to charge users 15 yuan ($2) for some applications in November, and it follows Apple's 30/70 revenue share, but other application stores are free at the moment in order to attract users," she said.
The number of Chinese smart phone users will top 100 million this year, according to Shen Bin, vice president of Motorola, but most are not used to paying for applications.
In Zhu's eyes, free isn' t necessarily bad. "For some applications, we release a free version to attract users, then about 5 percent of them will pay for the pay version," he said.
Training new talent
With the increasing demand for application developers, Zhu formed an ambitious plan to cultivate tech-savvy talents.
"I get many requests from Lenovo, China Mobile and China Telecom, and they asked me to design applications for their stores," he said. "Then I came up with an idea, why not use our experiences to train more talents?"
Zhu set up a training program, 3G Dreams Work, which provides 3-6 months of non-free training programs for software professionals. "After they finish the courses, they can join us or sign outsourcing contracts with our company and take over projects."
Zhu said they have recruited over 10 university students in Hebei Province, and has launched the program in Beijing April 1.
Zhu isn't the only one to see this opportunity. Wang Bo, CEO of iBokan Technology, founded iBokan Wisdom, China's first iPhone 3G-application training school, in August, and now its training programs cover almost all the smart phones' operational systems available on the market.
Piracy problem
For software developers and application store operators alike, China's ongoing piracy problem has continued to cause problems and affect their revenues, said a report released by technology analytics company 24/7 Wall St in January.
"The privacy problem is more highlighted in China, as Chinese users have used free software for years," said Zhu. He suggested developers charge affordable prices, and application stores pay more to take anti-piracy measures.
Zhang from Analysys International provided another idea. "Applications can be free for users to download, but developers and stores can win profits from inserting advertisements."
