VC Predictions for Cell Phones in 2010: Virtual Revenues and App Store Wars

mobile 2010

Predictions about how industries will progress are two a penny, but when they come from Venture Capitalists rather than analysts, and concern the multi-billion dollar cell phone industry, they tend to land with a splash. Early-stage VC firm Lightspeed Venture Partners (LSVP) has just spun out four key ways it predicts that the mobile sector will develop in 2010—and we can't fault the reasoning. Here they are, summarized.

Virtual Goods Make Real Cash

Virtual items sold for real cash is an accelerating phenomenon on the desktop—but its only emergent in the mobile apps world. LSVP is predicting that virtual goods will make a "profound impact on the mobile-app" start-up world. That's because developers can sell apps to smartphone users for free, and then sell them virtual add-ins later for nominal fees—the app marketplace ecosystem makes it easy for the customer to hand over the cash. Futurist Mark Anderson made a similar prediction for 2010, saying that mobile apps and content will drive micropayments from a niche to a mainstream play

Smartphone Apps Sold Direct to Consumers

LSVP notes that despite the rocketing success of Apple's App Store, no one else has made much of a dent in the smartphone app sales market. And Apple's closed-minded approach to admitting apps into its store, hand-managing the apps through the process and selling them itself to its legion of tied-in consumers.

The prediction is that other app stores will begin to catch up with Apple's lead, and eventually the business model may evolve away from a closed store-front system and into a direct-to-consumer model, copying Web-app world.

Someone Buys Palm

Palm tried its best to upset the smartphone world with the Palm Pre, and the later Pixi. For a moment, it looked like Palm's star was back on the ascendant. But the Pre has failed to really make an impact, being beaten down by the still-soaring iPhone and the arrival of Android phone after Android phone.

With slightly weak hardware, its undeniable that the Pre and Pixi's real strength is the clever WebOS that powers them. And that's why LSVP predicts that a big company like Nokia or RIM—both accomplished hardware makers, being slowly moved out of the top end of the smartphone market by Apple—will buy Palm. The resulting machines could be a fabulous synergy of hardware and software that might revolutionize the smartphone world. Again.

Enterprise Users Get App-Crazy

The final prediction is an extension of the fact that more and more business users are adopting the iPhone instead of the BlackBerry for work communications. The iPhone is fun, the BlackBerry—on the whole—is not. Why not have a business phone that's both fun and business-savvy? [eds note: the mullet-phone?] This is where apps come into play. They transform the iPhone, and mark it as different from BlackBerrys, where the data-over-network flow is either for voice calls or email, in the main. An iPhone, with its hundreds of thousands of apps, could be a potent business tool that lets you read email, edit documents, make VOIP calls, Webcast video to a remote team and so on. With new technologies in new phones, this trend is likely to explode in 2010.

It all sounds very plausible, and in one way or another it tallies with predictions you've seen here before. It even concentrates on smartphones, and reflects the inexorable shift away from dumbphones. But is that all there is to say? Given the surprising revelations in the cell phone market this year, how do you think things will go next year? Answers in the comments...

[LSVP]

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