Mobile App Mania

If you hold shares in Apple and you're keen to help the company boost iPhone sales -- not that it needs your help -- try this: Next time you're at an office happy hour, whip out your phone, open the App Store, and buy a title called Ocarina (it'll set you back a buck). Now hand the phone over to an iPhone skeptic and watch him figure it out.

Ocarina starts up with four mysterious blue circles on the screen, and in the lower right-hand corner, a flashing yellow arrow with the instruction, blow into the mic. Your pal does that -- and when his breath hits the phone, the device emits an ethereal, high-pitched tone, perhaps what a flute would sound like in the universe of Stanley Kubrick's 2001. The purpose of the blue circles now dawns on your friend. As he blows into the mic, he slips his fingers over these circles, at first tentatively and then with aplomb. The sounds shift in response to his digits, the phone producing strange, otherworldly music -- but music nonetheless.

At this point, you can be fairly sure you've converted him. Even if he's not a musician, he may well dump his BlackBerry tomorrow and head over to the Apple Store. Ocarina has this effect on people. Show it to a group of techno-jaded VCs and watch them turn to jelly. They'll see dancing dollar signs leaping off the screen. After all, what other phone can transform into a flute, just like that? And if it can turn into a flute, what other amazing things might it do?

That question animates app mania. In an otherwise grim economic time, mobile applications like Ocarina -- downloaded more than 700,000 times in its first four months on sale -- have sparked a frenzy among entrepreneurs, investors, marketers, artists, and even hobbyist programmers hoping to hit the smartphone jackpot. Startups now flock to the iPhone as the biggest new market in town, the one place where customers are willing to pry open their wallets (at least a little) and actually pay for software. Venture capitalists see Apple's device as a vista of possibilities. If apps are the next big platform -- and the most wide-eyed analysts argue that apps will be as big as the PC, as big as the Web -- then the mobile equivalents of Microsoft, Google, and Amazon are waiting to be discovered. To the world's major brands, meanwhile, iPhone apps represent a direct connection to the customer, an advertising model that puts your logo in people's pockets, right in their lives.

At the moment, all this excitement is centered on Apple, whose iPhone and iPod Touch App Store now carries more than 25,000 programs, with 5,000 new apps being added every month. But Apple's rivals are also catching app fever. Time was, people bought phones for inherent traits -- stylish facade, Internet prowess, fancy camera. Nowadays, we're just as interested in the downloadable little amulets that bless the devices with special powers. No one wants to market handsets that can't access this bounty. Last October, Google opened the Android Market, and it has already attracted more than 1,500 titles. Microsoft, Nokia, Palm, and Research in Motion, BlackBerry's maker, have already opened app stores this year or plan to do so.

App frenzy bears much in common with the early Web boom. Some app developers sound as optimistic as circa-1999 HTML monkeys who landed on the shores of San Francisco ready to claim their stake in the then-new economy. People in the industry talk casually about which businesses the humble app will transform or destroy next: video-game consoles, newspapers, satellite radio, gas stations, perhaps shopping? Naturally, some of this is overblown. Just as in the Web 1.0 boom, success can be elusive; for every Ocarina, there are 100 apps you'll never hear about. Yet the big talk also makes sense. "I really believe that the iPhone is an inflection point," says Ge Wang, cofounder of Smule, Ocarina's creator. Remember, the PC really did change everything. And what's the iPhone but a mobile PC that's always connected to the Internet -- so why wouldn't we expect it to change everything, too?

Apple didn't invent the idea of allowing third-party programs on its phones. Indeed, for several months after the iPhone's release, the company seemed reluctant to let users install any software on the device. Other phones, meanwhile, have long been able to run outside code. There were about 80,000 apps available for the BlackBerry before anyone had ever heard of the App Store. But that's a bit like pointing out that the iPod wasn't the first MP3 player to hit the market. Steve Jobs may not have been first, but when he finally let other people's programs sully his phone, he modeled his success on the iPod and iTunes. Which is to say: He made it easy, and he put Apple in charge.