Aping the iPhone App Store

Rivals including Sprint and Research In Motion want to fend off the Apple threat by enticing developers to create tools for their devices, too

by Olga Kharif

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Consumers are rushing Apple stores and mobile-phone outlets from Seattle to Sydney on July 11 in hopes of being among the first to get hold of the iPhone 3G. The long-awaited iPhone upgrade boasts touchscreen tech, navigation tools, and faster Internet downloads than its first iteration.

But one of its biggest selling points became available a day earlier, when Apple (AAPL) flung open the doors of the Apple App Store, an online grab bag of games, books, friend-finder tools, and hundreds of other software applications designed to make the iPhone more fun and useful.

Developers Target Many Devices

The appeal of amassing a community of software developers who will create scores of unique applications around a single mobile phone hasn't been lost on competing handset makers and cell-phone service providers. They're eager to keep customers from switching to the iPhone and the carriers such as AT&T (T) on whose networks the device runs. Owners of advanced cell phones are more likely to download applications than watch videos or access social networking sites, according to consulting firm M:Metrics. And the App Store may emerge as the No. 1 reason why people switch to the iPhone 3G this year, says Richard Doherty, director at consultancy Envisioneering Group.

In hopes of staving off a stampede, Sprint Nextel (S) this year will spend more than $100 million on marketing a single device, the Samsung Instinct. Sprint on July 8 announced an Instinct developer contest, its first competition focused on a specific device, offering the winner $25,000 in prizes. In May, Sprint relaunched its developer program, which enables programmers to certify applications for use with Sprint's devices and network for only $5,000, much less than it used to cost. Developers are also now free to bring applications to market without paying Sprint any fees. "It shaves off months of application development and reduces developers' costs," says John Schuler, director of platform management at Sprint. "It's like postage stamps vs. Federal Express (FDX)."

As popular as the iPhone is—as of the end of March, it had sold 5.3 million units globally—developers are hedging their bets and not confining themselves to a single device. "Anybody that's serious about the mobile market needs to develop for many [devices] out there," says Dan Gilmartin, vice-president for marketing at uLocate, a Boston-based maker of software that lets users find friends nearby. "We see the success that Sprint is having with the Instinct and we want to be part of that success." So uLocate has tailored its application for both the iPhone and the Instinct, which according to Sprint has been the company's best-selling handset of its peer group. Avian Securities analyst Matt Thornton estimates that Sprint has sold 150,000 units since its June 19 debut.