Widgets Gone Wireless

Microsoft's first wireless software spin-off wants to help companies deliver personalized marketing messages to cell phones

by Olga Kharif

Virtually every Microsoft move garners notice somewhere in techdom, so it's really worth paying heed when the software giant pulls off a first. That's just what's going down on Mar. 27, when Microsoft (MSFT) is due to spin off a company called ZenZui, its first spin-off specializing in wireless software.

ZenZui, based in Seattle, Wash., devises what are known as widgets. On the Internet, these are small packages of code that attach applications to Web pages. In ZenZui's case, they're colorful tiles that deliver a marketer's message straight to the cell-phone display. Nike (NKE) uses a mobile widget to helps runners track distance, while Amazon.com (AMZN) uses the tools to suggest books to buy and Kayak.com can use them to alert travelers to a sale on tickets to Tahiti.

Widgets are already becoming a big business on computers and over the Web thanks to companies such as Apple (AAPL) and Yahoo! (YHOO). ZenZui wants to ensure that they take off on mobile phones, too. In the U.S. marketing spending on mobile widgets will reach $500 million by 2010, up from about $2 million today, figures Scott Ellison, an analyst with consultancy IDC. By then, mobile widgets will account for as much as 15% of total mobile marketing spending. "The real promise of mobile marketing is the ability to create a very personal experience between a customer and a brand," Ellison says. And since widgets are selected based on an individual consumer's interests and preferences, they're "about as personal as you can get," he says.

Killer Opening

Much of the discussion of mobile marketing so far has centered on mobile TV ads or mobile search. Yet wireless widgets could have as much potential—if not more—than some of these other ways of grabbing mobile users' attention. "Of all the applications you see in the mobile space today, there are no good marketing applications," says Eric Hertz, ZenZui's CEO (see BusinessWeek.com, 3/24/06, "Now Playing on Your Cell Phone").

Widgets may also help carriers pinpoint future services and applications to offer users. Studies by consultancy Forrester Research (FORR) reveal that the percentage of mobile-phone customers using any given mobile application, except for the basics like calling and messaging, is declining. The percentage of cell-phone users sending or receiving wireless e-mail declined by 27% between 2003 and 2006, for instance. "What that says to me is, there's no killer application in the mobile world," says Charles Golvin, an analyst with Forrester.

Widgets let companies devise low-cost, low-risk applications that appeal to a target group. Using ready-made code provided by ZenZui or a peer, like uLocate, offering location-based widgets, developers can build a tiny application in a matter of days. "Widgets make a developer out of everybody," says Ryan Moore, general partner at uLocate investor GrandBanks Capital, one of many venture firms jumping into wireless widgets. "What the widget model allows you to do is create a lot of content quickly."

Crowded Bandwagon

ZenZui and uLocate aren't alone in their pursuit of the mobile widget market. The Web browser Opera will unveil developer tools for mobile widgets later this year.

Widgets appeal to portals by helping them promote other offerings. A tiny mobile-search widget, distributed to millions of phones, could help reallocate at least a small portion of share in the search battles among Google (GOOG), Yahoo, and Microsoft. "We view ZenZui as a partner for Microsoft," says Sharieff Mansour, senior manager of IP Ventures at Microsoft, the division formed in May, 2005, that licenses and helps incubate ideas developed through Microsoft's research arm. ZenZui is only the third company to be spun off from Microsoft's IP Ventures. The first two are social-networking site Wallop and Inrix, the leading U.S. provider of real-time and predictive traffic information.

Other widgets collectors, like uLocate, believe that wireless users will be willing to cough up some dough for useful applications as well. The company's package of a few dozen applications, including Zillow.com, which lets people see prices of homes in a given neighborhood, began selling for $2.99 at Sprint Nextel (S) two weeks ago. And there's no shortage of developers wanting to join uLocate's widgets effort: "We've been tremendously pleased with developer activity around widgets," says uLocate CEO Walt Doyle. "It's an enormous opportunity."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.