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Teenagers right now are "the sweet spot," says Burris of Sprint. An estimated 76% of kids ages 15 to 19 and 90% of people in their early 20s regularly use their cell phones for text messaging, ringtones and games, and that enthusiasm has turned wireless data services into a significant business. Gartner Research estimates that Americans spent $1.2 billion last year on ringtones, wallpaper and other "personalization" services and an additional $1.4 billion on cell-phone games and other entertainment. Fabrice Grinda, CEO of one of the leading ringtone companies, Zingy, says these services tap into young people's impulse to assert their individuality, as they have always done with clothes and hairstyles. And as with clothing, there's money to be made off these urges. While downloading an entire song from iTunes costs just 99ยข, Grinda's customers are willing to pay as much as $3 for a 30-sec. ringtone.
To turn wireless data services into a major source of revenue, carriers will eventually have to move beyond what works with young people. They are relying on an army of small companies to create the cutting-edge content. Many of them start-ups, those companies develop the games, ringtones, etc. and take a cut--as much as 80%--of the fees charged by the carrier for each download. Analysts expect that revenue from ringtones and gaming will eventually level off. "There are only so many ringtones and so many games they can offer," says Phillip Redman, an analyst at Gartner. So those companies are madly trying to come up with the next big thing in cell phones.
Intercasting is typical of the new breed of wireless-content companies. Its founders, Shawn Conahan and Derrick Oien, are both veterans of the digital music file-sharing wars, and they envision a world of mobile phones that bears little resemblance to what we have now. "The mobile landscape of six months ago was ringtones," Conahan says. He and his partner are convinced, however, that the possibilities are much broader. Just as peer-to-peer networks like Napster turned digital music into a global phenomenon, they believe that mobile phones have created a similar kind of untapped network. Cell phones, they argue, link each of us to a personal network of friends and family. Intercasting's service, Rabble, allows you to reach those people through mobile blogs--a combination of photos, text and eventually video--all created with a mobile phone. Imagine, for example, narrating your next vacation via cell-phone blog for all the folks back home. Or creating a real-time blog about the people you're meeting at a party--or at a business meeting.
Mforma's Kranzler is focusing on cell phones as a new venue for existing media. He guesses that his company will eventually offer a shorter version of what we already see on television and the Web. He calls this "media snacking": small bites of news or entertainment lasting from 30 seconds to four minutes. "When you're at home, you eat a full meal: an hour on the Internet and TV," Kranzler says. "On the mobile, you're snacking: two to four minutes, 15 or 20 times a day."