Ann Arbor's Got Apps

If you have an iPhone in the Ann Arbor area, then you know about apps (fancy slang for applications) and have probably spent a little coin on them.

A similar phenomenon is playing out with local tech start-ups. If a software development firm is familiar with the popular smart phone, then it's probably spending some change to develop an app to bring in many more coins. This emerging cottage industry is translating into badly needed revenue streams in a battered economy, hires in a time of record unemployment, and even expanded business opportunities for the area's emerging entrepreneurial class.

"The future of computers is mobile," says Prof. Elliot Soloway, who started teaching an instantly popular iPhone applications class this earlier year at the University of Michigan. "The way we learn inside and outside of school is through mobile computing. Every kid has a cell phone these days."

Business opportunities

And the kids are the future, or so says conventional wisdom. But this time it seems to be a case where the oldsters might have found a cliche that actually has an acorn of truth in it.

The evolution of smart phones has allowed users to combine an ever-increasing number of gadgets into an ever-shrinking piece of hardware. Which begs the question, is the iPhone app just the next generation vehicle for delivering the latest software programs? More and more local firms are answering "Yes" to that question, and backing it up by investing capital and hiring the people to create these smart phone applications.

"We're seeing a movement away from desktops and even laptops," says John Stout, president and founder of Ann Arbor-based Stout Systems. "Let's face it, an iPhone is basically a little computer."

And most of the apps (software) can be had for a few dollars. There are nearly 25,000 to choose among in Apple's App Store. The prices for many of those range from free to $9.99, but the most popular price point is the standard cost of a song on iTunes - 99 cents. In May the company logged its billionth app download. To say the technology has triggered a software gold rush would be an understatement.

Fifteen-year-old Stout Systems started out specializing in software development and helping firms with technical staffers, such as computer programmers or project managers. Its staff of 25 still do that sort of thing, but the company also does a little more than dabble in iPhone apps.

When customers began inquiring about and requesting iPhone apps, the company hired a few people earlier this year to handle creating them for its customers (it has come up with half a dozen so far) and even built one of its own. ISoBusy sends a fake phone call to its user and provides a fake conversation to go with it.

The app retails for 99 cents, but has the potential for huge profits. While it costs at least four or five figures to create and market one successfully, when done right it can bring in exponential returns on the original investment.

It can also be used as a marketing tool. Ghostly International, the Ann Arbor-based electronic and ambient music label, created a unique music app for iPhones. The program uses a "mood wheel" that blends different colors. The idea is to set the color that matches the mood and the app will match a playlist of songs from its catalogue that users can listen to for free. It also paves the way for users to buy the song if they so desire.

In this case, Ghostly doesn't make money off retailing the application. However, 
the company uses it to help extend its reach to customers and bolster its music sales. That, in turn, helps solidify its brand and stay connected with its fans in an increasingly viral world.

Like any other piece of popular technology, iPhones and the apps that come with them are destined for the dustbin of history. With the rapid evolution of technology, it appears inevitable that it will happen much sooner rather than later.

Many of the Ann Arbor area's most innovative tech firms are looking at what comes after iPhones. To them, this is one of the first phases of a platform that is revolutionizing technology.

"Technology is so fleeting it's hard to predict (when iPhone apps will fall by the wayside)," Stout says. "But mobile applications aren't going away."

Student opportunities

One of U-M Prof. Soloway's favorite pictures is of his 21-year-old daughter and her iPhone. Although a photo of a teen with a cell phone isn't unique these days, especially to a computer science professor who specializes in mobile computing, his is unique because she is carefully cradling it while sleeping. To him that sums up just how valuable this technology is to coming generations.

"It's such a big part of who she is and her way of life," Soloway says.

With that thought in mind, it was a no-brainer for Soloway to design a class around creating mobile applications, like iPhone apps, at the beginning of this year. The class was originally set for 15 senior-level students in computer engineering. More than three times that number who qualified tried to squeeze in, so Soloway opened up the class and taught more than 50 students. He expects at least as many to register for it this fall.

His class might be known as the iPhone app class but it's for applications for all sorts of smart phones like Blackberry, Palm Pre and Google Android phones. These are all considered unproven landscapes, because the customer base isn't built in like it is for the iPhone, which is why it's the overwhelming favorite platform in the class. The odd thing was that even though most of the students focused on iPhone, it was considered the most difficult to master.

"They told me the learning curve for the iPhone is huge," Soloway says.

The class led to the creation of at least one Ann Arbor-based start-up. Three U-M students, Jason Bornhorst, Kunal Jham, and Mayank Garg, used it as the launchpad to start Mobil33t (treat the 3s like Es), and create DoGood.

The free app is based on the Pay It Forward concept. It reminds its user to do an anonymous good turn to a stranger, like leaving a "You are awesome" note on a public restroom mirror. It's the first offering from Mobil33t, which plans to launch another app this fall.

"The only cost is essentially our time," Bornhorst says. "That's a good thing."

While some firms will spends tens of thousands of dollars to create and roll out an iPhone app (six-figure investments are not uncommon), the actual barriers to doing so are relatively low. Tech companies will pay the cash to hire iPhone app programmers and other personnel to handle marketing, but students behind Mobil33t can get into the game because they have the skills and time to make it happen.

The low threshold to entry harkens back to a time when programmers created software and computer games at their kitchen tables and in their basements for early versions of Windows, says Soloway. What makes today more exciting is the astronomical profit potential; so much so that the margins and immediacy of payment are the best he has ever seen in the modern computer age.

"There has never been a time when a student can write a piece of programming and collect money on it in a short amount of time," Soloway says. "In the past there was always an intermediary that needed to be paid."

This creates a unique opportunity for students to be their own bosses without spending too much time suffering as a starving entrepreneur. That's time most graduating students don't have at an age where they start to feel the crush of mounting debt and student loans.

"The one thing holding them back is the college loans. They're petrified of them," says Soloway, adding that the idea of paying them back quickly is constantly reinforced by their families. "They take jobs during their junior year to pay them back. This is the time for them to take these risks, and some don't."

Bornhorst is one of the few who is undeterred from pursuing his entrepreneurial instincts. He plans on being his own boss as long as he can, and hopes Mobil33t provides him with a way to pay the bills when he's starting out.

"The key is to stay agile and seek out new platforms," Bornhorst says.

He plans on doing so by expanding Mobil33t's offerings into the Blackberry and Palm Pre markets. That's a smart decision, according to Soloway. The way he sees it, Bornhorst and his colleagues are on the ground floor of something that promises to be quite big.

"The mobile computer revolution hasn't even begun yet," Soloway says. "We have no idea what mobile computers will be like in five years. We're at the tip of the iceberg."