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Tap-tapping into iPhone gold

Inspired by Apple's design legacy, startup aims to be top iPhone-applications developer in a crowded, competitive field

Finally, Bart Decrem thought. He'd gone through six cell phones in one year, looking for a model that worked well.

Then Apple released its iPhone and Decrem's search came to an abrupt, lovely stop.

As do many Apple devotees, Decrem says the iPhone — with its user-friendly design, seamless Internet access and advanced functions — is going to change everything.

"I think we're now just starting the mobile revolution after 10 years of hype. The iPhone is the beginning."

It's like having a computer in your pocket, he said.

And as the sort of serial entrepreneur for which Silicon Valley is known, Decrem also saw opportunity.

Although Apple hadn't designed the phone to be "open" to software developers, hackers soon created games that took advantage of the device's versatility and ingenious design. Those games spread quickly among a devoted following.

"Tap Tap Revolution," based on the video game Dance Dance Revolution but with fingertips rather than feet, was particularly popular.

Then Apple announced last November that it planned to open the iPhone in the coming year.

And Decrem, who earlier helped create Mozilla's Firefox browser and steered a couple startups of his own, decided he, too, wanted to design for the iPhone.

He founded Tapulous, a startup aiming to become the most popular maker of iPhone applications, or the games and tools owners can download to their phones.

Tapulous incorporated in January and has been in downtown Palo Alto since 2007. Like other startups, it was lured to the neighborhood by its oncentration of Silicon Valley players, Decrem said.

The firm's applications include Tap Tap Revenge, a spin-off of the game that rose to fame on hacked phones, and Twinkle, a location-based chatting service modeled on Twitter.

At 8 months old, Tapulous is the longest-running iPhone application startup, according to Andrew Lacy, chief operating officer and co-founder.

But longevity is not enough.

The founders and the band of developers they've assembled — including Sean Heber, the man Lacy said is known among Apple fans for building "30 apps in 30 days" — want to be the biggest.

The group works from a nondescript storefront at 240 Hamilton Ave. and resembles other Web startups. Beyond an entryway with a sofa and chairs, developers sit with rapt attention before computer screens surrounded by mainly bare walls.

There's no time to decorate when fun, flawless applications — "beautiful" is the word developers often use — are being built.

Tapulous has plenty of competition.

Since Apple officially opened its phone to developers in winter and released the unlocked iPhone 3G in July, hundreds of software creators have rushed into the fray.

The environment is now as crowded as the California Gold Rush, with plenty seeking to be the most popular, the most sleekly designed — the best.

Applications range from poker games to a simulated Koi pond that makes shy, darting fish appear on the iPhone's screen. Companies such as eBay and Audi have spotted opportunity, creating applications to bring their services to the iPhone.

All are available on Apple's online App Store — either for free or at prices usually topping out at about $10 — accessible from iPhones or from any computer through iTunes.

For the most promising ideas, the major venture-capital firm Kleiner Perkins Caufield & Byers has created a $100 million fund called — what else? — the iFund.

Why so much money? Fund manager Matt Murphy echoes the Tapulous founder when he waxes futuristic about the iPhone — it will usher in a mobile-Internet revolution, he said.

Developers seem to agree, or at least spot major potential — Murphy cited the 2,500 proposals the fund has received since March.

The sheer volume of applications stems from Apple's game-changing model of open business, he said. Previously, service carriers controlled access to phone users. Developers could be stuck in lengthy negotiations that left them with little bargaining power — or money.

"The mobile ecosystem has been broken for a long time. ... Developers couldn't get to consumers. The carrier was in a walled garden [and it could take 12 months of negotiations and an unattractive revenue split," he said.

Apple's 30-percent profit take is favorable compared to deals developers could previously hope to broker with carriers, he added.

Lacy agreed, explaining that because Apple deals with its sole carrier for the iPhone, AT&T, developers bypass Byzantine dealings and simply submit products to Apple. After a quick vetting for bugs or vulgarity, the applications are ready for exposure to a worldwide market via the online store.

"This is no longer a game that can just be played by big companies. Anyone that has a great idea can build an app and with one click have it in 30 countries," Lacy said.

And click, people do. The first month following the new iPhone's release saw 60 million downloads, according to Murphy. That's more downloads from a mere 10 million iPhone users than the combined application downloads of the other 250 million mobile owners in the entire nation, he said.

In August, a Los Angeles Times editor complained of "Appiphilia," or of a growing addiction to buying nifty new games and services for her phone.

"My problem started gently with the free apps. ... Soon, I moved on to the harder stuff, downloading $3 and $6 apps without a thought. Click, click. There was MLB.com At Bat for baseball stats and video, Wine Snob to track my tastings.

"One-click shopping (Apple stored my credit card information) eliminated the pondering process. It's an impulse buyer's dream — and nightmare," business Web editor Michelle Maltais wrote.

The legion of devotees has spawned websites from http://iPhonefreak.com to http://iPhonealley.com . Some are devoted to rumors and news of latest applications; others peddle advice or products.

For 25-year-old Doug Lynch, founding an iPhone-application website is a way to live out the American dream.

Lynch has adored the device since its initial, locked-up release.

"I was originally fascinated with the iPhone as a device itself. I mean you can't get more mobile than a computer in your pocket. Then I saw it get hacked and really saw the potential," he said.

Lynch wondered, however, who would differentiate through applications to sort the well-designed from the less-appealing. He decided to do it himself. A former employee of newsgroup-server UseNetServer living outside of Atlanta, Ga., he now posts reviews daily to his site, http://AppStoreApps.com — six in one day in September.

"With so many applications available in the App Store, who has the time (or money) to go through them and see which ones really are great? I think AppStoreApps.com fills that void," he said, adding that with its new user-reviews function, the site can help developers glean customer feedback.

Lynch also plans to launch top-100 lists when he's reviewed enough applications. He's at about 200. Meanwhile, he works two days a week at a pizza parlor, a job he took after getting laid off from UseNetServer, he said. He's hoping to quit soon and devote himself to his website full-time, which earns money through advertising.

That income is rising — and raising the prospect of supporting himself completely.

"In my eyes this is the dream job. This is the American dream. I never would have thought it was possible before," he said.

And as Lynch revs up to clock in more reviews and hang up his apron, investors see no limit to the iPhone's potential.

The iFund has invested about $50 million so far in five companies, including iControl, a long-distance home-automation service for air conditioners, security systems and other home technology, Murphy said.

The fund's initial $100 million pledge could turn out to be merely a jumping-off point as droves of talented innovators turn to the iPhone platform, according to the venture-capital firm's website.

The firm will invest in "as many great ventures as we see. If we need more than $100 million, we'll find more money," the site promises.

In such a crowded environment, how will Tapulous distinguish itself?

By being the best, Lacy said. Many applications on the store are buggy or simply not up to Apple's design standards, he said. He sees Tapulous as an Apple torch-bearer, carrying on the innovative-design legacy.

The startup's most popular application is Tap Tap Revenge, styled on the earlier game for hacked phones. Users must tap colored balls as they hit the bottom register of the screen and shake their phone left, right and back and forth when directed to do so.

Released just after the new iPhone in mid-July, the game now logs a quarter million users daily, Lacy said. YouTube videos show fans include a devoted teenager who taps the screen with his tongue and a pigeon who taps with its beak.

Lynch, the self-appointed application reviewer, said more than being fun, the game showcases the iPhone's uniqueness — its response to touch and motion.

As of mid-September, the game is rated 22 out of Apple's top 100 free applications, according to a tally on the official online store. Users laud it for being fun to use and well-designed but lament their inability to connect to iTunes, a feature on the earlier game.

The startup's other main application, a location-based Twitter spin-off called Twinkle, hasn't made the top 100.

Murphy said Tapulous is competing in a "crowded space" — many other developers are making similar applications.

The company is also subject to the vagaries of the Web-startup world. While its Hamilton Avenue window still displays a poster for Friend Book — an application meant to allow iPhones to "shake hands" and exchange contact info — development on that application has halted, Lacy said. Friend Book wasn't finished and its developer left, effectively putting the project on ice for the time being.

But he and Decrem expect the company to keep growing and improving.

A collaboration with a major record label is in the works to bring a variety of songs to the game fans dub "TTR," Lacy said — a possible solution to the iTunes complaint.

And Tapulous' designs have received perhaps the most coveted kudos — Apple staffers have called Tapulous to invite them to lunch, the chief operating officer said.

Some have accused applications of being fun but too often frivolous. Wall Street Journal columnist and popular technology blogger Kara Swisher labeled certain offerings on Facebook — such as a function to throw sheep at other members or a game to "pop zits" — as "toddler toys."

Lacy is pragmatic about such criticisms. People are going to get bored and use their phone to pass the time, he said. Tapulous' applications give them a fun — if not always "useful" — way to do so, he said.

Besides, compared to online social networks, the iPhone has a greater potential for providing helpful applications to people in transit, such as restaurant reviews, he added.

When asked how they plan to make money — Tapulous' applications are currently free — founders were quick to explain that advertisers see vast potential in the iPhone.

The trendy phone is a way to reach a young, savvy market with disposable income, Decrem said. And because it's often accessed on-the-go, its ads could be more effective, according to Lacy. Someone using that restaurant-review application is more likely to be en route to a restaurant — hence more receptive to suggestions — than a homebound Web surfer, he said.

Murphy, whose Menlo Park office is a 10-minute drive from Tapulous, described the same restaurant-searching example. He called the iPhone an entirely new "use case" — a new-and-improved alternative to old-school Internet browsing. The iPhone has a personalized memory and more information than a standard computer, he said.

"The phone knows where you are and when and it can set [your preferences. That combination of context and information makes the platform itself so much more powerful than the Internet."

In addition to allowing the smartphone to lead to smart ad dollars, Tapulous will also experiment with charging for applications, Lacy said.

The startup has received votes of confidence from big-name angel investors, including Sun Microsystems co-founder Andy Bechtolsheim and salesforce.com founder Marc Benioff. The company has raised just under $2 million, according to Decrem.

Those eager to buy an iPhone and load it up with apps will have to shell out bucks for the opportunity.

A new phone costs $199 for 8 gigabytes of memory — up 1,750 songs or 10 hours of video — or $299 for twice as much memory.

Buyers must sign a two-year contract with AT &T, priced from about $70 to $130 per month. There are two Apple stores in Palo Alto, at 451 University Ave. and at the Stanford Shopping Center at the intersection of El Camino Real and Quarry Road.

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