While services and applications developed for Chinese 3G remain in a nascent stage, they represent an area of significant potential profitability. In markets outside China, the App Store is one of the highlights of the iPhone experience, and China Mobile is introducing an OPhone store to supply applications to its own range of Android-based 3G smartphones.
However, the longevity of the concept of a self-contained, user-generated, specifically purposed application remains in doubt. User-generated content is a sensitive issue in China; Apple recently removed user-made applications referencing the Dalai Lama and Uighur activist Rebiya Kadeer from its China iPhone App Store.
On a larger scale, the popularity of applications may be short-lived as handset quality improves and mobile browsers become increasingly powerful.
"There will be some apps that really catch people’s attention, that really cut through the clutter," said Richard Robinson, CEO of Beijing mobile game developer Kooky Panda and former vice president at Chinese wireless value-added services (WVAS) company LinkTone. "But the huge Trojan horse is the browser."
In more advanced mobile markets like Japan, the role formerly played by stand-alone applications has been supplanted by an entirely browser-based system.
Jay Chang, CFO of WVAS provider KongZhong, believes the mobile market in China will tend toward some of the success stories witnessed in Japan, but it will take some time. "The Japanese model is probably five years away, so you’ve got still got this period where you need Chinese types of solutions," Chang said.
Among the obstacles to a browser-based application revolution are China’s high data tariffs, lack of sufficient handset subsidies, insufficient 3G mass-market penetration, and a user-interface structure based around the slower and less-intuitive WAP rather than the Flash Lite applications popular in Japan.
Chang says service providers will continue to concentrate on so-called 2.5G – services with more advanced features than 2G but without the speed of 3G – but believes that mobile gaming will become an increasingly lucrative market over the next two to three years. Whereas pay-per-download is the focus for the near-term, KongZhong is already testing models built around subscriptions and recurrent billing, along with in-game item purchases.
Advances in browser-based technology will likely facilitate growth in casual gaming while, higher up the technology spectrum, PC-based 3D gaming converges with mobile gaming. This means competitors in 3G could well include internet players like Sina and Tencent.
But even with the best mobile applications, whether self-contained or browser-based, success depends upon the unpredictable whims of the consumer market. "The biggest problem is not the content, not the technology, not the regulatory challenges," said Kooky Panda’s Robinson. "It’s all about the discovery."