Apple’s iPhone has quickly caught on among the masses with over 700,000 units sold in the first weekend of its debut and 3.6 million units sold in 2007. Now with the recently released SDK (software development kit), Apple has opened up software development for the iPhone. But as mainstream software development enters the mobile space, what kind of applications should we be building? What would be the ROI on these applications? Will software development for the iPhone end up being closer to what it has been for Facebook, with millions of applications, but  none of them generating any significant revenue? These are all questions that software developers and IT investors are asking themselves as they consider developing applications for the iPhone.

To answer these questions, lets take a look at the users that typically use smart phones. We can logically divide smart phone’s user base into three groups. The first groups consists of people who use smart phones primarily as a communication tool, to make phone calls, check e-mail and send text messages.  The second group consists of people that use smart phones mainly for entertainment, to watch videos, listen to music and play games.  The third and last group consists of users that use smart phones primarily for information and utility applications, to check their stock portfolio, read the news, and use productivity enhancing tools such as “to-do” lists.

The iPhone, as it ships today, has a very easy and intuitive interface for making phone calls, checking e-mail and sending text messages. This covers all the requirements of our first group, the communication heavy users. The iPhone also has all of the iPod features, for listening to music and watching videos, both downloaded and those available on YouTube, which would have covered all the requirements of our second group, the entertainment heavy users, except that there aren’t any games that come bundled with the iPhone! The SDK, however, gives developers access to the OpenGL framework, the industry standard for high performance graphics. According to the Journal of Targeting, Measurement, and Analysis for Marketing, games accounted for 42% of installed applications on smart phones. A similar distribution can be predicted for the iPhone as well when the App Store goes live circa June 2008. OpenGL along with iPhone’s accelerometer, which can detect the direction of movement, will allow developers to create breathtaking games, that will bring the same level of gaming to mobile devices that Wii was able to do for conventional console games.

Finally, there are a few applications on the iPhone for our third group of users. the information heavy users. The iPhone comes bundled with a “to-do” list and a stock portfolio tracking application but that is about it as far as utility applications are concerned.  This genre of information and utility applications is wide open for developers to build mobile software that targets areas such as personal finance, medical, hobbies, health and fitness, travel, translation and productivity and is also where we will see the most return on our investment. As developers and investors we need to focus on these applications, ones that target the information heavy group of users.

Apple’s SDK gives developers all the tools needed to build polished applications that enhance the user experience. With the App Store, selling and distributing applications is straight forward and easy and we should expect to see thousands of applications available for sale. Although the majority of these applications are going to be games and utility applications, the key is going to be building applications that not only serve a need but also look and feel just as great and intuitive as Apple’s own.