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Signs of Life?

You'll need plenty of patience to profit from m-commerce.

Mobile commerce (or m-commerce) may be a needle in the haystack of telecommunications and commerce, but it's getting bigger--slowly. The vision for m-commerce looked like this: consumers dialing up to order books and merchandise, the Web on every phone, and restaurant coupons beaming out to buyers. "The hype curve was way ahead of market reality," says Seamus McAteer, senior analyst with San Francisco research firm Zelos Group.

The real opportunities in m-commerce aren't where we thought they'd be a few years ago, and a lot of that has to do with the way American consumers buy products over the Internet. "You're dealing with a research-driven purchaser. Cell phones are about instant gratification and making a social statement. They're not an ideal device for research," says McAteer. People don't want to buy merchandise with their cell phones.

What they do want to buy are downloadable features and extras like ring tones, games and the ability to send digital photos. Companies have found niches in this space: Handango sells digital content for mobiles alongside software for handhelds. Nokia and MasterCard, banking on customers' desire for convenience, have run trials of a quick-pay system that attaches to a cell phone.

Since disappointing early experiences have left many big companies gun-shy, m-commerce innovation has headed back to the entrepreneurial streets. "Right now we're seeing small and [midsize] businesses and entrepreneurs taking it upon themselves. It's driven by garage development rather than major branded media companies," says McAteer. Many large companies are partnering with smaller ones for mobile initiatives. Growing businesses are finding opportunities here. NuvoStudios in San Francisco, for example, creates wireless entertainment content and has worked with the Disney and Mattel.

One thing required of entrepreneurs looking forward to a full-blown m-commerce future: patience. Most analysts aren't trying to figure out a development timeline. The arrival of advanced 3G services in a couple of years may be a big boost, but until then, slow and steady is the name of the m-commerce game.

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This article was originally published in the October 2003 print edition of Entrepreneur with the headline: Signs of Life?.

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