If you follow me on Twitter, then you’re already aware of my obsession with Foursquare, a New York-based service that taps into the narcissistic appeal of being able to post unusual locations such as our office cafeteria, Chatz Cafe, or best recommendations about a place and marries it to social networking. What’s more fun — it all seems like a game.

You can access Foursquare on its web site, on the iPhone, or via Android and BlackBerry devices. Every time you stop at a cafe, a bar or an eatery, you have the option to check in your location. Sure you can check in your visit to a shopping mall or even a 7-Eleven, but the focus is primarily on going out. The service will then tell you if one of your friends is in the same location. I started out as a skeptic of Foursquare but in just three months, have become an addict. And it’s the addictive nature of this little service that puts it on the fast track to the top. 

Foursquare founder Dennis Crowley

Foursquare, which has received $1.35 million in funding from Union Square Ventures (and others), launched back in March in a handful of U.S. cities. Then earlier this month, it was turned on in 50 additional cities across the world. If the recent increase in the number of requests to connect that I’m now receiving on a daily basis is any indicator, then it won’t be long before Foursquare becomes a mainstream phenomenon.

A prominent story on CNN.com has only helped spread the word about the service co-founded by Dennis Crowley, founder of Dodgeball, a similar pre-smartphone-era offering that was acquired and subsequently shut down by Google. I emailed Crowley recently to ask about Foursquare’s traffic.

“We’ve been growing 50 percent-plus per month,” he said. When I last saw Crowley, back in October, he said the service was growing at roughly 40 percent a month in terms of new users, so this latest figure points to a growth spurt. For a while, there were persistent rumors that the service’s growth had flattened at around 60,000 users.

Crowley, who teamed up with Naveen Selvadurai and Harry Heymann for the startup, said that with Foursquare he’s building the product he wanted to build with Dodgeball, but couldn’t. (He had an acrimonious and very public split with Google.) Crowley believes that if you make software that allows people to discover new places and services, you can quickly build a database of “taste” and “cultural preferences.”

For instance, I have become a big fan of Sightglass, a hip new cafe in San Francisco. Showing up there every day and letting my friends know of my repeated visits indicates my “preference” for Sightglasses’ coffee. The more places I “check into,” the better chance I have to win awards or “badges” with cute names such as “bender” (going out more than four nights in a row), “crunked” (more than four stops in a night), and “overshare” (more than 10 check-ins in 12 hours.) Compared to its rivals — and there are many, including Gowalla (which for some odd reason is popular with a lot of Sand Hill Road VCs) — these little, seemingly silly things are what make Foursquare so much fun. Of course, it helps that most of my friends are big Foursquare users as well, making the other services that much less attractive to me.

In my opinion, structured datasets such as those being collected by Foursquare are going to become highly effective resources for cost-per-action advertising or even e-commerce revenue models. A smart hyper-local advertising platform, coupons or even sponsored badges are possible ways that Foursquare could make money. But Crowley isn’t thinking about revenues just yet; he’s busy getting Foursquare to grow exponentially.

“In the end, we want it to be the Netflix of places,” he said, referring to that company’s movie recommendation system. “We want to use (the) social graph and help with (the) discovery of places.” The company recently launched its API with the hope that it would spur a variety of apps based on Foursquare data — thus making it that much more distinguishable from its rivals.

Like Twitter and Facebook, Foursquare taps into our inner exhibitionist self — a malady of the post-Internet era. It allows everyone to be a Ruth Reichl, the legendary food critic — an arbiter of taste. With a narcissistic quotient that is higher than a genius’s IQ, it’s only a matter of time before it’s discovered by everyone from dithering fashion editors to pro athletes and pop stars. And when that happens, yet another tech pop phenomenon will be born.

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Posted by Om Malik on GigaOM  |  Permalink  |  19 Comments
Tags: Dennis Crowley, Foursquare, Gowalla, iPhone, Location Based Services, Mobile

eBay is doing good business by getting back to its core of helping people find more efficient ways to buy and sell things. And the company has seen better-than-expected success on the iPhone, with 5 million downloads and $500 million in mobile sales (including sales from mobile browsers too) expected by the end of the year. Today eBay is introducing a second free iPhone app, eBay Deals, which scrapes the site’s listings for those with less than four hours left, no bids, no reserve and shipping included. Both iPhone apps now include PayPal integration.

That still pales in comparison to eBay’s total sales; the site had $45.6 billion in gross marketplace merchandise volume in the last four quarters combined. It does make us wonder about revenue from Amazon’s iPhone app, which includes one-click payments and the nifty feature of matching the site’s products to pictures you upload from your phone.

Meanwhile, eBay CEO John Donahue reiterated to Fox Business this morning that he expects PayPal to be a larger business than eBay someday — and of course mobile payments will help drive that growth.

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Posted by Liz Gannes on GigaOM  |  Permalink  |  2 Comments
Tags: eBay, eBay Deals, iPhone

AT&T isn’t the only operator whose network shortcomings have been exposed by data-hungry iPhone users. O2 — which until recently was the only UK operator to carry Apple’s gadget — said it will spend $166 million over the next several months to shore up its network to meet ever-increasing demands from smartphone users. Additionally, the carrier said it will build 40 new cell sites in and around London in advance of the holiday season.

Like AT&T, O2 has drawn criticism regarding its network performance as smartphone usage increases. The increased traffic is directly attributable to the iPhone 3G S and the Palm Pre, which are the best-selling devices on its network, CTO Derek McManus said in a release:

“World-class smartphones have brought about an unprecedented demand on mobile data networks,” according to McManus. “Data on our network has increased 20-fold in the last year alone. As a result, we have recently experienced some isolated pressures in London where there is the highest concentration of smartphone users.”

O2 has effectively leveraged its exclusive iPhone deal, gaining nearly 300,000 net mobile subscribers in the third quarter and emerging as the only UK operator to increase revenue in the first nine months of the year. The company isn’t likely to keep up that pace as rival carriers begin to offer the iconic device, but if O2 can address its network problems it could retain its crown as the top carrier in the region — until Orange and T-Mobile consummate their merger, anyway.

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Posted by Colin Gibbs on GigaOM  |  Permalink  |  0 Comments
Tags: Apple, AT&T, iPhone, O2, palm, Pre, smartphones

Motorola and Verizon, thanks to their $100 million marketing efforts, are going to sell some 600,000 Droids during the fourth quarter of 2009, according to Mark McKechnie of Broadpoint AmTech, a boutique research firm. He had initially expected about 200,000 device sales following the launch, but he has upped his forecast: Motorola should sell another 200,000 Droids by Black Friday and 150,000-200,000 during the remainder of the holiday season. This would bring the total to some 600,000 Droids for 2009.

We recently reported the findings of a study from Flurry that indicated Motorola might have sold close to 250,000 Droids in the first week of its availability. McKechnie’s forecast adds credence to Flurry’s findings. McKechnie expects that Motorola will sell about a million Android-based phones during the quarter. That works out to 400,000 CLIQ (also known as Dexter) sales on T-Mobile, Orange, Telefonica and America Movil.

According to Broadpoint AmTech estimates, Motorola should sell about 10 million Android units in 2010 with an average selling price of $286. The company is planning to have about 20 different smartphone models in 2010 and will be selling on most major carriers in the U.S. Each Android unit contributes four times the gross profit of a feature phone unit; those 10 million Android units will contribute nearly half of the gross profits in Motorola’s handset division.

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Posted by Om Malik on GigaOM  |  Permalink  |  14 Comments
Tags: droid, iPhone, Motorola, Verizon

China Unicom is continuing to trumpet the iPhone’s prospects in China — despite widespread conviction that it’s too expensive there. As Stacey recently noted, Daniel Amir, director and senior research analyst of semiconductors at Lazard Capital Markets, has cited China Unicom officials as saying they’d sold some 30,000 iPhones in the country since its launch there on Oct. 30.

And the company’s chairman, Chang Xiaobing, says he expects the device to become the best-selling smartphone in the country, Bloomberg is reporting. So should we buy all this iPhone love from China Unicom?

“We’re very confident about the market position of the iPhone,” Bloomberg quotes Chang as saying. The report also quotes IDC analyst Aloysius Choong, who said that “Unicom must lower its prices if it wants to access the mass market for the iPhone.”

That last fact is likely to be true. In China, a 32GB iPhone 3GS sold at launch for 6,999 yuan ($1,024) without a service contract; add that in and over two years a Chinese subscriber will pay some $3,000. Android phones, on the other hand, are likely to cost less in China given that Dell and other players providing them aren’t smartphone titans, and Android phones could play into pre-existing preferences for open source platforms that exist there.

China Unicom’s Chang is also denying that users will choose iPhones sold on the gray market, according to Bloomberg. Sales of gray market phones “won’t be very significant,” he claims, even though we just reported on iSuppli’s numbers showing that gray market phones are moving briskly in China.

Come on now. These pronouncements from China Unicom sound like little more than PR spin. There are many valid questions to be asked about the iPhone’s future in China. After all, the device will probably be hindered from using certain kinds of technology (it will get Wi-Fi, but only following a battle involving China’s government), there won’t be the same freedom to choose applications as there is elsewhere, and it’s very expensive relative to Chinese salaries.  Only  a few short weeks after the iPhone’s Chinese launch, it’s just too early to read the tea leaves.

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Posted by Sebastian Rupley on GigaOM  |  Permalink  |  6 Comments
Tags: Android, China, China Unicom, iPhone

If you’re a baseball fan like I am, then you know that it in order to win, teams need more than just marquee stars. The role players, pinch hitters and relievers — all have to contribute in order for a team to win. A weak link can blow a game. Same goes for companies — every member of the team has a role to play. Why do I bring this up? Apple’s iTunes App Store and its murky and muddled policies.

Apple’s designers and engineers have done a good job putting together what is an iconic product, the iPhone. Its software gurus have helped foster the app revolution. But it when it come to the App Store approval process, Apple is blowing it.

Let me put it in terms Apple and its management can understand: The foggy and opaque App Store approval process is as big a disaster as Dell’s DJ MP3 Player.

For months now, I have watched the twists and turns of the Apple App Store drama with a degree of bemusement. After all, the rejection (or approval) of quirky and pointless apps aimed at hormone-challenged post-pubescent boys weren’t of concern to me. I couldn’t get upset over Google Voice fiasco, but that was understandable (not acceptable) because it was coming in the way of the carrier voice service.  But lately, things have gotten a bit out of control.

The irrational approval process and reasons behind it given by the apparatchiks of Cupertino are driving developers to extreme frustration — especially those who have been Apple loyalists for years. Earlier this week, Joe Hewitt, a well-known programmer and a Facebook employee, threw up his hands in frustration over Apple’s App Store approval process and said he wants to work on a different project. (Check out my video interview with Joe Hewitt.)

No, Facebook isn’t killing its iPhone app — it is a corporation, after all, and will bend over backwards to appease Apple — but Hewitt is someone who’s made many vital contributions toward turning the iPhone into a major platform. He was carrying Apple’s water long before the rest of the 100,000 apps showed up, which is just one of the reasons why he was nominated to GigaOM’s Top 15 Mobile Influencers List earlier this year. When he speaks, I listen — plain and simple. And he expressed his anger in 140 characters.

Today, Rogue Amoeba, a company that is well-known within the Apple community for its audio-focused products, is publicly beating its head against the Great Wall of Cupertino.

Rogue Amoeba wanted to ship a bug fix for their app, Airfoil Speakers, but it took the better part of four months to get it approved. It was an arduous process, one that made the inner workings of the government bureaucracies look like a model of efficiency. The net-net, as described by company CEO Paul Kafasis in a blog post, is this:

First, be aware that Apple is acting as a gatekeeper, and preventing you from getting the software that developers such as ourselves are trying to provide you. We wanted to ship a simple bug fix, and it took almost four months of slow replies, delays, and dithering by Apple. All the while, our buggy, and supposedly infringing version, was still available. There’s no other word for that but “broken.” Right now, however, the platform is a mess. The chorus of disenchanted developers is growing and we’re adding our voices as well. Rogue Amoeba no longer has any plans for additional iPhone applications, and updates to our existing iPhone applications will likely be rare.

Others, such as programmer Jeff LaMarche, disagree with the disenchanted developers and have come to the defense of Apple. But I’m more inclined to side with Kafasis, as this is a problem that flares up more often than California wildfires.

John Gruber, who pens the Daring Fireball blog and is one of the most respected Mac-related writers out there, offers a very balanced view of the situation — and finds Apple at fault. “At a certain point good developers are just going to say, ‘I don’t need this,’” Gruber writes.

Gruber, as we’ve seen in the past, has the ear of the senior management at Apple. So perhaps his fair and balanced assessment is going to help Apple wake up from its stupor.

Apple has a very serious problem on its hands, one that can derail its grand plan. It needs to fix this as quickly as possible. Otherwise the company is going to blow the game in the bottom of the ninth — much like the Phillies in Game 4 of the 2009 World Series.

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Posted by Om Malik on GigaOM  |  Permalink  |  45 Comments
Tags: App Store, Apple, iPhone

Google’s Android OS-based phones and Apple’s iPhone maybe get all the media love, but one analyst firm believes that it will be RIM’s BlackBerry that will be the smartphone king of the U.S. market in five years. Pyramid Research expects the device to be the biggest beneficiary of the move to smartphones.

According to their research, smartphones represented 31 percent of the new handsets sold in the U.S. in 2009, more than double from 15 percent in 2007. They expect 60 percent of the new handsets to be sold in 2014 to be smartphones. The BlackBerry, which currently has 50 percent of the total U.S. smartphone market, will see that share decline to 37 percent, but the increase in terms of total smartphone sales is going to keep it ahead.

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Posted by Om Malik on GigaOM  |  Permalink  |  13 Comments
Tags: Android, Blackberry, iPhone, RIM, smartphone

Apple is expected to ship 11 million million iPhones this quarter, and is banking on China for continued growth, according to an analyst note issued today. Daniel Amir, director and senior research analyst of semiconductors at Lazard Capital Markets, cited China Unicom as sayings it’s sold some 30,000 iPhones in the country since the iconic handset’s launch there on Oct. 30. However, in light of the phone’s high price tag, he isn’t so sanguine about Apple’s prospects in China going forward. From the note:

In October, iPhone shipment to China reached 700K units even though sell-through has been much lower largely due to the high price point. Apple is likely to continue diverting 10% of the iPhone build to the Chinese market, as the opportunity for China could be significant to future growth of the iPhone. … Overall, in our opinion, the high price point remains a barrier for further iPhone adoption and the current run rate is below expectations.

Even if Apple can’t keep growing sales significantly through China, it need only wait until its exclusivity agreements are over to keep its sales on the up and up.

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Posted by Stacey Higginbotham on GigaOM  |  Permalink  |  7 Comments
Tags: AAPL, Apple, iPhone, Lazard

Livestreaming is all the rage today, be it from a handset or home computer with a webcam. But one of the major challenges is how to view that live content on a handset. Wouldn’t it be nice if a company could provide a method for livestreaming to mobiles without a lengthy re-encoding process? Lo and behold, enter Livestream, which today announced its Procaster beta application for Mac and PC at NewTeeVee Live, our annual online video industry conference. Using the iPhone’s native H.264 HTTP streaming, Procaster allows for near-instant broadcasting to iPhones — there’s roughly a 20-second delay from live broadcast to the devices, and multiple handsets can tune into the same stream. Watch NTV Live by clicking here or going to iphone.livestream.com. Here’s a video demo to see how Procaster works:

I took the Procaster software for a short test drive, and I was broadcasting live from my Mac in under five minutes using an integrated webcam and microphone. Procaster can use any attached webcam or microphone, so you don’t have to limit yourself to integrated audio or video capture devices. Once my broadcast was live, I simply pointed the Safari browser on my iPhone to http://iphone.livestream.com where I saw my personal channel. Tapping it opened up QuickTime where I saw a near real-time, high-quality view of my  broadcast. Even better: As a broadcaster, I was able to toggle between my camera setup and my desktop, a solution I envision as being useful for real-time training and presentations.

While there are other ways to view video on the iPhone, most involve a lengthy re-encoding effort. Livestream has cut that down to under a half-minute. And the best part? Procaster is simply using the native functions that Apple already provides to the platform. That’s a killer feature right there because it means people can begin to live stream to iPhones without any software installs on the handset.

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Posted by Kevin C. Tofel on GigaOM  |  Permalink  |  8 Comments
Tags: iPhone, Livestream, livestreaming, Procaster

Much of Facebook’s success on the iPhone has come courtesy of Joe Hewitt, an ace programmer who joined the world’s largest social networking site when it acquired Parakey, a company he co-founded with Firefox kid Blake Ross. Hewitt has now decided to shift his focus away from the iPhone. In a tweet sent out earlier today he said, “Time for me to try something new. I’ve handed the Facebook iPhone app off to another engineer, and I’m onto a new project.”

Joe was named to GigaOM’s Top 15 Mobile Influencers list earlier this year for his contributions to the iPhone app ecosystem — in particular, for single-handedly turning Facebook into a major force on the iconic Apple device. I recently gave him a hard time over the delays in launching Facebook 3.0, which prompted Joe to stop by our office and take part in an impromptu video chat. Here are the excerpts from that conversation.

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Posted by Om Malik on GigaOM  |  Permalink  |  12 Comments
Tags: facebook, iPhone, iPhone Apps, Joe Hewitt

Google earlier this week said it was buying AdMob, a mobile advertising network, for $750 million in stock — clearly an attempt to get a running start in the mobile advertising business. Together, according to some estimates, the two companies control 30-40 percent of the mobile ad market.

What wasn’t said was that without AdMob, it would take a long time for Google to get thousands of apps to use its ad service as that would involve re-tweaking thousands of iPhone apps that were using AdMob’s network. Google didn’t have time for that, as CEO Eric Schmidt explained in an interview with Bloomberg:

“AdMob is clearly the best of its ilk for applications monetization…We think that’s as strategic as search monetization, which, of course, we’re very good at…One the key success points for the iPhone was this enormous development of apps, and particularly free apps, which are advertising supported…Now that we have our Android platform coming out, and really with some serious partners behind it, it will also be important to have that be true for Android as well as the others.”

Ian Schafer, CEO of Deep Focus, a marketing agency, puts it all in context:

With the acquisition of AdMob, Google now has access to usage data of many of the most popular mobile apps–especially the apps in the iTunes App Store. For iPhones. If Google is taking on Apple for mobile OS market share, they just scored a huge competitive advantage. Google will know more details than ever about how people are using iPhone apps, how they are engaging with advertising within those apps, and users’ loyalty to those apps. Dashboards like the above only provide a window into the beginning of the mining that Google is likely about to do on their mobile handset competition.

Get the complete lowdown on mobile app stores, including details on who is doing what, in this special report, which is included in the annual subscription of GigaOM Pro. Subscribe to GigaOM Pro for $79 a year, get this report.

Google has been worried sick about the rise of the app economy because it undermines its ad-based search paradigm. As Andy Abramson explained:

If your business is built on things like web based technology (search), cloud based technology (Apps) and advertising from traffic that goes to and through your search engine or when people are looking at their content in the apps, the concept of many app stores has to be very, very scary for a few reasons.

Well nothing like a bit of fear to loosen the purse strings. AdMob is Google’s second-largest advertising-related acquisition to date, behind DoubleClick, for which it paid $3.2 billion. The company also paid $1.6 billion for YouTube. Notably, Schmidt said he doesn’t view AdMob-sized deals as the norm for future deals.

Photo courtesy of Charles Haynes via Flickr.

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Posted by Om Malik on GigaOM  |  Permalink  |  1 Comments
Tags: Android, Apple, Eric Schmidt, google, iPhone, smartphones

Apple became the world’s most profitable handset vendor in the third quarter of this year, reports Strategy Analytics. “We estimate Apple’s operating profit for its iPhone handset division stood at $1.6 billion in the third quarter of 2009,” wrote analyst Alex Spektor. That means Apple overtook Nokia, whose operating profit came in at just $1.1 billion. As Spektor noted, “With strong volumes, high wholesale prices and tight cost controls, the PC vendor has successfully broken into the mobile phone market in just two years.”

Well I don’t know if Apple can accurately be described as a “PC vendor,” but I do know that it’s seen unprecedented success with its App Store, that Nokia’s share of the smartphone market continues to slide, and that, going forward, Google’s Android may represent the real competition for Apple.

The iPhone’s success has everything to do with the huge and healthy ecosystem of great applications available for it. Strategy Analytics’ estimates only highlight how many ways Nokia, by comparison, has dropped the ball. For example, the company announced plans to focus on a new, open-source version of the Symbian operating system more than a year ago.

Fast-forward to today, and the Symbian Foundation has only recently open sourced the operating system’s microkernel. Meanwhile, Nokia reported terrible financial results for its latest quarter, capped by a 31 percent decline in North American sales. If the Finnish handset maker had a more fleet-footed, organized operating system and application strategy, it might have avoided having its lunch eaten by Apple.

Both the Windows Mobile and BlackBerry line of devices are being forced to confront the power of Android, and the  open source operating system is likely to provide some significant competition for the iPhone as well. As Stacey pointed out this morning, Verizon and Motorola moved more than 100,000 Droid phones this weekend.

It’s especially worth noting the comment made by Motorola’s Sanjay Jha analyst Mark McKechnie with Broadpoint AmTech, quoted in Stacey’s post, who said: “We estimate each Android unit contributes 4x the gross profit of a feature phone unit and that 10 million Android units will contribute nearly half of the gross profits in MOT’s handset division.” Indeed, from a profitability standpoint, Apple and the Android-based handset players are becoming the ones to watch.

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Posted by Sebastian Rupley on GigaOM  |  Permalink  |  16 Comments
Tags: Android, Apple, iPhone, Nokia, smartphones

Earlier today in response to my post about Nimbuzz, a good pal emailed to find out why the service didn’t work over the iPhone’s 3G connection. After all, a few weeks ago AT&T announced support for VoIP over 3G with much fanfare, a move that was widely applauded, including kudos from FCC Chairman Julius Genachowski.

A month has passed since the decision was announced, and there is still no support for VoIP over 3G. “Apple actually did not approve the 3G calling — so they completely broke their promise of allowing VoIP calls on 3G,” a Nimbuzz spokesperson said.

Even Skype doesn’t work over 3G (see attached screenshot). Truphone is not working either, much like Fring. I am not sure if these services work over 3G data connections in Europe and other parts of the world, but it looks like Apple is the one putting in the roadblock here.

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Posted by Om Malik on GigaOM  |  Permalink  |  41 Comments
Tags: Apple, iPhone, nimbuzz, skype, VoIP

Mario Queiroz, VP Production Management for Google Android, talked about Android and its competition, the iPhone, in an interview with FOX Business Network’s Liz Claman. Queiroz touts his company’s approach to form partnerships and alliances with carriers and handset makers as a better way of doing business compared with the iPhone. You can watch the video, which comes across as an Android advertorial.

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Posted by Om Malik on GigaOM  |  Permalink  |  1 Comments
Tags: Android, Apple, google, iPhone

Verizon Wireless launches the Motorola Droid this Friday (as if you hadn’t heard), and the carrier is opening “many” of its 2,000 retail outlets early (7 a.m. or 8 a.m. local time) to accommodate what it hopes is a rush of new customers. Call your local store for hours if you’re interested in being among the first to get your hands on the gadget. Meanwhile, here are a few other things you should keep in mind if you’re considering going Droid:

• The phone will sell for $199 with a two-year agreement and a $100 mail-in rebate. Users who don’t want to wait until Friday or deal with the hassle of mailing in for a rebate can pre-order the device at Best Buy, where the rebate will be applied instantly.
• As our friends at BillShrink have illustrated, expect to pay $110 a month for a mid-range plan with 450 900 minutes of talk time for the Droid, or $150 for an unlimited plan. Both rates match AT&T’s offerings for iPhone service.
• The Droid comes with a 16GB SD card to help offset its meager 256 MB of on-board memory. For more memory you’ll need to pick up a 32GB SD card.
• Android Market’s inventory of 10,000+ apps pales compared to Apple’s (a aapl) 100,000-title-plus App Store, but it’s a solid start for the year-old storefront.
• Google apps such as Maps, Latitude, Voice Search, Gmail and Calendar are included, and Droid is the first phone to feature the impressive new Google Maps Navigation.
• The Droid is the first handset to run Android 2.0 (dubbed “Eclair”), which includes new features such as a combined inbox for multiple email accounts, a virtual keyboard with improved layout and word completion, and “Quick Contact,” which enables a user to call, email or send an SMS simply by clicking on a contact or photo.

Whether the Cupertino gang has anything to fear in the Droid is a matter of some debate. But Motorola’s handset clearly has the firepower to move the needle in the fast-moving smartphone world, and I expect the gadget to sell very well this holiday season in the wake of Verizon’s marketing blitz.

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Posted by Colin Gibbs on GigaOM  |  Permalink  |  9 Comments
Tags: Apple, droid, GOOG, iPhone, MOT, Motorola, smartphones, T, Verizon wireless, VZ

China’s smartphone market is surging, according to figures from In-Stat released today. But sales of gray-market phones — which aren’t recognized or licensed by Chinese regulators — are rising right alongside legitimate handsets, according to separate numbers from iSuppli. Together, the reports highlight the vast potential for lucrative, high-end devices in the emerging Chinese market — and what may be a key reason behind the iPhone’s tepid launch last week.

Smartphone shipments in China saw a 30 percent increase in 2008 over the previous year, and the high-end handsets accounted for 15.3 percent of overall mobile phone shipments, up from 12 percent in 2007, In-Stat said. But its report followed yesterday’s estimate from iSuppli that gray-market shipments in China will grow to 145 million units this year, or nearly 13 percent of the size of the legitimate mobile phone business, and will increase to 176 million units by 2013.

Source: iSuppli

Those figures are particularly compelling in light of the lackluster debut of the iPhone in China. China Unicom, which launched the device last week, said yesterday it has signed up only 5,000 iPhone subscribers — a figure Piper Jaffray analyst Gene Munster called “disappointing.” Some analysts have cited a proliferation of iPhone knockoffs, which sell for substantially less than the $700 to $1,000 China Unicom is charging, and which were available long before the official Apple gadget came to market.

There are other reasons for the iPhone’s sluggish start, to be sure: The phone’s Wi-Fi was crippled to comply with governmental regulations, and its price is prohibitively high for many consumers. Plus, it’s possible Chinese demand for the iPhone simply isn’t very strong.

But in a nation where 150 million “missing” handsets seem to exist, the surging gray market has surely impacted sales of the iPhone as well. That’s a lesson other manufacturers need to remember as they try to tap the world’s largest mobile market.

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Europe Struggles With Three Strikes, Fox Exec Wants It Anyway NewTeeVee – by Janko Roettgers "; Desert Bus For Hope Rides Again for the Third Year NewTeeVee – by Liz Shannon Miller "; Smartbook No More — What Should We Call Them? jkOnTheRun – by James Kendrick "; Dealing With the Avalanches In Life and Business WebWorkerDaily – by Amber Riviere ";

Posted by Colin Gibbs on GigaOM  |  Permalink  |  4 Comments
Tags: Apple, China, iPhone, smartphones