It was worse than the Wild Wild West, he said in an interview with GigaOM this week, explaining his reluctance at the time. But then something changed: the iPhone.

The iPhone only offered web apps when it debuted in 2007. But the powerful hardware and unique user interface lit a fire of demand among developers for a software development kit. Apple obliged a year later and also introduced the App Store, kicking off the modern mobile app era. That market is now worth $8.5 billion and is expected to grow to $46 billion in 2016.

As we celebrate the five anniversary of the iPhone’s launch on Friday, the true impact of the device can’t be measured without talking about the era of mobile apps it spawned, creating success stories like Instagram, Angry Birds, Foursquare and many others. Suddenly, “apps” became an easy way of understanding software, opening up opportunities to thousands of eager developers who could sell directly to a fast growing base of users. And that has in turn changed the way people compute, weaning them off of PCs to smaller devices: first smartphones, and now tablets.

“Everything got flipped on its head (with the iPhone),” said Crowley, who has built a business worth an estimated $600 million thanks to the iPhone. “This app ecosystem has been built from scratch and now anyone from a 30,000 organization to a 10 person team can create things that are valuable to all. You could have never imagined this.”

Tapping into apps

Apple’s App Store now boasts 650,000 apps, including 225,000 for the iPad. Apple users have downloaded 30 billion apps from the App Store, generating $5 billion in revenue for developers after Apple’s 30 percent cut. To be sure, there were mobile apps prior to the iPhone, but they were either found on third-party app stores or they were controlled by carriers, which chose which apps got to appear on phones sold for their networks.

That market was so quiet, it really didn’t attract a big community of developers, said Ge Wang, the co-founder of music app maker Smule. But he said the combination of the iPhone’s great hardware, the SDK and development tools, a critical mass of users and the distribution power of the App Store suddenly opened a lot of eyes, from experienced PC developers to newbies excited at the possibilities. They quickly realized they could make a new form of portable and casual software that addressed the mobile lives of users.

“More than anything else in the last 20 years, (the iPhone) made people feel that it was possible, and not that hard, to take an idea and turn it into a piece of software that could be distributed to 100 countries around the world,” said Wang, whose company now boasts 60 employees and has generated 50 million app downloads. “I guess it’s not surprising that this happened, but the magnitude and speed [at which] it all happened is still shocking.”

Apple’s App Store isn’t the only marketplace for mobile software. Android also launched in 2008 and introduced the Android Market, now renamed Google Play, which now hosts 600,000 apps with more than 20 billion app downloads. The mobile app market earlier this year eclipsed 1 million apps overall, with platforms like Windows Phone and BlackBerry struggling to catch up.

It’s hard to quantify the exact impact of the mobile app market but according to one study, 466,000 jobs were generated by iOS, Android and Facebook apps. TechNet, a technology group, reported that 311,000 app-related jobs were created and another 155,000 jobs were indirectly created from the app boom. Whether that’s completely accurate is difficult to know but the impact has been dramatic, said Marco Arment, the former Tumblr CTO who built Instapaper into a profitable company.

“The App Store has made it very easy for far more developers than ever before to make a living by working independently,” Arment told me.

Apps create opportunities

And it’s also spawning a new market for app developer services, everything from app discovery, monetization and distribution to back-end support, retention tools and analytics. Advertisers have also found a new way to reach consumers via mobile ads in apps and on mobile websites. eMarketer expects mobile advertising revenues to hit $1.8 billion this year and will grow to $10.8 billion by 2016.

“The growth of the app economy has given marketers new environments to engage their target audiences, and mobile advertising has become the growth driver that enables developers to monetize and further grow the ecosystem,” said Matt Gillis, SVP of Global Monetization Solutions for Millennial Media.

The whole app era has also changed the way people approach the Internet. Increasingly people are spending more time in connected apps than in a browser, using dedicated commerce, search, entertainment and news apps to do what used to take place in a browser. App analytics firm Flurry noted that earlier this year that people are spending an average 94 minutes in apps a day compared to 72 minutes in a mobile or desktop browser.

Apple didn’t just help create the larger mobile app market, it also helped shape what users have come to expect from a mobile app and an app store. That leadership role, along with a great store, stellar hardware and the returns developers see from investing in iOS, has helped keep developers loyal to iOS over Android and other platforms. Even now, iOS holds a 3-1 advantage in revenue for developers over Android, making it the primary platform for the development for most developers. That has helped fuel sales of the iPhone and iPad, which are known for the quality of their apps. And over time, the investment people make in apps for the iPhone and iPad also serve to lock-in many users into the platform.

The iPhone is now being outsold by Android, which is also closing the gap on Apple’s app lead. Microsoft and Research in Motion are also still trying to compete by touting their developer ecosystems, although they might be moving in different directions. All are trying to recreate the success Apple has had with mobile apps because they realize the truth Apple brought to light. The modern era of mobile computing has been defined by software, not hardware.

Ki-Mae Heussner contributed to this report.

Please check out the rest of our stories on the fifth anniversary of the iPhone, collected here.

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Here are three startups integrating hardware with mobile software to watch for:

Shaka

Surfers looking to quickly check wind speeds and share the information with friends should look no further than Shaka,  a startup developing portable wind speed meters that attach to the iPhone. The device allows surfers to measure wind speeds at their favorite locations, and upload those speeds and wind conditions to social networks. They can also plot the results or conditions on a map using the Google Maps API, which is then searchable by surfers waiting for wind at home. The device looks like a tiny fan attached to the top of the iPhone, and it’s easy to see how it would be useful to anyone whose livelihood depends on the wind — farmers, sailors, and construction workers, to name a few. The Shaka founders said they hope to sell the device for about $60, and said they could see it expanding beyond the surfer community, since similar devices tend to be much more expensive and don’t always connect to the web.

Kindara

Kindara is a startup looking to provide women with a simple way to track their fertility signs through an app for iPhone and iPad. But it’s not just about apps: The company is also developing a thermometer that is awaiting FDA approval that would sync with the mobile versions. The company uses a simple interface on the iPad and the iPhone where women can input a variety of data sets each day related to their fertility. Women can then display that data in a chart to better understand when they’re most likely to get pregnant. The company just launched its app in May, and had more than 1,400 downloads in the first month. It’s available in the iTunes app store for a free download.

Loccie

Loccie is a startup that comes from entrepreneurs in Croatia and seems like a good solution for the spontaneous traveler looking for things to do in a new place. Loccie allows users to input basic information about their likes and location and then gives them suggestions for things to do a new city. The hardware component then allows users to leave their phones at home and explore the city wearing a small GPS device that tells them when they’re close to their Loccie-suggested destination. The GPS device seems less interesting (who really leaves their iPhone at home when exploring an unknown place?) but the web version of the app seems like a fun way to find entertainment. The GPS might also serve as a welcome respite from the constantly-connected feeling that a mobile device usually brings. Loccie is still in beta, but users can request a trial here.

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The project, which is being dubbed “Open Web Devices,” uses the Android Linux kernel but has an entirely new layer on top that puts HTML5 in the spotlight. It’s essentially a complete phone system run on web technologies that gives the on-board software access to core APIs through an embedded version of Firefox. That, in turn, means all apps on the phone essentially run in the browser.

While the proof of the pudding is in the eating — and the devices themselves won’t be out until later this year — the big question has to be whether the world needs another mobile operating system.

For consumers, the answer is decidedly unclear. They’re already fleeing a multitude of setups toward the top of the chain, in the sort of tectonic shift that has left long-term players like Research in Motion and Nokia all at sea.

For operators, though, it could actually make some sense to back this scheme: rather than be cut out entirely of the revenue loop with customers almost entirely (as has happened with Apple and Android ), they can potentially be a greater part of development and therefore win a slice of revenue from apps and other additions. That’s great news for the likes of Telefónica, the world’s third largest operator, and the owner of major brands like O2, which has been having a tough few years.

But can it really work?

Remember, this approach has been tried before — sort of — by Palm, which developed it’s own webOS as a way of using a suite of web technologies to power the handset. For all the plaudits that initiative won the company (our own Kevin Tofel was a fan), it simply couldn’t stop the company’s slide — which eventually ended with a fire sale to HP, which then promptly underwent its own internal crisis, let Palm wither and saw senior staff such as Jon Rubinstein leave.

And although HP shopped webOS around to try and offload it, it was ultimately unsuccessful. And with nobody taking the bait the company considered shutting it down completely, before finally taking the move to open source the system just before Christmas.

That is not to say Mozilla’s effort is doomed to failure. The world, and web tech, has moved on significantly since Palm launched webOS, and Mozilla has a different structure — and different incentives for success. But the smartphone market’s incredibly crowded already with iOS, Android, Windows Phone and BlackBerry all trading blows. What do these Open Web Devices need to do to stand out?

Article corrected to OWD is based on the Linux kernel, not Android.

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The company published a blog post Friday morning outlining how it believes the Facebook can help developers concerned about the discoverability problem. Getting noticed in places like Apple’s App Store, Google’s Android Market, or the other big third-party Android app stores is tricky and often fleeting; sometimes the result of a fluke appearance on a “best of” list.

“On many of today’s mobile platforms, distribution is often a function of ranking and position in curated app stores,” wrote Facebook’s James Pierce, head of mobile developer relations. “While this benefits established apps and (those) that are editorially featured, for the majority of developers, getting an app discovered can present a real challenge.”

Facebook’s argument is that if app developers use Facebook to have users log into their apps, new users will discover that app naturally as friends share activity within the app on their News Feed. It cited examples such as Foodspotting’s iOS app and Diamond Dash, an iOS game that enjoyed a traffic increase “by a factor of 3″ after it started using Facebook’s Single Sign On technology. But Facebook would obviously like developers to think of Facebook itself as an app development platform, highlighting the Washington Post’s Social Reader Facebook app. (Donald Graham, CEO of The Washington Post Company, is a Facebook director and investor.)

Getting into bed with Facebook isn’t necessarily a recipe for instant success: of the 425 million people who accessed Facebook through a mobile device in a month, just 60 million, or 14 percent, go on to visit another app. Still, Facebook mobile usage is growing, and Facebook’s argument that people enjoy discovering new products, information, and perhaps apps from their friends is at the heart of what could be a historic initial public offering.

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There weren’t a lot of details revealed by Mozilla’s press release, but the company plans to talk more about the Mozilla Marketplace next week at Mobile World Congress and will invite developers to submit Web apps. The idea is to give Web developers a prominent place to hawk their HTML5 Web applications. App discovery is a huge problem in the native world, and even though Web applications don’t really need a distribution channel other than a Web site, without a big signpost directing mobile users to Web apps it could be a lot harder for smaller developers to get noticed.

Mobile Web apps offer the promise of being able to target everyone with a single development effort, as opposed to building separate iOS and Android versions of an app (not to mention tablet versions). But right now native apps offer hooks into the phone’s hardware that Web apps can’t quite mimic and most consumers are quite familiar with the concept of stores like Apple’s App Store and Google’s Android Market.

While Mozilla avoided any discussion of the details, it suggested two ways in which it might try to change that equation: standard APIs (application programming interfaces) that could help developers reach down into the phone, and “a new identity system for the Web that puts users in control of their content, tying apps to the user and not the device or platform.” Stick around for our MWC coverage next week to learn more.

A report in the San Jose Mercury News suggested Mozilla might also be ready to unveil a prototype mobile Web phone based on the Boot To Gecko project announced last year. Google has also tried to plant seeds for mobile Web computing with its Chrome OS hardware, but it’s pretty clear that has yet to make an impact.

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If so, get ready for a new take on the concept of wearable computing. A number of smart gadgets that track your movements and assess your health havemade waves over the last year, but Google Glasses (just my suggested name) would be something unique: a network-connected pair of spectacles with a camera and a display that could record images and video of one’s surroundings and display information from elsewhere on a tiny screen, according to a report in The New York Times.

If it sounds like a potential privacy minefield, that’s because it is. There are obviously all kinds of benign implications for such a device, such as tourism or spectator sports, but it’s already easy enough for people to walk around recording each other with smartphones. The first production of these glasses will probably make it painfully obvious, however, that you’re wearing a computer over your eyes (and supplant the glasses designed for the armed forces as the world’s most effective birth-control device).

The Times cites an earlier report from 9to5Google.com that said the glasses would be operated by head movements and might resemble a pair of Oakleys. It’s likely to feature some of the technology behind the Google Goggles app, and at the price of a modern smartphone (between $250 to $600, according to the report), it might have a pretty limited audience at first.

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But while the frog may look more like a dinosaur these days, one Israeli startup thinks it has found a way to evolve the idea for the modern mobile user — and believes that if it succeeds, it will become bigger than premium ringtones ever were.

Pops, an Android development firm out of Tel Aviv, thinks that personalized notifications are the next big mobile money spinner, and is backing that up with the formal announcement today that it has raised $1.5 million from Mangrove Capital Partners, best known for being an early investor in Skype.

Essentially Pops is a wrapper for notifications, which allows users to turn their ordinary alerts into something flashier and more entertaining. The free-to-download app hosts a gallery of more than 1,000 animations (called pops) that hook into the notification systems for apps like Facebook, SMS and Gmail, letting users to spice up their Android handset and see different clips or video depending on what sort of message is coming in.

For example, instead of a small on-screen message informing you that there’s a new Facebook message, you can have a Nyancat pop that dances on-screen. Or instead of a simple email alert, you could have a shiny metal Transformers-style announcement. Users can create their own pops from videos on their mobiles, too.

Pops CEO and co-founder Yaron Orenstein, who cut his teeth in the browser toolbar business, said he came to the idea when he saw how popular notifications and alerts were with users — and how broad the opportunity for personalization was.

“We personalize the pictures at the top of our Facebook timelines, our Twitter backgrounds, our ringtones, we put stickers on our laptops, we personalize everything. What could we do to take it a step further?”

The average smartphone owner sees 3,000 notifications each month, he says: ”I had to do something with that.”

He sees notifications — many of which could be premium content — as a vast untapped market, and so far at least it’s looking pretty good. Since launching on the Android market last November, Pops already claims to have reached 500,000 users, and Orenstein says the average Pops user sees around 15 individual pops each day — with some being exposed to as many as 80 or 90.

“You make, what, 10 or 15 phone calls in a day,” he says. “You probably see many more notifications. It’s an order of magnitude bigger than ringtones.”

While the idea of customizing your phone this way might seem garish to some, there’s no doubt in my mind that it has got the potential to be a big hit.

After all, customization was what drove premium ringtones to explode in the mid noughties, creating a market that was worth an estimated $4.5 billion in 2006. It’s been on the decline ever since then, but ringtones are still a big money spinner — bringing in more cash for record labels than digital services like Spotify and Pandora, for example.

Nowadays apps are the big noise, but it’s easy to imagine media companies jumping on a bandwagon that allows them to score extra revenue in this way. The numbers that Pops is posting are the sort of thing that could easily entice brands to start using its system to provide premium downloads that promote their own properties.

Still, Pops has its weaknesses. Right now it’s Android-only, and looks set to remain that way, with the company waiting to see if Windows Phone is a valuable platform and Apple’s restrictions on iOS apps making it impossible to replicate for the iPhone. At the same time, there is a lot of effort required to provide a consistent service across the fragmented Android ecosystem: it’s tough to produce a service that is easy to use while taking into account the variable flavors of Android devices use, their screen size and their resolution.

And like premium ringtones, which declined just as smartphones took off, premium notifications could suddenly see themselves undermined by a shift in the market.

But although there are many potential obstacles, Orenstein is bullish about Pops’ prospects — and plans to use the funds to grow his team and expand the company’s partnerships to create what he believes can be an entirely new category of content.

“Right now this is a new ecosystem that we’ve invented, so we have a lot of challenges — but you also have a lot of room for innovation.”

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The fact that Chrome will be limited to just about 1 percent of Android devices is a disappointment, but we should see Chrome proliferate on more smartphones and handsets as devices are upgraded to Android 4.0 and consumers buy new Ice Cream Sandwich hardware. The Android version of Chrome features a re-imagined tab system, fast browsing using one finger flicks and auto complete for searches and URLs. Chrome will pre-load sites it thinks you may visit. And there’s also a new system of previewing links by zooming in, making it easier to click-through.

Because its connected to a Google sign-in, users can get their personalized browsing experience transferred to their phone. That means you can see open tabs and synced bookmarks from the desktop version transferred over to Android. There’s also support for incognito mode so cookies and other data are not saved during a session. Chrome will not handle plug-ins including support for Flash.

The plan all along was to bring Chrome and Android together but Google found it tough to pull off. It finally made a breakthrough with the combination of the improved software in Ice Cream Sandwich and better hardware. That makes it unclear how many older Android devices if any will be able to get the Chrome browser. Google made do with a stock Android browser, which got smarter over time but it was never appropriate to call it a Chrome browser because it wasn’t based on the open-source foundation of Chrome.

Now, Google has a much more robust browser that can compete against third-party browsers such as Dolphin. And Google has a better way to position Android against iOS and its Safari browser. This could also eventually provide a boost for the desktop version of Chrome, which is growing quickly but still trails behind Explorer. For Google users, this is a good reminder of why it’s helpful to stick with Android.

Android users with Ice Cream Sandwich can download the browser in Android Market. Google plans on baking the browser into the operating system for upcoming Android 4.0 devices in the coming months.

It’s nice to see Chrome finally make its way to Android, more than three years after the two debuted. It’s going to have limited effect initially because of the small footprint of Ice Cream Sandwich. But it shows that Google still has ways to keep improving Android and make it even more polished and usable, a big priority with Android 4.0. IOS users may not be swayed as much since iOS 5.0 provided some improvements to the Safari browser, including Reading List and tabbed browsing for the iPad. But overall, it’s a good sign for consumers that they’re getting more robust browsing experiences on mobile devices, which is important as consumers spend more and more time accessing online services from their smartphones and tablets.

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I switched away from buying digital albums to Rdio’s $9.99 a month subscription several months ago and find it to be a great way to enjoy music. Before you ask why I chose Rdio over Spotify and others: Rdio offers a discounted family plan that its peers don’t. As good as Rdio may sound, however, its previous Android client reminded me of Android 1.6: Mostly functional but not pretty to look at.

The new client, however, looks stellar and adds features that bring it up to par with Rdio’s app for Apple iOS. The navigation interface is much improved, with one-click access to most functions. Support for browsing new releases, the top charts and Rdio’s recommendations — based on your listening history — are now part of the software, as are the social components. You can now see what other friends using Rdio are listening to and it’s easier to see which tunes you have stored for offline use.

While the app is improved for all supported Android platforms, I especially like the support for remote control clients, which was added to Android 4.0, or Ice Cream Sandwich. That means the album art and music controls are available on the lock screen of an Android 4.0 device; handy when I’m running with my Galaxy Nexus.

All in all, this is a must-have upgrade for Rdio users on Android. The only issue I’ve had so far is more of a nuisance than anything else. Once I upgraded to the new version, Rdio had to re-sync, or download, all of my offline music tracks again.

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The modified Android software will be installed on commercially available handsets and can be used to support top-secret dispatches; something that the government doesn’t yet allow for. In the future, soldiers could use the handsets to locate other troops or quickly communicate orders to a group securely.

Ironically, the government group formed to manage the Android software project has already made a bold claim that makes the carriers look silly from where I stand.

Information-security director at George Mason University, Angelos Stavrou, is a contractor on the project and said when Google updates its Android software, an update to the secure Android phones can be ready within two weeks. Given that carriers can take 6 months or more to provide Android updates on some handsets, one of them should hire Stavrou away from this project!

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