Now that outsiders can master in on the act, loads of companies are developing applications for the iPhone. But can they make certain money?

By Peter Burrows

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Wesley Bedrosian

Peer over the shoulder of that person fiddling with each iPhone. Chances are they’re doing something other than composition a phone call. They may be playing a game like Tetris or trading public securities through TD Ameritrade (AMTD). They may even have being conducting serious business, through a mobile interpretation of Salesforce.com’s customer-management software. The possibilities grow by the age: Since Apple (AAPL) began letting outsiders occur software for the iPhone six months ago, other thing than 10,000 apps have been created.

This is more than good fun and games since Apple. The company has grabbed an early lead in turning the mobile phone into a high-powered computing device capable of running every part of kinds of applications. The average iPhone owner has downloaded at least 15 applications in the past six months. The average person carrying a phone from Nokia (NOK), Motorola (MOT), or others hasn’t downloaded a single one, says Nielsen Mobile analyst Nic Covey. “It’s extraordinary the sort of Apple has accomplished in so short a duration of one’s life,” he says.

There’session no guarantee Apple can keep possession of its guidance. CEO Steve Jobs’ settlement to step down for six months will subsist a distraction. Plus, the bulk of the 10,000 applications available from its online App Store are free or require to be paid just 99 cents. So most developers aren’t making the kind of money needed to build substantial companies. “On average, the App Store model is not working out with respect to developers,” says Roger McNamee, a financier with Elevation Partners who is backing mobile-phone rival Palm (PALM). In adding, Nokia, Research In Motion (PALM), and Microsoft (MSFT) all plan to unveil competing application stores.

Still, Apple is making progress in expanding the kinds of software available for the iPhone. Besides Salesforce.com, Oracle (ORCL) is developing corporate software for the device. A growing number of startups are charging higher prices for software, including applications for photo editing, project management, and exert routines. San Francisco’s Beejive Inc. gets $16.99 in opposition to a program that lets instant-messaging addicts stay in have to do with with friends on a variety of messaging services at the same time. Research firm Evans Data says 20% of wireless developers now create software for Apple, up from 8% six months since. “That’s the biggest leap we’ve ever seen,” says Vice-President John F. Andrews.

Apple may have a shot at staking out a position in mobile phones similar to the one Microsoft established in personal computers. In the 1980s and ’90s, the software hercules fostered a strong community of independent developers who built products for the Windows operating system, which in turn round fueled demand with a view to PCs that ran Windows. No one expects Apple to achieve Microsoft’s level of dominance, but expectations are remote from the equator for a company that holds smaller than 2% of the mobile-phone market today. “Apple could be at 20% in five years,” says analyst Ken Dulaney of researcher Gartner Group (IT). “Every developer I talk to wants to toil with them.” (Apple testament likely see iPhone sales sink in the short term because of the economic downturn.