Hiptop on the Horizon
By Jeff Goldman, Fri Aug 15 00:00:00 GMT 2003

Just when you thought multifunction devices were only targeting the enterprise, here comes Danger.


On August 6th, the California-based startup Danger announced a range of partnerships that will lead to the release of its wireless device, the Hiptop, within the next few months. After twice pushing the date back, the company now says the device will first be released on the T-Mobile network in the U.S. by the end of the year, followed by Orange in Europe.

Sounds like any other product announcement, right?

But the Hiptop isn’t just any wireless gadget. It offers enterprise-level functionality at a consumer price point, expected to be around $200. It’s a thin client device which leaves most of the processing and data storage to back end servers. And the business model is unique: Danger profits only by providing services and infrastructure for the device, not by selling the device itself.

The Hiptop is designed to help carriers show off their new high-speed networks to the best possible advantage, providing consumers with phone functionality, a web browser, messaging, games, a camera, and an organizer, all on one device. A Flash demo on the company’s web site vividly demonstrates the Hiptop’s capabilities.

Primarily targeted at 18 to 34 year olds, the device is built to be fun to use. When closed, the monochrome screen remains visible: rotate the screen in a half-circle, and you reveal a full keyboard with a directional pad for on-screen navigation—and, of course, for gaming. To the right side of the screen, a scroll wheel (which glows in different colors) makes navigation simple.

Despite the unique aspects of the device itself, Danger isn’t in the device business: the Hiptop’s reference design will be licensed royalty-free to hardware manufacturers. Danger’s business model then involves either licensing the device’s back end solution to carriers, or hosting the infrastructure on the carriers’ behalf.

Carrier-FriendlyDesign


John Arledge, Danger’s Vice President of Business Development, says the idea is to give carriers a seamless, end-to-end solution that puts them in complete control of the customer relationship. “Danger is the only company offering a complete solution that incorporates hardware, client software, and a back end service,” he said.

The carrier can either license the back end solution from Danger, or Danger can host it as a managed service. This allows a carrier to reduce their risk by starting with the managed service, then transitioning to the license if the offering is successful. When the Hiptop is first offered in the U.S., Danger will be hosting the service on behalf of T-Mobile.

Andy Rubin, Danger’s President and CEO, explains that the company’s business model provides wireless carriers with some significant advantages. First, because the device is so cheap, carriers won’t have to subsidize it when selling it to their customers. As a result, their risk in taking on new customers is reduced, and they can start realizing a profit immediately.

More importantly, Rubin adds, the Hiptop should greatly reduce churn. Because the device is a thin client, all of a customer’s data—including calendar and contacts—is stored on the back end server, not on the device itself. The carrier, not the customer, controls the data. “Having the back end manage your data, and not being able to take it with you when you turn off, is a good feature for carriers,” he said.

Similarly, because the carrier can resell Hiptop applications to their customers, Rubin likens the Hiptop to a Sony PlayStation. People who buy games for a PlayStation are less likely to switch, say, to a Nintendo GameCube. “It’s a platform,” he said. “When you vend out applications on top of that platform, that’s a personal investment for the end user. You can’t take those with you if you churn off.”

This arrangement also means that carriers can customize the device in a number of ways. Each carrier can differentiate its offering and target specific market segments by controlling the suite of applications it makes available to its customers. The device itself can also be fully rebranded—in T-Mobile’s case, the Hiptop will become the T-Mobile Sidekick.

Consumer-Friendly,Too


The fact that the customer’s personal data and applications are stored on the server does also benefit the consumer. Rather than requiring the user to sync the device to a PC on a regular basis, the Hiptop automatically syncs wirelessly with the back end server. It can also offer seamless updates to the applications on the device without involving the user at all.

More significantly, Rubin points out, you can lose your device, and you won’t lose any data. “Because every user-generated piece of data is stored and archived on the back end, you can lose it, or it can get stolen or broken, and your data is safe,” he said. “All you have to do is re-provision a new device, and your data comes back automatically.”

Additionally, because all data is manipulated by the server before it’s sent to the device, network bandwidth is used much more efficiently. “Next to a device that doesn’t have a service on the back end, you’ll notice it being about four times faster on download speeds, even though they’re using the same technology and the same network,” Rubin said.

And Arledge points out that the pricing, of course, provides another great benefit. “We’re targeting a much broader audience, at a much lower price point, with applications that are tailored for them: instant messaging, email, web browsing, games, camera, all the things that have taken off so well on, say, the DoCoMo service in Japan, but have not been addressed in the States or in Europe,” he said.

Renee Niemi, Danger’s Vice President of Marketing, explains that aspects of the device such as its monochrome screen are a result of the company’s concerns about pricing. “We’re targeting a younger generation: price point is a key consideration,” she said. “We’ve designed it so it will sell for unprecedented low prices, and color would drive that price up. It’s all a prioritization game.”

At less than half the price of the Handspring Treo or the RIM BlackBerry, the Hiptop offers consumers a lot of functionality—but Yankee Group analyst Sarah Kim points out that the price still may not be low enough for many people. “$200 is still a high-priced phone,” she said. “I paid $35 for my phone. They still have the challenge of price—there’s still that sticker shock.”

And Kim is also concerned about the viability of a monochrome device targeting an entertainment-focused market. “I can’t emphasize enough how important it is to deliver rich functions on a function-rich device,” she said. “If you’re the kind that’s going to use data, you’ve probably shopped around—and once you’ve played any popular game in color, you can’t go back to black and white.”

A Tough Audience


As a result, it’s reasonable to expect that future models will offer color screens, MP3 players, and other changes. Mike Dolbec is a General Partner with Orange Ventures, which invested in Danger: he suggests that upgrades will come easily. “Because the platform’s more open and more programmable than a regular phone, Danger is well positioned to improve the hardware, and to improve the services as well,” he said.

In fact, the Hiptop is clearly built for flexibility. Not only does the thin-client design enable carriers to upgrade or fine-tune software easily from the back end, but the hardware can be adjusted as well. The screen is designed to be replaceable by the user if damaged, which could also allow users to replace a monochrome screen with a color one in the future.

Giga Information Group analyst Ken Smiley suggests that Danger’s prospects rest on its ability to find an audience in an increasingly crowded market. Palm offers the best organizer and the RIM BlackBerry has the market cornered for wireless email, he says: in the same way, Danger will have to find its own niche.

“For thin client access to a mobile device that’s centered around consumer activity, Danger may have a very attractive device for that audience,” Smiley said. “It just remains to be seen whether or not that audience is really there, and whether or not they’re willing to invest a little bit more and sign up for some of these services.”

Danger’s Rubin contends that, with both companies targeting the younger demographic, Danger’s recently-announced partnership with T-Mobile is an ideal match. With all its innovations, he says, the Hiptop heralds a completely different way of looking at mobile data usage. “We’re really entering a new era in terms of always-on data being available to the mass market,” he said.

Jeff Goldman is a freelance writer covering a wide range of topics for a number of online journals. He currently writes regular articles for Internet.com's ISP-Planet. Brought up in Belgium, Jeff spent the last decade in New York, Chicago and London; he now lives in Los Angeles.