A look at Danger

Mobile can be an ironic business. Anyone familiar with Danger, the Palo Alto-based developer behind T-Mobile’s Sidekick devices, will almost certainly associate the company with it’s distinctive handset design. The Sidekick looks more like a handheld games console, with shoulder buttons, centre-mounted landscape screen and navigation pad. The smartest feature – a neatly designed QWERTY keypad – lies hidden beneath the screen until it is flicked upwards with a thumb, rotating away with a clever action to reveal the input mechanism.

Sidekick III

However, when I met with the company’s PR manager Matthew Flegal recently he was inistent that Danger is not a hardware business. Even though it is closely associated with the distinct form factor of the Sidekick and built the first blueprints for its production back in 2002, Danger itself has been reducing its involvement in the handset business for some time. In the early years, the company did work with a Taiwanese ODM to develop the first versions of the ‘Hiptop’ (later re-branded as ‘Sidekick’ by T-Mobile), but in 2004 it agreed a deal with Sharp which saw the Japanese manufacturer takeover design and production responsibilities.

Indeed, according to Flegal Sharp and T-Mobile have a completely separate agreement covering the procurement of Danger-powered hardware. Danger’s revenues are derived entirely from software and services, including a per-user licensing fee for each Sidekick on the T-Mobile network and a cut of third party application sales. The company is also working to secure another major OEM partnership to help it expand the range of devices using the Danger platform.

Hardware development, like much of the rest of Danger’s business, was a necessity to help the company achieve its objectives rather than a core function. The company was founded in 2000 by a team of instant messaging enthusiasts from the web development world, including current CTO Joe Britt and Matt Hershenson, who continues to serve as Senior Vice President of Advance Products. They identified a need for mainstream mobile devices to deliver a great messaging experience and realised that they needed to build much of the infrastructure from scratch.

The result is a complete platform, from Java-based OS and server software to hardware reference designs and SDK. It took more than two years to bring together the first product, even with the added bonus of a ready pool of recruitment talent left over from the Dotcom crash of 2000. Many of the team working on the core OS came from Be, Inc., the failed developer which was later bought by PalmSource.

This built-for-purpose architecture enables Danger to provide an impressive experience through its platform. Instant messaging, for instance, is seamlessly connected with Yahoo and AOL, but uses a server component to maintain sessions even when the device is out of coverage, ensuring that messages are always delivered. Data – from photos to contact – are automatically backed up to the Danger server, so they can be restored in the event of a crash or device loss. They can also be accessed directly by users through an integrated web portal.

Danger has also included an on-device catalogue of applications, which automatically refreshes as new products become available from third party developers. Apps can be bought, downloaded and installed with just a couple of clicks. There are now several hundred applications on the market, ranging from simple calculators to web-linked widgets, and Flegal told me they derive a high single digit percentage of their overall revenue from application sales.

These are features which many mobile companies are still struggling to launch on more advanced hardware and Danger has been offering them for several years already.

The company’s success has been confined mainly to the US. According to Flegal, T-Mobile spends “tens of millions” of dollars marketing Sidekick in the US, an indication of how significant a part of its business it has become. It also has agreements with other regional carriers in the US and T-Mobile UK and Germany, but T-Mobile’s US business remains the core of their operation.

However, that may soon change. Flegal is confident of securing another major manufacturing partner and a new operator customer in the near future. The company is also re-positioning itself to concentrate on marketing the ‘Danger DNA’ – the key software and interface elements of the platform – which could be ported to other OS and handsets.

The existing roadmap also calls for new devices with more advanced feature sets. Despite their popularity in the US, Sidekick products have always been aimed at younger customers and offered quite a basic specification compared to the multimedia offerings from leading manufacturers like Nokia and Samsung. The latest ‘III’ version of the Sidekick, for instance offers only a 1.3 megapixel camera and 2.5G network connectivity. Flegal told me that Sharp is working on improving the specification in the future and has a pipeline extending to 2008.

I also got the sense that Danger needs to move itself forward conceptually. It offers a great messaging experience for consumer email, IM and texting. It has a fantastic end-to-end application suite and highly intuitive interface. However, there is a growing appetite for high-end media consumption and manipulation on mobile devices – witness the Nokia N95, Apple iPhone and LG’s recent deal to produce phones linked to YouTube.

Danger’s platform – indeed, the very fact it has a complete platform offering and servers already installed in the operator network – put it in a great position to capitalise on this trend, but to do so will require more advanced devices and a higher build cost.

The language and structure of mobile messaging is changing. One-to-one conversations are becoming group discussions; conversations are evolving from information exchanges to leisure activities rich in pictures, video and shared applications. I’d like to see a new version of the Danger platform which put social networking, multimedia capture and sharing at the heart of the interface, right alongside its core messaging functions.

If Danger doesn’t do it, someone else most definitely will. Nokia is trumpeting its evolution as an internet company louder and louder every day. In 2008 it plans to re-organise with devices, software and services becoming a single division. All of the major handset manufacturers are increasing their investment in services linked specifically to their devices. Research In Motion (RIM) is also pushing its BlackBerry email platform into the consumer space with a new range of devices aimed at mainstream customers rather than the core of business people who’ve traditionally bought its products.

Danger is playing in a niche which is going to be increasingly under the spotlight in the future. It will be interesting to see if it can scale up the impressive experience it’s delivered for T-Mobile across new hardware and other operators. I suspect it will also become a prime acquisition target for companies keen to build a consumer messaging business around software and services (RIM would be a strong partner).


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