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Is Nokia's Ovi Finnish'd?

Ovi is Finnish for "door" and the Ovi Store was expected to be Nokia Corp. (NYSE: NOK)’s doorway to the world of Internet services. Now some reports (one each from Reuters and TechFlash) say that plans may have changed rather dramatically.

Nokia told TechFlash that it plans to close its Kirkland, Wash., facility as part of its recent restructuring efforts. Kirkland was the home of Nokia’s 2007 acquisition, Twango, which was the basis for its media sharing services. A spokesperson told Reuters: "Ovi Share… is planned to be maintained in its current state" -- apparently meaning no more investment or development is expected to take place. All this is a far cry from the company’s plans of just a few months ago.

At last December’s investor meeting Nokia was expecting the Ovi Store to be the gateway to accessing what it expected to be a €40 billion Internet services market in 2011. In their view, 1 billion people use a Nokia device every day, and Ovi would be the service brand that would bring them together.

Nokia officially announced the Ovi Store at the Mobile World Congress in February. While the store was not officially intended to "open" until May, it has been available for access for some time. However, while other media-sharing and social-networking sites are generating tens of millions of unique visitors per month, Ovi.com commanded only about 70,000 unique visitors in April, according to statistics at Compete.com. Not a scientific comparison, to be sure, but it gives some idea that Ovi wasn't keeping the folks at Facebook up at night.

But aside from the social-networking aspects of Ovi Store, there is a more important issue that comes into play relative to Nokia.

Nokia has been quite late to the party when it comes to the War of the Smartphones, in more ways than one. It only got its first touch-based device (5800) out the door earlier this year and it is largely a me-too unit. The company’s long-awaited N97 is not expected until next month.

However, two critical success factors in smartphones will be applications and their delivery systems, just as they were in the early days of the personal computer and video game industries. Unfortunately, Nokia is well behind the curve here as well.

Application software developers will gravitate to the platform that provides them with the greatest opportunity for success. If you look at the iPhone community as an example, we know that more than 100,000 iPhone Software Developers Kits (SDK) were downloaded during its first week of availability more than a year ago. With the advent of the more-powerful iPhone 3G units last summer, I’m fairly certain that the iPhone development community has grown substantially given the fact that they currently have more than 35,000 applications on their App Store.

While it is certainly not a perfect analog by any means, compare the iPhone developer interest with Nokia’s recent experience. At the company’s Developer Summit held late last month the company attracted all of 345 developers. Granted, it is a difficult economic environment and that may have had a significant bearing on attendance. If that is indeed the case we should see subdued attendance when Apple holds its World Wide Developers Conference in early June.

What may also be holding developers back when it comes to the Nokia platform is the simple lack of scale. The amount of advanced hardware in the hands of subscribers is limited as are the resources developers have to throw at any opportunity. If you look at Nokia’s overall strategy that developed as the handset market evolved, it seems to be based upon the assumption that the aforementioned 1 billion subscribers can be leveraged as if they are an asset that will attract developers for the “next” platform.

The billion Nokia devices out there are, for the most part, simply making phone calls (not that there’s anything wrong with that). The market Nokia is trying to enter is, in fact, a separate market and in this new arena Nokia is really starting far closer to square one than it may think.

This situation reminds me very much of the early days of the high-speed broadband market as cable companies rolled out cable modems and telcos countered with DSL. Both were a refreshing alternative to the days of dial-up and its king, AOL.

The cheerleaders for AOL insisted that the cable companies and the telcos would be forced to cut a deal with AOL and offer AOL’s services via the new high-speed pipe. After all, the logic went, AOL had the customers. Yes, they did and in retrospect. But building applications for the Internet as a whole, instead of just AOL, proved to be more attractive to developers. So we see just how well that worked out for AOL.

— Bob Faulkner, special to Light Reading
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