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Business Money

Mobile app economy inspires local entrepreneurs

The mobile app economy is real — and it's brewing in Baltimore.

Many businesses are opening their wallets and spending to build mobile apps for customers to use. And developers are in hot demand across the United States, various surveys this year show. It's all a response to a young technology that has become a $6.8 billion market — and is growing quickly.

In the Baltimore area, the mobile app economy is still in its early stages, fueled by a small corps of independent developers, advertising and marketing companies, and a handful of companies that specialize in creating the apps.

But interest is high. Last November, Chris Stone, co-founder of a Harford County-based website development firm, started the Baltimore Mobile group to help build the community of app developers and designers. The group has gone from three to nearly 200 members, with meet-ups every three weeks in Canton.

"It's been a lot of fun," said Stone. "It's grown way faster than anyone expected."

Baltimore's mobile ecosystem is anchored by Millennial Media, a private firm that goes toe-to-toe with Google and Apple in mobile advertising. It's a promising startup that's drawn $67 million in private investment since its founding five years ago.

As of August, more than 116 million Americans were using mobile applications — up 19 percent over the previous year, according to a ComScore survey this month.

"The ramp-up of mobile apps being central to mobile computing has happened so quickly," said Hemang Gadhia, senior vice president for audience intelligence at Millennial Media. "It's just been tremendous, tremendous growth."

It's a familiar story. In the 1990s, companies rushed to build websites to extend their brand or engage in e-commerce, mostly for consumers sitting behind desks at computers. A new economy was built around websites — their design, marketing and behind-the-scenes hardware and software needs.

Now, the mobile app market is a new chapter, as consumers are using powerful smartphones and tablets that are touch-sensitive, location-aware, and socially networked — and these devices shoot photos and video.

Apple's introduction of the App Store three years ago opened up the market, allowing any developer to submit his or her work for approval. Apple's competitors soon followed with their own variations of the App Store.

The global mobile applications market was worth $6.8 billion last year, with more than 40 percent of revenues in North America. It's expected to grow to $25 billion by 2015, according to a survey this year by MarketsAndMarkets, a global market research firm based in Dallas.

Generally, the barrier to entry is low for businesses and developers that want to build mobile apps. Businesses with existing websites can spend hundreds or a few thousand dollars to extend their Internet presence onto mobile phones. More sophisticated mobile apps, though, can cost five or six figures to develop, industry observers say.

And not every mobile app behaves the same. Generally, smartphones can access two types of apps — native or mobile web. Native apps are downloaded from an app store, such as Apple's or Android's, and can tightly integrate with a smartphone's hardware and software. Mobile web apps aren't downloaded, and instead are viewed with a smartphone's mobile web browser, in much the same way a computer user would view a website on a desktop PC.

Among the Baltimore-area entrepreneurs seeking a foothold in the market are Todd Marks, Jason King, and Shawn and Stephanie Grimes. Their stories illustrate the promise — and sacrifices — that have accompanied the young technology.

A startup tale

Todd Marks had been building websites for years in New York and Baltimore, working for a creative agency and later as an independent consultant. But when Apple unveiled the iPhone in 2007, he could sense the coming opportunity in mobile.

Marks, 35, started Mindgrub in the basement of his Oella home in 2002 and nurtured the business in his spare time. In 2007, he hired a full-time employee and the next year, he quit a job that had him telecommuting to New York every week. Early on, he recruited computer science interns from the University of Maryland Baltimore County, where he's an adjunct professor.

The first couple of years were lean times, as Mindgrub had a narrow pipeline of website projects. As the economy cratered in 2009, Marks spent time bartering his services and building his portfolio. He had six employees working out of his basement.

By 2010, the marketing departments in companies were starting to experiment with building mobile applications, and Marks watched business explode. And 2011 has been another busy year, with Mindgrub moving its office to a bigger space in Catonsville to accommodate 30 employees.

"Things just took off," said Marks. In 2010, "we went from early adopters to the early majority. At that point, businesses started to make the switch" to mobile apps.

Mindgrub has dabbled in making its own native mobile apps for consumers, but the company's core business is serving clients' needs by building for them. Clients include Yamaha and the Johns Hopkins University. For Hopkins, Mindgrub designed an app that uses an iPhone's built-in GPS feature to help a user navigate the campus.

Marks' firm's revenues have skyrocketed. In 2009, Mindgrub's sales were $300,000. Last year, revenues were just under a million. And this year, the company is on track to make more than $2 million, according to Marks.

The company's early revenues came entirely from website design. Now, no more than 40 percent of sales come from regular websites — while more than half comes from mobile applications, Marks said.

"If we didn't add mobile, we'd probably only be a half-million-dollar-a-year company," said Marks.

The independents

Shawn Grimes, a computer security expert, expects to lose his job and six-figure annual salary this January as part of a long-planned downsizing at a local company. With years of experience and multiple job offers every week, Grimes is confident that he could quickly land a similar high-paying job.

But that's not what he wants.

Instead, Grimes, 31, plans to take his severance pay and pour the money into his and his wife's mobile app business. For more than a year, he's been building iPhone and iPad apps on the side. His wife quit her job as a Harford County teacher to design and market apps, so she could help her husband.

"I'm getting a unique opportunity with a severance package," said Grimes. "To pass it up and not try going out on my own and living this happier life would be a big mistake. I have to at least try."

His company is called Shawn's Bits, and he has built gaming and photography apps. And his wife just started Campfire Apps, which is focused on family and education apps.

Campfire just released a Halloween-themed app this month called Henry's Spooky Headlamp, which encourages preschoolers to find spooky objects on the touchscreen.

Having released five mobile apps, the pair has taken the business from nothing to $1,500 a month in sales through Apple's App Store. (That's after Apple takes its customary 30 percent cut of each app sale.)

His initial goal is to create at least 10 mobile apps, with each pulling in $500 a month in sales. On average, it takes him and his wife about three months to design and build an iPhone app.

"I'm not going into this looking for the big win, the quick win," Grimes said. "You have to go into this knowing it's going to take you a while to establish yourself, even as a freelancer. You've got to get something in the app store that looks good."

To prepare for their new venture, the couple, who do not have children, downsized their lives. They own two homes, which they rented out, and moved in with his grandparents in Dundalk.

Grimes recognizes that the money he and his wife are making now, and will make in the near future, is a shadow of his six-figure salary.

"It's a different income, but it's a happier living for me," said Grimes, who works at night for hours side-by-side with his wife to create apps. "The corporate world is a little too corporate for me."

Completely virtual

Jason King concedes he's a bit of a computer geek. He graduated from the University of Maryland, College Park with a computer science degree and went straight to work for Northrop Grumman. But he soon got the itch for entrepreneurship.

In August 2006, he decided to form his own business, Accella.

For the first few years, King built websites for commercial clients, such as real estate brokerages. But soon after the iPhone hit the market, he and his technical team started experimenting with developing apps to pitch to clients.

"We thought it would be a niche that would get us into the door with companies," King, who lives in Odenton, said of Accella's new thrust.

King, 31, now employs 22 full-time staffers, and they all work from home or wherever they happen to be. Seventy percent of King's employees are based in the Mid-Atlantic region.

Accella employees communicate using cheap or free online tools, such as Gmail and Google Chat. They meet at clients' offices. And periodically, King throws all-staff affairs, such as a holiday party and a springtime barbecue.

King has turned a small company whose sales were entirely tied to traditional website development into one whose mobile apps business now accounts for 50 percent of revenues. And those revenues are growing every year.

King's firm has built apps for the National Archives, Long & Foster and a company that offers a medical job search database. Sometimes, clients want a straightforward mobile presence that's similar to their website; in other cases, King helps them develop an app that's geared toward a specific use or online tool.

In 2008, revenues were $800,000. In 2009, $1.4 million. Last year, revenues topped $1.8 million. And he expects to top $2 million this year.

King is bullish on advances in mobile technology, believing that it will continue to drive a nascent apps economy. "I don't think people have fully taken advantage of their mobile devices," he said. "They'll continue to get more powerful."

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