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Apple, Google vie for hearts (and wallets) of developers

It's the contest within the iPhone vs. Android contest: In Silicon Valley, developers are trying to decide whether a $100 million venture capital fund or a $10 million contest are better worth their time.

For the last four months, Howard Chau has been developing a mobile application that's designed to alert people to their next calendar appointment, factoring in data like the person's physical location and traffic conditions en route to a meeting.

In the next two weeks, Chau plans to submit the GPS-based application, called Mappily, to Google in the hopes of winning its Android Developer Challenge, a developer contest with $10 million in total prize money. Because Chau only stands to win tens of thousands of dollars in the first round of the challenge, the money would just be gravy.

"It's really a way to get seen," said Chau, the 26-year-old president of Cupertino, Calif.-based Mappily, which employs three people.

Chau's plight is part of Silicon Valley's new contest within a contest to create the hottest new mobile technology.

Pulling the strings are Google and Apple, which are in a simmering battle in the handset market with respective new platforms and software development kits. (That could be especially uncomfortable, given that Google CEO Eric Schmidt sits on Apple's board of directors.) Behind the scenes are the venture capitalists, such as Kleiner Perkins Caufield & Byers, which recently established the $100 million iFund to invest in mobile applications for the iPhone. Google's Android Developer Challenge is its own version of the iFund at a 10th the size. But surely other VCs are ruminating on forming the Android Fund to rival KPCB.

Charles River Ventures, for example, has briefly considered the idea, but will likely fund Android applications from its QuickStart seed program, which grants promising upstarts a convertible note worth $250,000 to get their project off the ground, according to one partner.

With all of that money floating around, developers are rushing to build the next big widget, social network, or mapping technology for the mobile phone. Not only are developers lured by the idea of making money on the mobile phone, but they're also drawn by financial incentives coming from both camps that might seal their future.

Google's $10 million will be doled out in chunks to developers with winning mobile apps for its upcoming Android platform. That contest, which will come in two rounds with the first deadline April 14, takes a page from the XPrize Foundation and other incentive-prize competitions that have spawned innovations in flight and rocketry, and potentially, lunar rovers and energy-efficient cars.

Meanwhile, KPCB has dangled a much bigger carrot for developers trying to win big with mobile applications on the Apple iPhone. The venerable VC announced the $100 million fund in early March, when Apple unveiled its software development kit. Developers who land a deal with KPCB will not only be well-funded, they will be well-connected to Apple's platform. Apple executives at the highest levels will be consulting on the deals, according to KPCB iFund lead Matt Murphy.

KPCB has already ported a couple of its own venture-backed start-ups into the iFund, including Pelago, which makes a social-networking application.

Still, such specific funds have failed before. For example, during the dot-com boom, KPCB announced the Java Fund, and nothing huge came of that venture. For that reason, many VCs say it's a way to generate buzz more than anything else.

"Any serious VC is going to fund things on the iPhone and Android platform if it's a cool thing. In general, VCs are less excited about applications where the carrier is in control," said George Zachary, a partner at Charles River Ventures.

iPhone already established
For many developers, Apple's iPhone is more alluring as a development platform because of the established customer list. Unlike Android, the iPhone platform has hardware with millions of customers; and as a bonus, Apple-sanctioned applications go on sale in its mobile store.

Craig Hockenberry, chief technology officer at IconFactory and a longtime Mac developer, said the iPhone offers a clear business path. His company is developing a Twitter messaging tool called Twitterific for the iPhone, among other applications. IconFactory will sell Twitterific for a one-time fee of $15 or offer a free advertising-supported version.

"We don't need outside investment, but that iFund is going to be useful for people who have big social-networking programs that need backend infrastructure," Hockenberry said. "We just want to build small, fun apps and leave it at that. Those are the ideal apps for the iPhone."

As for the Android contest, he hasn't been enticed by it because there's no hardware yet. "It's a bit of a gamble. You can maybe make a million dollars, but what if you don't? You have nothing. I think what we have going onto the iPhone, it's going to sell. People are asking for it," Hockenberry said, adding: "Nobody's got Android."

Hank Williams' company Kloudshare aims to enter the Android contest. Having raised $40 million in venture funding for ClickRadio during the dot-com boom, he said that VC money comes with too many strings. Kloudshare, based in New York, is developing an application that will help people manage data on their phone and desktop, but Williams wouldn't get more specific than that.

"The idea that Google's putting $10 million on the table, saying 'we're going to give it to the best companies by this deadline' is more direct in my mind. I would imagine Google will write more checks than the Kleiner folks."

"The money--that's a maraschino cherry," Williams said.

Still, Kloudshare will likely develop an application for the iPhone. "We figured Android was the low-hanging fruit. We want to prove that it worked on the Android platform and then go from there," he said. Williams believes that Android will likely be the operating system for the largest portion of the cell phone market, rekindling the PC vs. Apple fight. "It's going to be like the PC market, with 20 companies selling Android. One is perfect and the other is everywhere," Williams said.

To be sure, developers say Android's platform is easier to create applications for because of built-in mapping intelligence technology and so-called background processing. That's why Chau chose the Android platform, for its in-build mapping technology.

Chau said he's waiting to hear of an Apple update that will include a GPS-sensor so that he can port his application to the iPhone and boost its customer base.

"It's tempting to see that there's a lot of money out there for companies like us," Chau said.