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Over the past year, I have been intrigued about the opportunities in the mobile phone industry, specific to application development. Google and Apple have fueled the excitement among software developers with their activities in this space, with Google developing the Android platform, and Apple’s announcements of the iPhone SDK coming AppStore. These two platforms seem to be diametrically opposed, as Apple takes their traditional “closed system” approach, while Google’s Android celebrates openness. As an entrepreneur with limited resources, I wonder which path would present the most opportunity. You would think that Android would be more successful in the long run, as it enjoys wider distribution, both because of the financial advantage that Android offers manufacturers (Google provides the platform to hardware manufacturers for free), but also because of the massive number of phones from varying manufacturers that are expected to adopt the platform.

However, Apple has captured the imagination of the cell phone consumers, and their history of innovation may make for a formidable competitor. When compared to Apple products, the cell phones produced by other manufacturers seem cold and uninviting. Cell phone manufacturers are trying to answer the iPhone with their own devices that share many of the same characteristics. So, will they be successful?

My take is that the iPhone will not reach the same penetration as the iPod. It will stay a fashionable, niche device, as Apple maximizes revenue opportunity. Apple enjoys being a premium brand, and that requires some level of exclusivity. With so many other manufacturers competing for market share, these manufacturers inevitably compete on price. It doesn’t make sense for Apple to play this game, and so the iPhone will continue to be a premium product, targeted at a fraction of the consumer base.

With that in mind, entrepreneurs should consider whether they want to target the larger audience of price driven consumers, or the smaller iPhone user base who is willing to spend money on highly polished applications that compliment the iPhone experience.