London set to become the mobile internet capital of the world

British users still fail to realise their phones’ potential. But web pages tailored for small screens could soon change that, reports Simon Evans

It's 4.45 on a Saturday afternoon and the football results are coming through. Thousands of fans up and down the country attempt the sometimes arduous and often costly process of accessing the internet on their mobiles to find out the scores.

They are part of an estimated 25 per cent of British phone users who tap into the web by means of their mobiles at least once a month. For the other 75 per cent, the process is either too difficult or, in many cases, they don't even know they have such access.

In India, a different pattern is emerging. The home computer revolution, unlike the one that swept Britain in the 1990s, has been largely eclipsed by the arrival of the mobile. India has around 200 million mobile users and it is through their handsets, rather than PCs, that they access the web. Chinese and Indonesian audiences are also lapping up mobile-only web content.

The lack of penetration among British users and the opportunities in Asia mean that venture capitalist cash is pouring into the sector at a rate of knots. And it's British firms that are at the vanguard of producing mobile-only web content.

"Using the web on your mobile simply hasn't become a habit yet," says Mark Curtis, chief executive of Flirtomatic, a mobile-only dating company which is backed by venture capitalists. "People aren't really sure what it's useful for at the moment but the advent of maps and charting and the launch of the iPhone are really helping awareness.

"With such a large number of people ignoring the mobile web at the moment, there's a fantastic opportunity out there."

An opportunity there may be, but for smaller companies looking to offer their wares on mobiles, just getting past the gatekeeping operators isn't easy.

Jerry Ennis, a venture capitalist at Doughty Hanson, which backs a number of companies in the sector, including Flirtomatic, says that getting operators to look at smaller independent offerings is tough but that this situation is slowly changing: "There has been a real preoccupation with Facebook among the operators. But the problem is that Facebook on a mobile is the same as on the web. These companies are starting to realise this.

"We recently sold our investments in Actionality, which allows companies to develop mobile ads around games, to Yahoo!, and Plazes, a social networking offering that is based on one's location, to Nokia. There's definitely a realisation among some."

For Doug Richard, the entrepreneur who appeared in the BBC's Dragons' Den programme and who runs Trutap, a mobile social networking company that has garnered a strong following in India, the mantra is "presence, location and status".

"Facebook will clearly have to rebuild itself if it wants to exist on a mobile phone," says Richard. "When we speak to users, they are asking for 'who is online at that moment, who is nearby, what's their mood' – you get the picture. Just putting stagnant web pages on a phone isn't going to work longer term."

Jan-Joost Rueb, the chief executive of eBuddy, a mobile messaging service, says big operators are finally warming to the idea of broadening their mobile-only offerings.

"It has been exceedingly slow but operators are finally starting to allow other applications on their phones," says Reub. "The rapid adoption of iPhone applications is just the starting point but the tipping point is coming.

"What we have been seeing is phone manufacturers starting to add applications to phones to make money because margins on equipment are on the decline."

Although the industry is in its infancy, London has become the hub for mobile start-ups – incredibly eclipsing Silicon Valley in America. Alongside Trutap and Flirtomatic, the city plays host to offerings such as Mippin, a web-content aggregator for mobiles; Reporo, which brands itself as Bebo for your mobile; Truphone, which allows people to make calls from their mobile over the internet; and Bango, which offers mobile payments and advertising. More established firms such as AdMob have chosen London too.

"London has always been a hotbed of digital talent, and I think the growth of the mobile web arena shows that," says Flirtomatic's Curtis. "The American data tariffs are very high compared with Europe, where there are plenty of flat-rate offerings. That's encouraged development over here and stifled it across the Atlantic."

According to Richard: "In the US it all tends to be about supporting your traditional web experience rather than giving something specifically for the mobile. That will have to change."

For the venture capitalists on this side of the pond, it's easy to see the attraction of the mobile-based web.

"We found in speaking with major VCs that the monetisation of mobile is exceedingly better than that of the web," says Rueb of eBuddy. "They place the valuation of mobile users in their business model as up to six times higher than a web user. Monetisation is also much more natural on a phone than on the web because it's much easier for people to pay through their mobile account."

Despite the credit crunch, which has put the brakes on many private equity and venture capital investments, interest in the sector remains buoyant.

JumpTap, a US group that provides mobile searches and advertising services for mobile operators, secured a raft of funding to continue its expansion just last week.

"There is still a lot of interest in this space from the VCs – a hell of a lot," says Scott Beaumont from Mippin.

Doughty's Ennis is in agreement. His latest investment in the space is in a company that combats viruses and spam for mobiles. "The mobile web is going to be big and so there will inevitably be an increase in mobile-only viruses in the future," he says. "There are viruses lurking out there now but most people have no idea that you can get a web virus on your mobile."

Estimates suggest that as many as 1.2 billion people could regularly be accessing the web via their mobile by 2012, dwarfing the current usage.

"There have been a lot of false dawns in this industry and a lot of people have had their fingers burnt," says Beaumont. "But I really think that it will be different this time."

In the next few years we'll find out. And perhaps we'll get the football results a bit quicker too.