Ecrio's Revolutionary Cell Phone Applications Could Change How America Shops

EnlargeNagesh Challa | photograph by Suzy Polling

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In the wee hours of the morning, Nagesh Challa's life often unfolds like some turbocharged remake of the movie Lost in Translation. Like Bill Murray's character, Bob, who blows off steam in Tokyo's karaoke underworld, Challa decompresses after long days in Japanese boardrooms by mounting bar stages and belting out standards like "Hey Jude," as well as enka -- love songs in Japanese -- that he doesn't quite know the words to. As the shirt-and-tie-clad engineer croons, "Don't ca-a-a-rry the world upon your shoulders," locals clap and whistle -- and Challa's colleagues in the Japanese mobile-phone industry watch in amazement. "It scares the heck out of me," Challa admits. "I'm not a very public person. But it's okay, because you don't have to hit all the notes perfectly."

This derring-do has served Challa's daytime alter ego well. After dawn, the unlikely karaoke king can usually be found in one of two places: in the idea lab of Ecrio, his Cupertino, California, company, dreaming up next-gen cell-phone features, or in technophilic Japan, forging multimillion-dollar agreements to license those features to such mobile heavyweights as NTT DoCoMo, Mitsubishi, Sony Ericsson, and NEC. More than 30 million Japanese cell phones already include applications he has designed -- applications, for instance, that let consumers swap cell-phone video clips as easily as they trade photos or call up coupon and credit-card codes on their phones instead of walking around with overstuffed wallets. "We always joke, 'Hey, Nagesh, you don't need to invent things five steps ahead of everyone else, only about one and a half,'" says Hide Tanigami, CEO of semiconductor distributor Marubun/Arrow USA, who has worked with Challa for more than 20 years. "You can still make money that way."

Five steps ahead works fine for Challa. Ecrio is profitable, with the bulk of its revenues coming from Japan. It recently wrapped up a $24 million investment round led by CSK, JAIC, Nomura Securities, Aplix, NTT DoCoMo, and Visa, a colossal vote of confidence from global firms that follow the industry closely. And later this year, it will release a product in the United States for the first time, one that the company hopes will revolutionize shopping and expand our understanding of what a mobile phone can do. "Mobility and ubiquity are so important -- being able to communicate easily and seamlessly," Challa says. "The idea is that as you're walking around with the phone, you're doing more and more things."

Challa's been a tinkerer since his childhood in southern India. "My parents and sister would duck for cover whenever I said I would repair something," he says. "To them, that meant destroy." He moved to the United States to pursue a PhD in physics at Purdue University, but abandoned his studies for a job designing chips at National Semiconductor. Then he started a company, NexCom Technology, developing gadgets that were light-years ahead of their time; for instance, in the early 1990s, he invented the Media Stick, a 2-megabyte storage device for PCs and mobile phones. "People didn't quite know what to do with so much storage," Challa says. He again found himself too far ahead of the curve when he started Ecrio in 1998. Working late at night in each other's living rooms, Challa and cofounder Rao Gobburu had developed a device called SmartPad that let users scrawl handwritten notes and transmit them to phone and PDA displays -- a platform they envisioned expanding to images, videos, and other data. But when they pitched the multimedia package to mobile operators in 2002, "the feedback we got was, 'This is too much,'" Challa says. "We got carried away by the technology. The operators were looking for something simpler."

By 2004, the mobile landscape had changed -- but Ecrio's passion for sophisticated technology hadn't. Much-hyped 3G cell-phone networks, which allow high-volume data transmission, were becoming common in Japan, making mobile providers there more receptive to the bandwidth-heavy apps Challa and his team were developing. One of those applications, Push-to-Talk -- a voice-based instant-messaging system -- produced a coup for Ecrio: NTT DoCoMo opted to include the system on all of its phones, which are made by companies including NEC and Panasonic.

Push-to-Talk proved a huge moneymaker, but that wasn't all. It also inspired Ecrio to create a broader platform called Push-to-X, which the company envisions as the future of multimedia messaging. Larry Loper, Ecrio's VP of marketing, grabs his cell phone off the table to demonstrate the possibilities. "Let's say I'm running late, and I can't reach Nagesh, so I open up this little app on my phone." He speaks into the mic, "Hey, Nagesh, it's Larry, and I wanted to let you know that Highway 9 is completely blocked this morning, so don't wait up." A couple of seconds later, Challa's email client dings an alert.

When Challa clicks an icon in the email, Loper's just-recorded message plays through his computer speakers. From here, Challa has several options: He can reply via email, which gets sent to the recipient's phone as a text message; record a voice-message reply using the computer or his phone; or have a text-based phone-to-phone or computer-to-phone dialogue in real time, Instant Messenger -- style. "It's fixed and mobile convergence," Challa explains. "Multimedia messaging isn't new by itself, but the flexibility of receiving a message any place is what's interesting about this platform." He sees the Push-to-X platform as akin to the primitive Internet of the early 1990s -- a forward-looking framework on which more specialized structures will eventually be erected. "I can add video IP -- I can say, 'Hang on, let me show you something,' and there'll be a little 30-second video that'll come directly to your phone. I can add advertising. I can add coupons. I can add commerce. That's the uniqueness."

The next Ecrio product planned in this line -- and the first slated for release in the United States -- is MoBeam, a program that uses the LEDs on cell phones to create patterns that mimic bar-code sequences. For years, developers have been trying to display scannable bar codes on cell-phone screens -- unsuccessfully; light reflecting off the screens interferes with the scanners' detection systems. "Then I thought, What if we get out of the paradigm of trying to read the code off of the screen?" Challa says. "It's looking for light reflections, so why don't we just give it the light it's expecting?" The upshot: Instead of printing out online coupons, movie tickets, and boarding passes -- and toting around credit cards and gift cards -- consumers will soon be able to store bar codes in their phones. Visa found Challa's idea so revolutionary that it just announced plans to make MoBeam the centerpiece of its upcoming mobile-phone credit-card program.