Israeli firms are bringing the wonders of the Internet - in innovative and refined applications - to your cellphone

Hanan Sher

SHAUL SHALEV has a unique way of showing hospitality. Instead of ordering up coffee or a soft drink for guests at Cellenium's offices, not far from Netanyah on the Tel Aviv-Haifa highway, he takes them to the beverage machine in the waiting area. "What would you like?" he asks, pulling a cellphone out of his pocket.

"Diet cola?" He click-clicks on the phone's keypad, the big red drink machine issues some rumbling noises, and out pops a silver-and-red cola can.

It's not a techie's parlor trick. Shalev is demonstrating one application of Cellenium's base technology that does more than just operate soft-drink dispensers: In other configurations, it will collect for parking in paid lots or on city streets, order and purchase fast food, replace the credit card and maybe the attendant at the gas station, and handle transactions as small as 60 cents. Instead of searching their pockets for change, users punch cellphone buttons.

Cellenium is in the midst of a stampede of Israeli companies racing to make a buck - or better yet, a few million bucks - out of mobile Internet, the offspring of a marriage between portable devices like the cellphone or the PDA (personal data assistant) and the World Wide Web. Koldoon, the authoritative Tel Aviv technology company database, lists no fewer than 132 firms and individuals, most of them Israeli, in the field and in the related area known as m- or mobile commerce. "At every trade show we go to in Europe," says Reuven Gamzon, co-founder of mPrest, an m-commerce firm, "Israel is always the country with the most mobile Internet exhibitors."

And mobile will be big. In two or three years, according to estimates, there will be 1 billion cellphones and other handsets in use around the world - and most of them will be able to handle data as well as voice communication. "Any application that captures a tiny percentage of what's out there will have a huge business," says Dror Daniel Ziv, mPrest's marketing VP.

"Everyone is looking for a killer application," adds Alon Bloch of Jerusalem Venture Partners (JVP), which has invested in several mobile Internet firms. "So far, there is no killer app, just a bunch of things that can be interesting" in a range of disciplines, from interactive games played with other cellphone or PDA users to mobile banking and technology that will enable cellphone users to order plane or movie tickets, or even follow the bidding on an auction Internet site.

But if nobody knows exactly what's going to click, the market for mobile Internet services is a given. Over the last year, cell operators have spent a lot of money to acquire air spectrum, the frequencies needed to transmit mobile messages. "In the U.S., for example, operators paid a total of $17 billion alone for the rights, before they even got to building the wireless infrastructure," says Yossi Wellingstein of Herzliyah-based CellTick, another firm in the field.

Voice service won't generate enough revenue to cover the massive overheads. So operators - like Sprint in the U.S., Telecom Mobile Italia, and Israel's Pelephone, Partner/Orange or Cellcom - must provide add-on services at an extra charge.

"Quite early on the mobile operators said they didn't want to be like Internet service providers on the wired Internet, acting as conduits and collecting a monthly fee," observes Bloch. "They wanted to be both the pipes for the data, and the owners."

And getting customers to pay for frills - games, e-mail, stock quotes - shouldn't be hard. The wireless world, notes Alan Feld of Israel Seed Partners, a Jerusalem-based venture capital firm, isn't like the Internet, where surfers are used to getting services, software and information for free. "Customers are accustomed to paying on a per-use basis for their cellphone, like they do on the telephone for voice mail," he says.

NOT MANY CONSUMERS HAVE the mobile Internet on their handsets now, but the building blocks of the brave new world of communications are almost all in place. Data services already account for 10 percent of the revenues of wireless operators in Scandinavia, and the volume of SMS (short message service) in wireless-savvy Europe has already passed 3 billion a month, and going strong.

The problem is finding new services that will work on hand-held devices. If anyone thinks it's all just a matter of transferring the Internet data from the 15-inch PC monitor screen to the 1x2-inch cellphone, or even the slightly larger PDA, they'd better think again. Marketing current, or even future, technology as mobile Internet "may have been a mistake," says mPrest's Ziv, "because Internet users expected what they got on the web, with all the content. But they found out that, say, reading the Guardian newspaper on the phone wasn't the same as seeing it on the screen."

"Nothing on mobile devices is really designed for the Internet," explains Bloch. "You have a lousy little screen, and a de-vice that's not very good except for punching in some numbers. And you've got a screen that takes forever to scroll down, if you want some kind of meaningful search."

The other problem is speed. The wireless network transmits data at 9.6 kilobytes per second, slower than even the outmoded 28.8 modem. Even the next-generation networks (known as 2.5G or 3G), due within the next year, won't be fast enough for video images. It's unlikely things will get appreciably better because of limitations on available bandwidth, and the amounts of energy needed to transmit large data packages. "I don't see laser beams or phasers giving more frequencies to mobile Internet anytime soon," chuckles Wellingstein.

The successful mobile application, then, should comply with the "three fives" of Marco di Benedetti, the head of Telecom Mobile Italia: It should be no more than five lines long, and it should take no more than five clicks and five seconds to get it. Given these limitations, an astute handicapper will pick companies that offer something tailored for the new medium, not those that attempt to move fixed Internet businesses onto wireless. The favorites fall into several categories: enabling technologies for more effective delivery of wireless content; location-based services that target cellphone subscribers in a particular geographical area; and business applications that could, for example, enable a salesman to configure a complicated piece of equipment without calling in service personnel.

The fact that mobile Internet is in its infancy dictates that most of the companies in the field are start-ups. CellTick of Herz-liyah, for example, broadcasts messages promoting various operator-offered services while a user's handset is turned on but idle. A steady stream of advertising could, for example, offer discount theater tickets to users in the vicinity of Tel Aviv's Habimah an hour before curtain time, advertise specials at the Publix supermarket chain in Florida, or tell mobile gamers around the world when the next "Dungeons and Dragons" is about to start.

Tel Aviv's mPrest attacks the limitations of mobile differently: With a couple of clicks of a cursor on their PC, users can select specific bits of information - from the price of a share on the New York exchange to the latest bid on an item on EBay - that then show up, in one line, on their mobile's small screen. Unlike other competing applications headed for the market, Ziv says, mPrest is simple. "You don't have to be a tech whiz to drag and drop on Web pages."

While both mPrest and CellTick expect to form alliances with mobile operators, Cellenium's plan is to team up with the seller and take a cut of micropayments. "In Japan, $100 constitutes a micropayment," he says. "But we think they can be much smaller. And if you sell a soft drink for 60 cents, there's no reason why a quarter of that can't be invested in the transaction."

Cellenium is working on limited-area launches of its product in Israel and elsewhere: Its local partners include the Israeli Coca-Cola distributor, gas stations of the Dror and Alon chains, and paid parking at the Kiryat Weizmann high-tech park in Nes Tzionah. Sometime in 2001, it will be used to pay for on-street parking in Tel Aviv: Instead of meters or prepaid vouchers, motorists will dial a number and punch in a sum and a time, which will be fed into the city's central parking-ticket computer.

There are plenty of other local firms in the mobile field, all start-ups with fewer than 50 employees: Ayeca, headquartered in Rosh Ha'ayin, specializes in management and billing of millions of customer profiles for wireless operators. The Peanut Butter and Pistachio applications of Cash-U, in Netanyah, provide a platform for dozens of games on multi-user cellphones. C4U, of Tel Aviv, facilitates automatic updates of data, including news and market quotes, direct to the cellphone. Rosh Ha'ayin-based AdamTech offers a variety of mobile payment solutions.

It's generally conceded that there are too many companies doing similar things in the mobile business "space" and that some will crumble - just as Internet content companies are crumbling now, in Israel and other places - when the eventual shakeout arrives. Bloch says the lines will be clear well before 2003 or 2004, by which time mobile Internet is expected to be well established.

There's already substantial belt-tightening. "Once funding for Internet consumer companies stopped in March or April 2000, money for mobile Internet consumer applications kind of stopped too," says Bloch. Start-ups agree it's harder to raise capital. But this has also made some move more quickly, to bring their products onto the market. "The mobile operators need to bring back some of the money they've invested," says Ziv of mPrest, "and to do that they have to deploy more services."

IN THE PAST, ISRAEL has been a leader in various Internet-related technologies, from Mirabilis, which set the standard for instant messaging with its ICQ program, through CheckPoint, a recognized world leader in computer security, to networking and optical transmission firms like Chromatis, sold last summer to Lucent for a price that, even after the NASDAQ collapse, was valued in the billions of dollars. In each of these areas, part of the technology base came from applications developed in the military industry, then adapted to civilian uses. In the case of mobile technology, Bloch notes that "research in the universities is also a good source."

Another advantage is that virtually all of the Israeli ventures into mobile are programs rather than hardware. "It's much easier that way," says mPrest's Gamzon. "Everybody already has the device, and all you have to do is create new ways to use it."

CellTick's Wellingstein, for example, got a call from a friend about an idea they could turn into a business of their own. "I made a phone call here and there, about how to turn our idea into a working technology. Soon I had just what I needed to know," he says. The circle of people that helped refine the CellTick idea amounted to fewer than 100. "Some," he says, "were close friends, some people I knew about, through the university, the army and business."

The Israeli old-boy network, it seems, is alive and crucial - even in an industry where hardly anyone is over 40.

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CellTick Software Technologies
Herzliyah

Founded: May 2000

Main investors: Jerusalem Venture Partners, $3.5 million

Key executives: Yossi Wellingstein, 38, founder and CEO . Uri Baron, founder, 44, Ronen Daniel, VP sales, Ran Wellingstein, CTO.

Employees: 20

Celltick builds an interactive software platform for mobile content-centric and m-commerce services. It lets mobile operators non-intrusively "stream" constantly changing content into handsets, and provides real-time location-based information without consuming large amounts of bandwidth. Subscribers react to a displayed message by pushing the OK key, which connects them directly to the content provider. CellTick is negotiating with several European wireless operators about installing its system.

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Cellenium Ltd.
Shefayim (south of Netanyah)

Founded: November 1999

Investors: A subsidiary of Contop Ltd., a 50-50 joint venture of the Elbit Ltd. holding company and Shaul Shalev. Elbit invested $14 million in Contop in November 1999.

Key executive: Founder and CEO
Dr. Shaul Shalev, 45

Employees: 50

Cellenium uses proprietary messaging technologies to enable m-commerce solutions, which are marketed to content providers and cellular operators in Israel and abroad. In addition to parking and vending machines, the technology adapts to fast-food outlets too.

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mPrest Technologies
Azrieli Towers, Tel Aviv

Founded: April 2000

Funding: $4 million in seed money from Polaris, SKFT, Technoplus and Chase Capital venture capital funds, and Amal American-Israel corp.

Key executives: Founders Eli Arlozerov, CEO, and Reuven Gamzon, president, and Dror Daniel Ziv, VP marketing, all 33.

Employees: 22

Technion-trained Gamzon and Arlozerov, served in different army programming units, say they worked for a year on development before coming up with the idea for a start-up, directing selected information to a mobile's small screen. The base technology involves tracking a very large number of small bits of data simultaneously. The first commercial release is due before the end of March via Mirs, a provider of internal communications to Israeli businesses. Internal "beta" trials are planned or under way with a dozen European operators.