iPhone effect: Will it work its magic on mobile advertising?

UK: It is not just the iPhone platform that is attractive to advertisers. The iPhone and devices that are following in its wake provide the best platform yet for enabling mobile advertising because they are optimised for rich media applications like video and also provide a genuinely good mobile browsing experience. This means the potential for better, more creative mobile advertising campaigns and of course a more engaging user experience.

Another big plus for advertising on the iPhone is the kind of people that own them. Comscore recently released data about iPhone application users that suggests they are a particularly attractive demographic for advertisers, with higher than average incomes and higher than average engagement with online media. More than half (54 percent) of app users are in households with incomes greater than $75,000 per year.

Engagement with online retail scored particularly highly, which suggests they could be open to mobile commerce that by its nature has a strong affinity with mobile advertising.

At the same time, a mobile advertising ecosystem is building up quickly around the iPhone. Specialists like Pinch Media have emerged to provide advertising-related tools and analytics for iPhone developers. Leading mobile advertising network AdMob has launched a business unit specifically for the iPhone. The iPhone is the top device on AdMob's network and has gone from generating 28 million ad requests in July 2008 to 236 million in October 2008.

The pull of the app store and branded applications is promising
However, the more immediate impact of the iPhone on mobile advertising is the application store that comes with it. In March 2009, Apple announced that there were 25,000 applications on the App Store, and in April 2009 it reported that the 1 billion downloads barrier had been broken.

This is impressive, but what is interesting for mobile advertising is that a growing number of these iPhone applications are branded. Companies that have launched branded applications include Audi, Volkswagen, BMW, Porche, Carling, Heineken, Charmin, Kraft, Nike, Gap, Coke, Zippo Lighters, Universal Pictures and Betty Crocker.

The Audi A4 Driving Challenge application registered 370,000 downloads in the first two weeks of the campaign. The Zippo Virtual Lighter application was the number one free application in the Lifestyle category. The popularity of branded iPhone applications suggests that people do not see them as advertising, which is one of the ideal outcomes for any type of advertising.

Branded applications are normally free, which is why Kraft's paid-for, branded application comes as such a surprise. Kraft's $0.99 iFood Assistant application, featuring recipes and tips, is in the top 100 applications by downloads. People are in effect paying Kraft to advertise to them, except they do not see it this way.

Apple is, of course, not the only device manufacturer to launch an application store: Google, Nokia, RIM and Microsoft have all done likewise. It will be interesting to see if the other device platforms and application stores will be as effective as the iPhone/app store combination in acting as an enabler for mobile advertising.

-- Eden Zoller, principal analyst at Ovum