• by Mark Walsh  @markfwal, June 10, 2008

The upgraded iPhone unveiled Monday after weeks of fervent speculation is likely to be a hit with digital advertisers by helping to bring the mobile Web and wireless content to mainstream consumers.

The next-generation Apple device comes equipped with a high-speed 3G wireless connection, GPS technology, access to new third-party mobile applications, and an Internet service that pushes work e-mail, contacts and other information to the iPhone.

On top of all that, Apple cut the price on the 8-gigabyte model to $199 from $399, and the 16GB one to $299 from $499--potentially putting the smartphone due out in July in the hands of many more mobile users.

"The 50% cost reduction and 60 to 70% speed boost for a mass-market mobile Web device is clearly a winner in dramatically improving both the perception and viability of the mobile Web as a content delivery medium," said Eswar Priyadarshan, chief technology officer at mobile ad network Quattro Wireless. "This is equivalent to the price/performance race that drove the ubiquity of PCs back in the day."

The original iPhone launched last year redefined the way people interact with mobile devices by offering a user-friendly interface, large screen and easier access to the notoriously balky mobile Web.

A study by mobile research firm M:Metrics, for instance, found that while only 7% of wireless subscribers on average listened to music on their phones, 74% of iPhone users did so. And Google earlier this year said it received 50 times more search requests on the iPhone than any other mobile handset.

Media companies and marketers from NBC to L'Oreal, meanwhile, began to develop mobile Web sites and ad campaigns specially designed for the iPhone.

Wireless analysts said the latest version, dubbed the iPhone 3G, would provide even more platforms for advertisers to reach cell phone users. Mobile applications are one of the key new formats for marketers and content providers to explore.

After announcing in March that outside developers would be allowed to create third-party applications for the iPhone, Apple said that companies including AOL, Cisco, eBay, Electronic Arts, YellowPage.com and Salesforce.com had already come up with their own iPhone widgets.

"There will be this whole slew of things out there you can do with this phone," said Greg Sterling, senior analyst at Local Mobile Search, a unit of Opus Research. "It will be like applications on Facebook."

While competitors such as Samsung and LG intend to unleash so-called "iPhone killers," "none have this built-in community of developers creating cool apps," Sterling said.

Developers offer iPhone applications through Apple's online App Store--taking a 70% share of sales unless they choose to give away their creations for free, as is common on the PC-based Web.

Separately, the iPhone's added GPS capability is expected to expand opportunities for local advertisers through services such as local search and mapping. "Geography, and especially local relevance, opens up the ability to provide advertising relevant to the user whether in New York or L.A.," said William Ho, a wireless analyst at technology market research firm Current Analysis. "That's good for ad companies and brands."

The combination of new applications and location-based services on the iPhone would provide further options for developers and advertisers alike, Ho said.

By slashing pricing on the iPhone, Apple is also putting the device within reach of a wider group of consumers, which should appeal to marketers frustrated by the slow-growing mobile Web. It could also help the iPhone regain ground in the smartphone market, where it slipped to 19.2% in the first quarter from 26.7% in the fourth quarter, according to research firm IDC.

The BlackBerry maintained its dominance in the category, with a 44.5% share. But Ho said the iPhone price cuts would help move the device from the early-adopter crowd to the mainstream. "That's going to grab (phone) switchers for sure," he said.