• by Steve Smith , Staff Writer @popeyesm, August 21, 2008

For all the things it was supposed to be, there was one thing the iPhone 3G was not (for a day, at least): operational. It was buggy and prone to crash, right out of the box. AT&T's supposedly higher-speed network failed to deliver, offering spotty coverage and "speed" that was anything but. Almost every first-day U.S. buyer suffered activation problems while using the overtaxed servers. But experts aren't worried for the Teflon brand.

While satisfaction was somewhat delayed, "the iPhone remains an evolutionary product," says Dan Flanegan, CEO of Brand Anywhere. The combination of the 3G's speed, embedded GPS location awareness and the new App Store of third-party downloadable programs opens the door to brands crafting truly useful tools for consumers. "Mobile marketing for the most part has been about display banner or text ads," says Isobar's vice president of mobile services, Gene Keenan. "With third-party apps, it will be about creating life-enriching participatory experiences for the consumer." Adding location awareness and local information into something like a hotel's own downloadable app is a game-changer. "It's a revolution," he says. "Within a few years ... it will be bigger than the iPod."

Apple dropped new DNA into the phone industry with the original iPhone, but the new software-hardware combination allows "persistent marketing" with consumers through a dedicated program on their phones. "The fact that a branded application can sit next to my SMS, e-mail or browser icon and have equal real estate on my iPhone is extremely powerful," Flanegan says. For brands that do not create their own mobile tools for users, advertising into a new universe of free applications opens up rich marketing territory. AdMob, JumpTap, and Medialets are just a few ad networks already promising to serve lush new display units into iPhone apps.