• by Mark Walsh  @markfwal, June 9, 2009

Will everyone soon be sporting an iPhone in their back pocket? Announcing at its Worldwide Developers Conference Monday it would cut the retail cost of its iPhone 3G to $99, Apple showed it was willing to risk some cachet to broaden its customer base. The new 16MB iPhone 3GS will sell for $199.

The more recession-friendly pricing will appeal to consumers who may have previously thought the iPhone too expensive while forcing competitors to reconsider their own pricing. Presumable knowing Apple was rumored to be planning an iPhone price-cut, Sprint might have trumped Apple and its carrier partner AT&T by coming out with a lower-priced option than the $199 Palm Pre it launched last week.

But don't be surprised to see smartphone prices start to tumble under pressure from the 'budget' iPhone. For mobile users, falling prices on smartphones and feature phones coupled with the spread of all-you-can-eat calling and data plans is a welcome trend.

Advertisers stand to benefit as well from Apple's latest moves. The cheaper iPhone 3G could help expand the audience for mobile content-Web browsing and App Store applications in particular.

Apple boasted Monday that the iPhone is already responsible for 65% of mobile Web usage. With the new iPhone 3GS (which includes a 32MB version for $299), faster processing power and increased memory promises faster downloads and smoother delivery of display advertising. While the quality of AT&T's wireless service is often iPhone users' biggest complaint, the carrier plans to begin rolling out its next-generation network sometime next year.

New in-app payment options for developers in the updated iPhone operating system should also encourage the further proliferation of compelling apps, which have emerged an advertising platform in their own right. Expanded features in the iPhone 3.0 OS such as MMS messaging and various location-based and mapping services could also lend themselves to advertising or e-commerce opportunities.