• by Steve Smith , Staff Writer @popeyesm, August 31, 2007

The iPhone changed the way we view the Web on mobile devices, but how long will it be before the marketplace catches up?

When Apple released the iPhone this summer, it created what can only be called a blockbuster sensation. People waited in line for hours to have bragging rights to obtaining the phone on the day of its debut. Over a quarter of a million units were sold in two days alone.

More than simply another in a long line of new wireless devices, the sleek iPhone is heralded as the gadget that will transform mobile media by spurring users to finally embrace video on-the-go. In theory, a new demand for mobile video will lead to a big jump in mobile ad spending, say mobile marketing experts.

"It will do for the mobile Internet what "American Idol" did for SMS messaging," says Nihal Mehta, former CEO of mobile marketing firm ipsh! In other words, by bringing more people to the mobile Web from many devices, Apple is helping to lift the entire industry.

"It's going to make WAP," says ," says Gene Keenan, vice president of mobile services at Isobar Global, Mobile Web development has already accelerated in recent months with daily announcements of new WAP (wireless application protocol) presence from broadcast, local TV and print brands. Several of Keenan's clients are building sites specifically for the iPhone, and he expects that the example of the mobile Safari experience will move third parties to develop much more robust browsers for a range of phones. "For the first time, there is a device it is exciting to create content for," he says.

For now, however, mobile advertising still has a long way to go to achieve any sort of critical mass. Last year, marketers spent just $465 million on mobile ads, according to Veronis Suhler Stevenson. While spending is expected to grow by double-digit rates for the next five years, the total mobile ad spend will still amount to just 1 percent of all ad dollars, says Veronis, which bases its forecast on a variety of research.

Even given the current state of affairs, there are reasons to believe the iPhone will have an impact. One of the device's benefits is that it lowers the barrier to entry for mobile content and advertising because Apple's standardized Web-based approach erases the costly, arduous step of making every application and mobile site compatible with countless handsets.

Lowering Barriers and Raising the Bar

Apple's platform for Web-based widgets is wider and more accessible than anything that preceded it on mobile. "The speed to market is incredible," says Bill Denk, whose small team wrote the popular Applists.com content portal for the iPhone in less than three days. In just the first two weeks, Applists.com received 17,000 unique iPhone visitors. "Imagine if I tried to do that on traditional phones? I never saw anything like it." In the face of such a simple, media-friendly standard platform, how do handset manufacturers and carriers continue to rationalize their world of countless standards as anything but media-hostile?

Also, there's the theory that the device will lift all boats and give mobile marketing its much needed scale. "That has been one of the biggest challenges," say Mehta. "The concept is that if it will double usage in six months that will be huge for mobile Internet advertising. You will have more ad impressions to serve."

With a best-case scenario of 10 million users in the first year, the short-term impact of the iPhone might prove to be collateral. That is, the revolutionary design and attendant hype likely will influence the rest of the wireless value chain - hardware makers, carriers, and especially the consumer. No doubt many manufacturers will try to mimic some of Apple's innovations in interface and touch screen design, because just about everyone agrees that the device really is that good. "As a consumer device it is a home run," Mehta says. "It's the first usable, pocket-sized Internet device, a complete breakthrough.

Not only is it "the best phone I ever had," says Isobar's Keenan, "but you get a little angry and wonder what these other guys have been doing focusing on features rather than a better consumer experience."

It didn't take long for Apple to raise the game for everyone simply in demonstrating by contrast how poorly the rest of the wireless world serves consumer experience. Hardware manufacturers either have to compete directly with a techie icon or rededicate their efforts toward defining their own niches at the lower end or in the enterprise.

In fact, in some ways, what the Apple marketing program may have sold even more effectively than iPhones is the idea of mobile content generally. With only 10 percent of mobile users in the United States regularly accessing the mobile Web and even fewer taking advantage of their own phones' video and music capabilities, there has been a huge disconnect between the dreams of a wireless content and marketing platform and consumer response. "Mobile has been there, and marketing people have been predicting huge growth and opportunity, and yet you see marketers and advertisers talking to themselves," says Jason Kramer, chief strategy officer of media research firm Interpret.

Interpret's research showed that the iPhone had a dramatic impact on users' mobile content habits, with almost two-thirds using it to watch video compared to less than a third who do so on other phones. When he polled all customers before the iPhone's arrival, Kramer found "consumers were not very excited about watching full or short video on their current cell phones." But as users moved from Treos or RAZRs to an iPhone-like experience, however, "It blew us away," says Kramer. "It's not the consumer. It's the phone."

According to Interpret data, most non-iPhone owners expect mobile video to come first from carriers but then from all the usual suspects - TV networks and cable, movie studios and the Web portals. But the biggest beneficiary of the iPhone and its attendant hype is the mobile Web itself. Now the many millions who don't, won't or can't own one know that phones do the Web.

What's Not Alright ... Yet

That's not to say that the iPhone will revolutionize mobile marketing overnight. As a platform, the device clearly will be limited for the foreseeable future. Many other phones from Verizon, Sprint and AT&T (the iPhone carrier) that can run BREW or Java applications will dwarf it in the market. At its height, the Motorola RAZR sold more than 2 million units a quarter; currently, there are more than 100 million units in the wild. "I think once you get to 5 million and 10 million you will see a shift, and at that point you can segment out iPhone users and spend dollars on them," says Dan Flanegan, CEO of BrandAnywhere and former CEO of Soapbox Mobile.

The iPhone's closed operating system (only Yahoo and Google are on-deck partners) and its slow AT&T network are no secret. While undeniably elegant, the iPhone "didn't get everything right," says Rajeev Raman, CEO of MyWaves. "You can't do a data-centric device without high speed 3G, or do one that doesn't do [downloadable] ringtones."

MyWaves' mobile video portal has one million subscribers from other devices, and Raman's team did port the site to an iPhone-friendly version. But Apple limits third-party development to Web-based apps that are accessible only through the phone's Safari browser. "This stuff kinda hurts," says Raman, because it relegates an entire eco-system of mobile content to browser bookmarks rather than more discoverable icons on the deck. For now, Raman is testing the waters to see if the iPhone demo maps well against his own young male audience. "If it ends up being something different, then we have to see how it shapes up," he says.

In addition, there also are real questions about whether consumers will accept ads on mobile phones. "The major hurdle is consumers' perception that mobile advertising represents an intrusion, and they resent paying an additional fee to view or read an ad," states Veronis in an August report about mobile advertising.

More Than Evolution

The real halo of the iPhone for marketers may come farther down the line, as it helps them imagine how media and campaigns can work across a genuinely integrated multimedia device. Arguably the most complete and usable convergence device we have seen yet, the iPhone's video, SMS, contacts, call features and Web browser work together in an unprecedented way. "You now have a bar set on what a fully integrated Web could be," says Flanegan. As mobile marketing itself moves toward more integrated campaigns, reaching from video to Web to SMS to e-mail, the iPhone is the kind of device that allows that messaging to move as fluidly as the interface itself. An e-mail confirmation can combine with an SMS or a click-to-call function or call up a Web site all on the same handheld brick. Just as the iPhone helped Interpret's surveyed consumers imagine a world where mobile video was palatable, the device may also help marketers think outside the platform silos. Can they start to connect all of those much-discussed fragmented consumer "touchpoints?"

Even months after its launch and a drunken hype-fest the likes of which consumer electronics has never seen, Apple's little wonder continues to impress with its potential to help focus an industry. At the very least, it exposes so many weaknesses in the wireless world's approach to ease of use, integration, media, and even to the customers themselves. This may be one case where the consumer and media hype surrounding the iPhone actually registered how deeply we value yet remain unhappy with the defining consumer technology of the young century - our own phones. "It is like someone snapping his finger and saying 'Wake up!' " says Flanegan. "Sometimes it takes someone to knock everyone out of their collective stagnation, which is what I think has happened here."