• TechCrunch, Thursday, August 7, 2008 11:30 AM

After testing some 1,500 iPhone apps, TechCrunch's Michael Arrington notes that very few are taking advantage of "the network effect." Many apps from established players are simply iPhone versions of their normal service. Google and Yelp are two examples. However, for those that are unaffiliated with an established Web site, Arrington says they face the tall task of building their business on the iPhone alone.

Some of these apps have almost identical competitors, and it's impossible to sustain a business charging $10 for your product when your competitor offers something comparable for free. As Arrington says, there's a march towards free with these apps, but it's still too early to know whether advertising will be a viable option on the iPhone.

Lacking an established brand or a truly innovative product that can be protected by copyright, many of these app makers will fail. Arrington suggests they start thinking about ways to have users to interact with each other in order to build network value. "I've long argued that social networking on the iPhone is a huge opportunity, and the fact that the big guys are ignoring it for now leaves the door open for a newcomer to get long term market share."

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