Is the iPhone a tipping point?

What impact will the launch of Apple's iPhone have on mobile advertising and marketing? David Murphy finds opinion significantly divided.

It's one of the coolest phones, if not one of the coolest gadgets, ever made, and since it first appeared in the US, consumers have been clamouring to get hold of one. For eager punters in the UK, that day came on 9 November last year, when the iPhone went on sale at O2, The Carphone Warehouse and Apple stores at 6.02pm precisely.

So what does the iPhone mean for mobile advertising and marketing?Will it make brands sit up and take notice of the mobile channel? Or, at £269 and a minimum 18-month contract with O2, is it just a boy's toy for people with more money than sense?

O2, the network with exclusive distribution rights for the iPhone in the UK, is unsurprisingly in no doubt about the handset's significance. Its head of mobile advertising, Simon Dean, says: "The iPhone marks a step change for the mobile internet, bringing by far the best browsing experience on the market."

According to Dean, 60% of O2 iPhone customers are sending or receiving more than 25MB of data per month - equivalent to approximately 7,500 e-mails or 25 YouTube videos, compared to 1.8% of other O2 pay -monthly customers. "We expect a halo effect, as more people start to appreciate the benefits of the internet on mobile," he adds. "This will bring increased data usage across the board, which will in turn boost the mobile advertising market."

For its part, Apple inexplicably refuses to comment on the iPhone's prospects, saying it has a policy of not discussing its marketing.

But Mike Hawley, digital futurologist and former director of the Massachusetts Institute of Technology, says the iPhone represents "a major step forward as a platform" when compared with other smartphones, and calls it "the first real pocket operating system; the first device that puts the net in your pocket".

He believes Apple's command of rich, high-end graphics, combined with the overall design and the touch-screen user interface, mark a significant departure from what has previously been possible in creative applications.

Hawley is not alone. Mark Slade, managing director of mobile advertising specialist 4th Screen Advertising, is excited by the hype it has generated around the subject of mobile content.

"It reinforces the idea that the mobile is more than a communications device," says Slade.

"It's a media device now. People are consuming, and will continue to consume, a lot more content through mobile phones, and the iPhone is a good stepping stone to get people thinking about that." The iPhone has spurred advertisers and media buyers to proactively contact him to find out what opportunities it offers, he adds.

The most popular mobile advertising formats currently, he says, are banners and pre-rolls on mobile video clips. Search and in-game mobile advertising are also starting to gain momentum.

US company ON Networks is using pre-roll ads as part of a sponsorship package for the programmes it commissions and distributes via telecoms and online partners such as AT&T and Yahoo! The programmes, all shot in high definition, are typically between three and seven minutes long, with a 10 to 15-second pre and post-roll ad, plus two or three brand pop-ups during the programme.

Bruno Teuber, ON Networks' vice-president EMEA & Asia Pacific, points out that while the content is primarily designed for downloading from a PC website, the quality of the iPhone's screen has made both the editorial and the ad content look better than ever before.

"The iPhone provides good enough quality to do things other than phoning," says Teuber. "It gives us the ability to put great-looking content on to the phone. It's a fantastic combination of a phone and a multimedia device."

Russell Buckley, European managing director of probably the best-known mobile ad company AdMob, describes the iPhone as "a poster child for a new generation". He claims the device has single-handedly put mobile on the mainstream map in Silicon Valley - even among what he describes as "dyed-in-the-wool web people".

As Buckley points out, some of the more forward-thinking brands have already begun to exploit the iPhone's unique capabilities.

These include Land Rover in the US, which has made full use of the device's web browsing and interactive capabilities.

AdMob enables advertisers to target mobile users by a variety of different criteria, including the user's handset type, and Buckley expects to see more brands creating mobile ads that can "work harder on the iPhone".

But while he is enthusiastic about the device's potential, Buckley points out that, despite the hype, not many iPhones have actually been sold in Europe. "What advertisers want is reach. But even in the US, where we have 600 million page views, only 0.8% is on the iPhone, so it's very early days."

Reserving judgement

Others, too, are reserving judgement. For Jonathan Bass, managing director of mobile agency Incentivated, the lack of 3G connectivity is a big problem.

Bass describes the iPhone as "a beautiful device" but adds: "There is a fundamental flaw. After using 3G on O2 for 18 months, I cannot go back to 2.5G and wait for pages to download at 9.5kbps kilobits per second.

"Safari (Apple's web browser) is brilliant, but when you browse a PC website on the iPhone, you are trying to load more data than through a Wireless Application Protocol (WAP - mobile internet) site, through a smaller pipe."

Another problem for Bass is the "fat finger" problem. Most people, he says, will find it difficult to click on links with their fingers, using the iPhone touch-screen interface.

In fact, he claims the iPhone will have no effect on mobile marketing and advertising. He says O2's motivation for becoming its exclusive UK network partner was nothing to do with mobile advertising, but an attempt to move away from its younger, non-contract customers and attract more upmarket, contract customers.

But, Bass concedes, the iPhone offers "another good reason to go into Soho and talk to agencies about mobile marketing and advertising".

Douglas McDonald, client services director at mobile agency Sponge, agrees that the lack of 3G is a major flaw in the iPhone. And not the only one. "People buying phones such as the Nokia N95 expect to find a decent camera onboard, so the iPhone's two megapixel camera makes it a downgrade for a lot of people," he says.

And he describes its inability to send a text message to multiple recipients as "laughable".

"You have to remember Apple is not a phone company, so we will have to wait until it learns its trade a bit more," he cautions.

So, if you accept that the iPhone is not going to single-handedly fuel a rapid increase in mobile advertising and marketing activity, what is?

For Incentivated's Bass, the Internet Advertising Bureau's recent creation of a dedicated Mobile Council, and its attempts to work with the Mobile Marketing Association and the Mobile Entertainment Forum, are a step in the right direction.

"As an industry, we have to remove the confusion around what mobile advertising is about, who offers it, how you buy it and what you get," he says. "There is a huge education process needed."

And while he points out that mobile networks would not be allowed to come together to form one mobile advertising sales company, he says there is no reason why they should not agree on a common currency, so that when an advertiser spends a pound with each of the networks, they know exactly what they are getting for it. This, claims Bass, could be in place within the next 12 to 18 months.

Future initiatives

Google could also have a big part to play in the future of mobile advertising. While it has not countered the launch of the iPhone with its own "G-Phone", the company has joined forces with T-Mobile, HTC, Motorola and others to create Android, which it describes as "the first truly open and comprehensive platform for mobile devices".

The first phones developed on the Android platform should be released in the second half of this year, and having seen where Apple has set the bar with the iPhone, it would be a surprise if there were not some seriously sophisticated models among them.

Another driver could be advertising-funded networks such as Blyk, which launched in the UK in September last year.

Blyk offers 16 to 24-year-old consumers 217 free texts, as well as 43 free minutes of voice calls each month, in return for looking at, on average, one or two advertising messages a day. If ad sales are up, customers get more texts and talk time, and if they run out of free time, customers can buy more.

Jonathan MacDonald, sales director at Blyk, says the company expects to have signed up 100,000 customers within a year of launch. But he's unconvinced that the iPhone signifies any major move forward in mobile marketing, and he feels the big sea change will be in the use of relevant messaging, as opposed to top niche applications or technology.

"Advertising needs to be relevant, intuitive, non-intrusive and ultra-targeted," says MacDonald. "For this, user preferences and interests need to be known about, on top of which there must be total opt-in by recipients."

So while the iPhone is undeniably a beautiful phone, the consensus seems to be that it will take more than a swanky handset to convince consumers - and advertisers - of mobile's benefits.

If nothing else, Apple has once again entered a market where it has no experience whatsoever, rewritten the rulebook, and shown everyone else what it's possible to achieve.

If that forces other manufacturers to raise their game, that can only be good news for consumers and, ultimately, for those companies looking to target them via the mobile channel.

iPHONE HYPE?

What's so special about the iPhone?

There are a few standout features. The first is Safari, Apple's cross-platform web browser, enabling users to access the internet, e-mail and online applications such as search and mapping.

Looking at a website designed for a PC screen on a mobile phone could be extremely awkward. This is where the iPhone's touch-screen user interface comes into its own, enabling the user to navigate around the website simply by pointing and dragging with a finger, and double-tapping on the screen to zoom in and then back out.

The on-screen "soft" keyboard includes a ".com" key to simplify web address entry.

The e-mail is similarly intuitive. It can display HTML e-mails, and can open and read JPEG photos, Adobe PDFs and Microsoft Word and Excel files. E-mail marketers are already starting to look at the opportunities it offers.

But there are flaws, the major one for many early adopters being that the iPhone is not a 3G (3rd generation) device. So, while the Safari browser may be excellent, accessing PC websites over the iPhone's 2.5G, 9.5kbps (kilobits per second) mobile connection is painfully slow. Fortunately, the device is wi-fi-enabled, so if you have access to a wireless network, surfing will be much quicker.

There are other niggles. The camera is a 2-megapixel model - hardly state of the art.

And you can't send an SMS to more than one recipient. But the lack of 3G is the biggest turn-off for users attracted to the idea of web browsing on the go.

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