Why the iPhone is over-hyped

Listen in on any conversation in the wireless industry, or one about cellphones in general, and the iPhone is bound to pop up sooner than later. The device has changed how digital marketers can leverage a rich media experience on a handheld, but it also presents some inherent challenges that have to be kept in mind.

While so much chatter about Apple’s trailblazing mobile device is gushingly positive, iMedia decided it was time to play devil’s advocate and determine where the iPhone’s marketing power is overhyped.

The device has turned developers – working in their basement – into millionaires overnight, yet the marketing return is nowhere near the scale needed for larger campaigns.

“I think that brands need to resist being knee-jerk in terms of wanting the shiny new toy and really ask if this is the right thing for them,” Adam Kleinberg, CEO of Traction, tells iMedia. “It has to add value. It doesn’t have to use all the features, but it has to provide value.”

Currently, the marketing opportunities presented on the iPhone platform lie in branded applications and unique ad-supported models, which vary greatly in terms of meeting the objective.

Climbing toward scalability
Study after study highlights the incredible web usage driven by the device. Nearly every report indicates iPhone users comprise more than half of all mobile web traffic in the U.S. Traffic is great, but the scale marketers can reach through the device needs to approach 25 to 30 million users before it starts making sense, according to some digital marketing experts.

By most estimates, the number of iPhones in use is at least halfway to that count, but still a ways off from reaching the saturation target.

In January, the iPhone had about 1.1 percent market share worldwide, says Alec Andronikov, chief mobilizer at MoVoxx. That makes it difficult to reach enough scale to justify spending the majority of your budget on an iPhone app.

Marketing exclusively to the iPhone dramatically narrows your potential reach, says Zaw Thet, CEO and co-founder of 4INFO.

“I think the reach is limited in terms of the whole market share,” Kleinberg says. “Think of the huge market share that Nokia has on a global scale that dwarfs the iPhone’s scale. But I’ve never had anyone come up to me at a cocktail party and show me their cool new Nokia app.”

The other side of that equation, however, is if you can develop an effective experience, it can be an incredible powerful tool for the customer.

“If you have a breakthrough idea, it’s a great platform,” Kleinberg adds. “Brands are interested, but I think that it’s an emerging technology and there are not always the largest budgets set aside for something that is ‘experimental.’”

Thet points out that the iPhone deserves to play a part in any mobile marketing program, but it should not be the exclusive focus for mobile marketers. “To ignore everybody else is to waste much of the value that is delivered through mobile,” he says.

And don’t forget that the iPhone is an expensive device that requires a monthly data plan.

“That’s fine, as long as you’re only marketing to that audience, but if you want to reach the millions of people who don’t use AT&T, or love their BlackBerry, or that don’t have data plans, you need to go beyond the iPhone,” Thet says.

In fact, everyone iMedia spoke with for this story mentioned SMS as a much greater path to achieve the level of scalability needed for most marketing objectives. It’s cheap and ubiquitous.

“[The iPhone] allows for the richest experience, but I would still say that SMS is very powerful in its ability to connect various other types of media,” creative marketing strategist Adam Broitman says.

“You don’t necessarily need all the functionality of the iPhone. A lot of the branded apps on the iPhone do too much stuff,” he says, while “a text message can power an entire CRM program.”

The basic missing links
Speaking of simple things like short messaging, the iPhone is still missing some basics that mobile marketers, in particular, have relied on for years.

The iPhone still doesn’t have multimedia-messaging capabilities. Also, there’s no way to forward a text message. These features are nearly universally available on every mobile phone on the market today. 

“If you want to do an MMS campaign, don’t target iPhones,” Thet says.

Derek Merrill, VP of products and founder of MoVoxx, is particularly disappointed about the lack of basic SMS forwarding.

“I consider this to be a pretty egregious oversight on part of Apple,” he says. “We often build in incentives that induce users to want to forward on an SMS offer to friends in their contact book. This activity is blocked for iPhone users.”

To be fair, Apple has already announced plans to release an iPhone software update this summer that will address MMS, and there’s hope it will address SMS forwarding, too.

Flash, a technology used in many interactive ads, is still missing from Apple’s plans, however. With Flash capabilities glaringly absent from the iPhone’s web browser, many digital marketers are faced with the prospect of either sitting on the sidelines, or downgrading the experience they aim to associate with their client’s brand.

There’s also a limiting size factor that comes with any mobile device on the market today, despite the fact that Apple delivers one of the largest screens out there.

“The less obvious problem is with the browser,” Thet says. “In many cases, mobile sites don’t render well on an iPhone – it’s too small – but at the same time, many traditional sites don’t render well either” because the iPhone relies too heavily on zooming and scrolling. “Marketers that want to deliver a consistent, high quality consumer experience – regardless of device – have problems with the iPhone.”

New opportunities coming
For all the new features and opportunities presented by the iPhone, there is still plenty left to be desired. Entire ad networks have emerged thanks to the platform, and some are introducing ad-supported models, the likes of which have mostly been a far-off dream in the mobile arena.

But with scale not yet at a saturation point, ads can only go so far in terms of marketing objectives.

One particular upgrade of interest is Apple’s plan to implement new ways to monetize content and build new business models that go beyond ads or flat fees for application downloads.

Subscription models have long been the revenue model for many content companies. So to the glee of many, Apple plans to enable developers with the ability to sell subscriptions and allow users to make one-off purchases within applications, not just at the App Store.

Game makers could charge for extra levels or expansion packs; publishers could charge for daily, weekly, or monthly feeds. The move is expected to pave the way for a surge of new applications and business opportunities that were not possible before.

The fact that purchasing capabilities are missing in any capacity on the iPhone has been a deal breaker for many brands.

A recent report from Bango concluded that the iPhone doesn’t even make the top 20 in terms of the most popular phones for browsing and buying content on the mobile web – it comes in at 24th worldwide.

“The iPhone has done a lot to encourage people to browse the internet on their phones,” says Ray Anderson, CEO of Bango. “But to get the most out of their mobile marketing spend, companies who are riding the iPhone wave, attracted by its excellent features and user demographics, need to optimize their mobile websites for all phones – especially those in Bango’s Top 20 handset list. Without this, they will be missing out on the mass market.”

He adds that mobile marketers need to understand their users’ needs and behaviors and build strategies around that frame of mind.

MoVoxx’s Andronikov adds that brands targeting a more affluent, business crowd are typically best served by targeting BlackBerry users if they want to stick to one device set. That audience is much more likely to download a new car image on their BlackBerry than download a branded car-driving game on an iPhone, he says.

Still, marketers should really open up their nets to capture all smartphone users.

“The majority of iPhone-specific media cannot be accessed on other devices, whereas most smartphone-specific media can be accessed on an iPhone,” Andronikov says. “It might be better to build media around the smartphone market than an iPhone market to make sure your media can be accessible by a larger audience.”

The nuts and bolts
Beyond the coolness factor, there are some start-up costs that iPhone revelers should consider.

First, development is no easy feat.

“It’s a more challenging API to develop on than say a Facebook API, XML, or anything Flash,” Traction’s Kleinberg says. “It’s more challenging to build, and it’s also more challenging to get approved by Apple. The approval process is onerous." 

Apple has never made public its guidelines for approving or rejecting an application, and the only contact developers make with the decision makers is over email. There are no standards to look to when developing an app for the iPhone.

This approach highlights Apple’s stranglehold on the entire iPhone ecosystem, Broitman says.

"Humans drive on networks and collaboration, and my feeling is that with Apple’s approach… it stunts the role of networks, and it will make it very difficult for them to reach scale in the long term,” he says.

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