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May 14th, 2009

iPhone Continues to Grow as Ad Platform

Madison Avenue is plowing more resources into a new marketing medium: Apple Inc.’s iPhone.

In the past several months, companies such as Burger King Holdings Inc., Zippo Manufacturing Co. and Lions Gate Entertainment Corp. have experimented with promotional software applications that can be downloaded onto the iPhone, or they have created ads that are placed within other popular applications for the device.

At the most basic, marketers are taking advantage of the iPhone’s advanced video and screen capabilities by creating streaming video ads. But some are taking things further by offering ads disguised as apps. The latter allow users to do such things as play games or manipulate images by touching the phone’s screen.

Many marketers find “app-vertising” attractive because the iPhone’s audience has grown so quickly. The iPhone now has more than 20 million users, and more are likely to buy in because Apple is widely expected to unveil a new model in coming months. Analysts estimate that Apple’s iPod touch, which can also run downloaded apps, adds at least 15 million more users to the market.

In addition, many iPhone users are young, have high incomes and spend more time with their device than users of other types of smartphones. Consumers, once wary of using their phones for anything more than talking or texting, now seem to have an almost insatiable appetite for mobile applications. IPhone owners on average download more than 20 applications to their devices (upward of 40, according to some reports) and Google Android users are even more ravenous.

The market is sure to grow even larger as more companies leap in. Nokia, which has nearly 40% of the global smartphone market, announced that it would be entering the mobile-application fray with its Ovi Store (featuring 20,000 applications available for download) this week, joining competing offerings from BlackBerry, Google’s Android Market, Microsoft and Palm.

All of this is igniting the imaginations of brand marketers and ushering in a land grab for an increasingly valuable piece of real estate: the always-on device in our pockets.

Enter “app-vertising,” a new name for an emerging mix of branded mobile applications and in-application advertising that is finally poised to deliver on the promise of mobile marketing.

Around Valentine’s Day, Burger King launched a full-screen iPhone ad that included a minigame in which viewers could tap the screen to burst heart-shaped bubbles. The ad appeared in iPhone game applications.

Greystripe, a mobile-advertising network, says users interacted with the ad nearly 14% of the time that it was shown. Online banner ads, by contrast, generate an interaction rate of less than 1%.

Other companies are creating ads that exploit the iPhone’s accelerometer, which detects movement of the device. In September, Zippo launched a virtual lighter application that users can open by flicking their wrist. The flame sways on the touchscreen as the phone is tilted, and the app sends warning vibrations if the device is held upside down.

The free application got more than three million downloads, says Zippo marketing manager Brent Tyler.

More than half of the top mobile applications are games — and engagement for apps averages nine-plus minutes per session — so it makes perfect sense that the Audi created the A4 Driving Challenge game app. Taking advantage of the iPhone’s accelerometer (which allows the device to detect movement), the A4 game allows users to select courses, choose car specifications and more.

The next wave of mobile advertising will certainly be in-application advertising, and the creative possibilities there are limitless as well. Levi’s Dockers’ “shakeable” ad, built on the Medialets platform, is a great example of how savvy creatives can take advantage of the iPhone’s accelerometer to add motion to advertising — in this case, making a khaki-clad model break dance — when the user shakes the device.

So will “app-vertising” finally take off? Analysts certainly think so. Sanford Bernstein’s Jeff Lindsay predicts that the worldwide mobile-advertising market will explode, mushrooming from $700 million in 2008 to $7.2 billion by 2012. And with Silicon Alley Insider estimating that in-app advertising fetches a hefty $20 to $30 CPM, there’s no turning back now.

Sources: Wall Street Journal and Adage