Since the iPhone 3G’s splashy summer launch, use of the next-gen smartphone has taken off, bringing with it an assortment of nifty new features – notably an applications store, GPS capability and an accelerometer. The advent of a newer, faster 3G network also breathed new life into the possibilities of mobile marketing. Marketers are only now starting to experiment, but with Google and BlackBerry making forays into the handset market with new devices, software kits for developers and app stores, Mobile 2.0 is becoming more of a tangible reality. What’s going on in the space now and where could it go? We’ll tell you.

The arrival of the iPhone provided marketers with a new universe to explore – specifically with Apple’s app store, a one-stop shop where consumers can download apps directly to their phone, providing entertainment and utility quickly and easily. ‘We have the cool devices coming out, we have access to relatively inexpensive data and now we have an ecosystem that just lends itself to adding more cool stuff on your phone,’ explains Nick Barbuto, director of digital solutions at Cossette in Toronto. Barbuto actively seeks out digital opportunities on behalf of his clients, including those in the smartphone space. ‘This easy access to an app that will work on your phone is what most consumers are looking for. Because it exists, now we have a lot of really cool opportunities.’

And iPhone owners are certainly not disappointed. J.D. Power and Associates’ Canadian Wireless Customer Satisfaction Study released in November ranked the iPhone as the top device in terms of customer satisfaction among mobile phone providers with a tally of 783 on a 1,000-point scale. With 25% of wireless users currently owning a smartphone and over 65% of them expecting to purchase one for their next phone, the audience of next-generation smartphones stands to increase significantly. As does the scope of apps, especially given the release of the Android software development kit (SDK), which comes with its own app store, the Android Market, and BlackBerry’s plans to open its own app store in the near future. ‘It’s feeling like we’re now at a point where we can get excited,’ says Barbuto. ‘It’s like being little kids, having the world at your finger tips and as a marketer it’s starting to explode quite dramatically and it’s really because of these devices – the iPhone and the Android platform.’

Smartphone apps are increasingly allowing brands the opportunity to create better and more compelling user experiences on mobile devices. Early adopters have experimented with branded entertainment applications and those that provide practical utility to the consumer. Audi, for example, was one of the first brands to navigate the app-verse, launching a simple, free, branded racing game application called the Audi A4 Driving Challenge in the iPhone app store – a precision performance driving game wherein players race around a track. ‘I would say that it was a success,’ says Barbuto. ‘They showed the potential that people are actually willing to download something that’s branded as long as it’s entertaining and fun.’

Palo Alto, CA-based Tapulous was another early adopter of the iPhone app space and quickly transitioned from pure entertainment products to brand-involved versions. The company’s flagship game, Tap Tap Revenge, kind of a mobile hybrid of Guitar Hero and Dance Dance Revolution, is among the more popular apps out there, consistently present in the top 25 free application downloads in the iPhone app store. ‘The reason we started this company is that we believed that the iPhone and the iPod Touch really marked the next generation of mobile,’ explains Bart Decrem, CEO and co-founder of Tapulous. ‘Mobile is becoming the centerpiece of our computing experience.’

The game allows users to tap along to various hit songs by musical talents like Weezer, Nine Inch Nails and Katy Perry, providing an interesting promotional venue for record labels. The company has also developed custom games for artists. ‘This is an exciting new platform,’ says Decrem. ‘Tap Tap Revenge offers people a new way to engage much more actively with music than before, and you can charge money for that. You can use it as a way for people to connect with the band, and as a way for people to go back to iTunes and buy the music.’

Most of the brand experimentation in the application space is taking place south of the border, but some Canadian companies are jumping into the fray. In August, Canadian sports network The Score launched its own free iPhone application to provide up-to-date scores and stats for all the major sports leagues. ‘We recognized that there would be a large audience of iPhone users interested in sports news and information,’ explains Dale Fallon, director of mobile at The Score Media. ‘It seemed a natural fit for people that were interested in keeping up-to-date with sports while they’re on the move. What it’s become is not the sole element of our mobile strategy, but the shining star.’ At press time, the application had been downloaded 275,000 times globally, with 40% of their audience being Canadians. When asked what advertisers have to cough up to get face time on its app, The Score says only that it is comparable to premium web pricing.

Before the iPhone arrived in Canada, marketers were already ushering in Mobile 2.0, a new breed of mobile internet services leveraging and complementing the capabilities and benefits of Web 2.0. Rogers’ ‘Beg for a BlackBerry’ Facebook contest is one such effort. Developed by Toronto-based Publicis and Toronto-based Vortex Mobile, the promo, which ran through the holiday season, asked consumers to submit a 30-second audio clip pontificating on why they deserved a new BlackBerry from Rogers for the holidays. Contestants logged into the Facebook application, input their mobile phone number, and with the push of a button their phone would ring, allowing them to make an audio recording and instantly post it on Facebook. Consumers could also forward their clips to the mobile numbers of friends and family across the country.

‘If we want target engagement, we need to provide real entertainment or a measure of utility,’ says Paul Brousseau, director of consumer advertising, wireless division, at Rogers. ‘With the Q4 Beg for a BlackBerry application, we appear to have accomplished both.’ The contest marked the first time that a branded mobile phone recorded audio clip was incorporated into Facebook and the application made it into the top 3% of Facebook apps. It also quadrupled the number of participants from a similar initiative Rogers ran this past summer, where people could submit a collage of pictures taken over the summer break with their phones and have friends vote for the best.

Certainly, the social media applications haven’t met everyone’s expectations as only a small portion of the apps available on Facebook – the top 100 out of thousands – are actually experiencing substantial usage. But similar to the videogame biz, those that do make it to the top arrive with deep user experiences racked up. ‘If Facebook is two-dimensional, cell phones are 10-dimensional,’ explains Barbuto. ‘When you have an accelerometer, when you have GPS, when you have localization of content, when you have the ability for one device to connect to the Internet, just that alone creates really compelling opportunities.’

Brands are also getting value out of useful applications without having to lift a finger. TimmyMe, a free application developed by Saskatoon-based zu.com, marries the iPhone’s web and GPS capabilities. Consumers can find the nearest Tim Horton’s to their current location and then retrieve directions on how to get there using the iPhone’s maps application. The third-party app was developed without any involvement from Tim Horton’s. ‘In developing TimmyMe, there were three goals,’ explains Ryan Lejbak, CEO and co-founder of zu.com. ‘One is to develop something Canadian, the second goal would be to further understand how consumers use their iPhones – because that’s really important for research on the applications we want to do later – and third is just get our foot in the door and learn the entire process of developing for the iPhone application.’ Since launch, TimmyMe has acquired 52,538 unique users, is accessed 9,917 times daily and has been accessed 981,754 times over its lifetime.

Zu.com also has a BucksMe application – the same principle as TimmyMe but for Starbucks. The difference between the two is that consumers have to pay 99 cents to download Bucksme. Similar to other free apps like Tap Tap Revenge, The Score’s iPhone app and TimmyMe incorporate banner ads to generate revenue. The Score’s app had Volkswagen on board as a launch partner and has Sony Pictures and MSN Canada advertising with them on banners, which drive traffic to mobile-optimized microsites. TimmyMe’s clients are more localized, and it has yet to sign a national brand. However, its banner ads utilize the GPS capabilities of the iPhone to incorporate geo-targeting – if you’re near a local car dealer, their banner ad will appear in the application. Advertisers can expect to pay between three to nine cents per view on TimmyMe, and the more geo-targeted the ad is, the more they pay.

‘Because of the special features of these phones, like geo-location, the ads can be super targeted,’ says Lejbak. ‘When you’re walking in the mall, if you’re in front of the Gap it could be a Gap ad and when you’re in front of an Eddie Bauer, that ad could change to Eddie Bauer.’

Whereas zu.com deals with the placement of ads on its applications by itself, larger companies with numerous applications, like Tapulous, rely on companies like San Mateo, California-based AdMob to help facilitate the placement of ads in applications. The company uses its iPhone network, which consists of numerous applications and sites, to match up developers with the right advertisers.

AdMob has run campaigns for Hollywood films like The Mummy: Tomb of the Dragon Emperor, where the movie trailer will play once the ad is clicked on. There are banners that, once clicked, initiate an automatic call to the advertiser, as well as ads that open up a larger screen, allowing consumers to interact without navigating away from the original page.

These options are proving to be fairly successful (and of interest to marketers). Both The Score’s iPhone app and TimmyMe report ad click-through rates higher than what is typically experienced online. ‘The total number of clicked-on ads is about 60,000, so we’re looking at about a 6.2% click-through rate on the ads, and on the internet you’re seeing a 1% to maybe 3% click-through rate,’ says Lejbak.

The amount of ad content is growing too. According to an AdMob mobile metrics report released in October, the iPhone is now the number one device throughout the company’s entire mobile network based on the number of ad requests, the percentage of advertisements requested to be placed on the mobile web, or applications for a particular handset. The U.S. led the pack with 62.8% of all iPhone requests and Canada, where it’s the number one device in terms of mobile advertising, ranked third with 4.4% of all requests. The report also noted that since AdMob launched its ad units for iPhone sites and applications, ad requests on the next-gen smartphone increased from 28 million in July to 236 million in October. ‘We currently have more than 400 applications and sites in total, which I think is very indicative of how much growth and excitement applications on the iPhone are experiencing right now,’ says Nicole Leverich, director of corporate communications for AdMob.

As T-Mobile launched the first Android phone just a few months ago, AdMob has not yet branched out into that space. ‘We’re definitely looking at it right now,’ says Leverich. ‘The explosive growth we’ve seen on the iPhone shows that there is a real desire by consumers for engaging applications on their phones, so it’s definitely something that we think is worth investing in.’

And it’s with the (likely eventual) acceptance of the Android platform, and the implementation of BlackBerry’s app store that the true potential of the space may be realized. Plus, a lot of marketers have yet to jump in because the next-gen smartphone space has yet to fully settle. ‘No standard has really won, which is why Google came out with Android, the Windows of phone and open source, they’re just trying to standardize it,’ says Dave Lafond, VP and managing partner at Toronto-based Publicis Modem, who worked on developing Rogers’ ‘Beg for a BlackBerry’ contest. ‘The quicker this gets standardized across carriers and across handsets, the easier it will be for marketers to jump in.’

So what opportunities will be available to marketers in the future? If the results of Google’s Android Developer Challenge are any indication, plenty. The two-round contest, which launched at the beginning of 2008 and wrapped up towards the end of the year, awarded $10 million to the best applications developed on the Android platform, many of which provide utility that might interest marketers. One of the winning applications is a freeform barcode reader called Android Scan – an application that finds metadata for anything with a barcode using a device’s onboard camera. If you snap a picture of a CD’s barcode with your phone, the app will source information. From there you can pull in reviews and find out things like where the CD is available, both online and offline, and prioritize that information based on price or location.

The usage of the barcode scanner could go even further afield. Imagine scanning people’s tattoos to surf their homepage. ‘Around the world, the use of 2D barcodes or QR codes (quick response codes) is pretty prevalent,’ says Barbuto. ‘It’s germane to some cultures that people tattoo their own 2D barcodes on the backs of their necks.’

Advertisers could also take advantage of the prospect of augmented reality. An application that was developed for the Android contest called Enkin combines GPS, orientation sensors, 3D graphics, live video, web services and a novel user interface to create location-based content that bridges the gap between reality and classic map-like representations. Imagine being able to use your phone as a looking glass and search out a particular store amongst various buildings – as your phone camera passes over the store, Enkin will tag the store with its name overlaid on your screen and how far away it is. ‘It’s overlaying a real image with contextualized data and that’s augmented reality,’ explains Barbuto.

With the standardization of the space through platforms similar in scope to the iPhone and more sophisticated apps being developed, there’s no telling what means of engagement marketers will be able to come up with. ‘Just the degree of relevance with which we can communicate with the consumer is unparalleled,’ says Bryan Kane, VP and managing partner at Publicis Modem, who worked with Lafond on the Rogers initiative. ‘What gets us really excited about it is the fact that I can communicate with you at the perfect time, the perfect message, which we haven’t been able to do until this point.’