The new iPhone is sliding into mailboxes and Apple stores around the country this week. But beyond all the bells and whistles that get consumers excited — email search, copy and past functions, a compass — the iPhone is also helping a lot of businesses find solutions to their more pressing problems of monetization.

According to AdMob, more than 40% of iPhone and iPod touch users access the Internet more frequently from a mobile device than a computer.

What do those numbers provide for companies desperate for revenue streams? Hope.

As marketers and media companies are learning, consumers are willing to purchase goods on their phones that they expect to get for free online.

According to The New York Times:

"One example of the stark difference between the phone and the computer is the concept of micropayments. … the phone industry has had a micropayment system for decades. Ever since the local telephone company charged a customer an extra 35 cents to hear a recorded weather forecast, the phone industry has been charging for content.

Couple that pervasive billing culture with the ability of consumers to get what they want, whenever and wherever they want it (playing Tetris while waiting in line at Starbucks, for example) and you have a powerful alchemy."

And while profits online might be shrinking or staying flat, mobile revenue is growing. For instance, AdMob, the largest mobile ad purveyor, saw its mobile advertising business grow 35% in the last year, thanks mostly to the iPhone. Last February, AdMob served about 1.3% of its 2.56 billion ad requests to iPhone. This February, the company sent 18% of 6.56 billion total ad requests to the iPhone and iPod touch devices.

And in a dark advertising revenue forecast released this week, PriceWaterhouseCoopers found a glimmer of light in the mobile space.

"In the mobile arena, opportunities across the advertising continuum will enable the growth between brands and consumers, ranging from click-through banner ads and pre-roll ads on video clips through coupons and online subscriptions."

But advertising is not the only sector seeing a bump from smartphone sales. As consumers get more comfortable accessing the Internet on the go, businesses all over are looking for ways to monetize in the space.

Speaking at the Advertising 2.0 conference last week, Barry Diller was bullish on the iPhone's prospects for monetization, calling it a "great example of what's going to happen."

One problem with the online space right now is that consumers have grown accustomed to getting things there for free, something that Diller calls "an accidental historical moment that will absolutely be corrected." But on the phone, says Diller, "People are now getting paid for transactions."

Andrew Lack, CEO of Bloomberg News, also had positive words about mobile at Advertising 2.0. Looking for revenue streams for Bloomberg, Lack said that his company is focused on screens: "Advertisers are looking at different screens. And what those screens generate. Advertisers on the Internet have not found the money for what they do. But we can generate a business model for content providers [on the handheld.] And not get hammered."

Even publishers who are making money online acknowledge that it's hard to charge for things that consumers have grown accustomed to accessing for free. Asked to explain the Wall Street Journal's success with paid subscriptions online last week, John Miller, News Corp.'s Chief Digital Officer, had a simple explanation. He did not cite the Journal's content, business model, or audience composite. Instead it was a question of timing: "We had the benefit of doing it out of the gate."

As the price for smartphones come down — the iPhone is now available from AT&T for $99, the Blackberry Curve can be had for as little as $50 — more consumers are joining the space. But the fees to maintain a smartphone are only growing. Monthly charges for an iPhone hover around $80. And consumers are purchasing more content on top of that.

The lucrative cellular market even has the Feds getting involved. This week, four senators sent a letter to the FCC asking for an end to exclusive wireless agreements.

Why? Apple and AT&T entered into a consensual and legally binding contract. That is set to expire next year. But those senators don't think its fair for AT&T and Apple to horde the windfall coming from the iPhone. They wrote:

"We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."

In less than a year of business, the iPhone App Store has brought in over $30 million in revenue, in all areas of business. And while reversing the trend of free content online is a difficult endeavor, getting consumers to spend cash on their cellphones is proving more appealing. Consumers have long been comfortable purchasing ringtones and games for their handsets, and now they are rushing to access subscription content, software and other media as well. 

And the desire for new offerings in mobile has consumers paying to play on their phones. According to Allison Mooney, Director of Trends and Research at Next Great Thing:

"People are willing to fork over a little money to make their lives easier and to get things as soon as possible. The phone is with you 24/7, so location and time are two benefits of mobile that can be capitalized for a fee."

Meghan Keane

Published 18 June, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

You might be interested in

Comments (0)

Save or Cancel

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.