The store, part of the latest version of iTunes, allows iPhone users to download applications, little programs that sit on the device and update even when the internet browser is closed. The store lets people fill the phone with useful programs and has the potential to make good on what many have long promised the smart phone would be: a personal computing device. And along the way it will open up major advertising opportunities around some of those apps.
While scores of developers have been creating applications for other smart-phone-powering platforms such as Windows Mobile, BlackBerry or Symbian, until now there was no easy-to-use, central place to find all of those applications.
To understand the concept of the App Store, look no further than the iTunes store. Digital music exploded when Apple launched iTunes as an easy way to buy and download music to an iPod. It hopes to do likewise for mobile applications through the App Store -- and that kind of simplicity is the real game-changer.
It's no surprise companies such as MySpace, Facebook, New York Times, Flickr, Google and AOL have all created native iPhone applications. Some of the more interesting applications take advantage of the phone's inherent GPS or tilt-control technologies. Sega's Super Monkey Ball game requires users to tilt the device to guide the ball through the game. And social-networking tool Loopt, for example, marries GPS and messaging technologies to let you find friends that are nearby.
"The context of a mobile phone is so much more personal ... there's a certain urgency or utility to it," said Scott Symonds, exec media director at AKQA, San Francisco. "But [saying that] has been an exaggeration in the past because it's been so painful to do things with it." AKQA and other agencies are building apps on behalf of clients. Wieden & Kennedy, for example, built a Careerbuilder.com app that calls up job openings located within blocks or miles of where a user is.
But the App Store will offer one more way for marketers to get at that valuable iPhone-carrying audience because while some of the applications will cost a fee to download, about 25% of them are free -- and many of those will count on ad support as their primary revenue source.
Pandora has an iPhone app in the store -- the first time its service will be available to mobile users free. The online radio company partly came to the decision to not charge but instead offer a free ad-supported version, said Cheryl Lucanegro, VP-ad sales, because the data costs for the 3G network were already so high. She believes there's a lot of overlap between Pandora users and iPhone buyers -- both are young, tech-savvy and attractive to advertisers.
A few companies have cropped up to help monetize iPhone apps through advertising. Pinch Media and Medialets have both launched iPhone app analytics tools that enable developers to track data such as how many people are using the apps, how often and the time people spend on certain features. Both plan to offer ad-sales services to developers. Apple now takes a cut of the revenue from paid apps but it hasn't yet indicated whether it will require a revenue-sharing deal on ad-supported apps.
Eric Litman, CEO of Medialets, doesn't think it will. "Apple really wants to sell mobile devices," said Mr. Litman, who for the past year has been making "jailbroken" apps -- iPhone apps created before Apple began sanctioning them. "And to be the leading smart phone or mobile device on the planet, they need to encourage [the] market to innovate."
But while it's easy to be breathless about the App Store, it's wise not to get too presumptive about the volume of ad impressions that applications will develop, at least not yet. Pinch Media, for example, is working with existing mobile-ad networks that want to extend the impressions they serve onto the iPhone app platform. Eventually there will be applications with enough of an audience to sustain more elaborate application-specific campaigns, said Greg Yardley, co-founder and CEO.
"The Apple experience is so compelling and there's a real opportunity down the road for rich interactive advertising," he said. "But right now an ad agency has to ask themselves, 'How many people am I really reaching here?'"
Hard-core Apple fans queue up for iPhone 3GThe line outside Apple's Fifth Avenue flagship store on July 11 was an event unto itself. The crowd was of a size usually reserved for papal visits and Michael Jackson court appearances. Hundreds of would-be customers eager to buy the iPhone 3G snaked around police barricades and stretched well down 58th Street in front of FAO Schwartz and children content with more modest toys.
Ralph Founoles, an entrepreneur, said he would likely give his current iPhone to his sister. Mr. Founoles, 27, said he considered the general quality and reputation of the Apple brand as having the most influence in the iPhone's success. "It's word of mouth," he said.
"I've actually only seen one ad for the iPhone," said Nathan Couchon, 25. "I don't even get cable." Mr. Couchon, who lives in Brooklyn and works in real estate, said anyone who knows Apple is going to come anyway.
And come they did. Matt Bronleewe, an author visiting from Nashville, had already clocked more than two hours in line. Mr. Bronleewe, an owner of four Macs, said formal advertising factored little into his trip to the Apple store -- it was talk of a 3G-integrated network that brought him there.
Linn Cheng, 30, of Rego Park, Queens, said the iPhone would be her first Apple product. The imminent social ramifications also played into her imminent purchase. "All my friends are going to have iPhones now, too. "