Inside the iPhone App Gold Rush

NEW YORK If you’ve been to a concert over the past five months or so, you’ve probably seen fans holding up iPhones in a new-media twist on the time-honored tradition of holding up lighters to call for an encore.

Lighter company Zippo came out last October with a branded iPhone application that features a simple lighter on the screen. Since its introduction, the Virtual Zippo Lighter has been downloaded 3 million times, making it the most popular brand application on the iPhone platform.

Zippo is one of over a dozen brands looking to the iPhone as a way to build persistent engagement with consumers. With an estimated 17 million iPhone owners, brands like Kraft, Audi, Target, Coke and Nike have all introduced apps in recent months hoping to latch on to the newest new thing. For all the potential of the iPhone and similar mobile platforms rolled out by BlackBerry and Nokia, the brands face daunting odds of becoming the next big app.

“Everyone has seen this land grab before, with Facebook,” said Chad Stoller, executive director of emerging platforms at Organic.

Most brand applications on Facebook have fallen flat for reasons that in some ways mirror the challenges brands face on the iPhone platform. For one, brands need to compete with armies of scrappy developers building apps for nearly every conceivable need. There are already 25,000 iPhone applications. Coca-Cola, for instance, built a brand variation on the childhood game spin the bottle for the iPhone in January. The application is competing with over a dozen other similar offerings.

Applications tend to live and die based on their usefulness. Spin the Coke has done relatively well, garnering three out of five stars in user feedback. Other brand apps are less fortunate. The NikeWomen Training Club application, released in January, has an average rating of 2.5 stars out of five. So too does a movie app for the Nissan Murano. The Audi A4 Driving Game is rated two stars. And the Kraft iFood Assistant, which the brand sells for 99 cents, is rated at 2.5 stars.

Another challenge: Despite its fast growth, the iPhone remains a small part of the mobile market. Recent data compiled by Bongo Wireless show it’s the 24th most-popular handset.

Brands tend to gravitate, often with poor results, to “shiny objects,” said Wayne Arnold, CEO, North America, Profero, an independent digital agency. “Creating an iPhone app is jumping to implementation before you have a strategy,” he said.

Even more telling, iPhone apps, while often billed as a route to long-term connections with consumers, are usually flashes in the pan. According to Pinch Media, an iPhone analytics company, less than 5 percent of downloaded iPhone applications are kept longer than a month.

The space also faces the same challenges as the Web in its early days, when initiatives were often caught between IT and marketing departments. For companies like banks and hotel chains, an iPhone app is viewed as an extension of its product rather than a marketing exercise. Choice Hotels, for instance, rolled out an app for users to book rooms. “It’s a natural progression of distribution,” said Mary Beth Knight, svp of e-commerce and worldwide distribution at Choice.

For all those downsides, the financial risks are manageable. Zippo spent less than $100,000 on its application, without any money spent on ads to promote it. Developers will create brand apps for as little as $20,000.

For some brands, it’s still not worth the risk. Procter & Gamble’s Charmin took a different, if time-honored approach: it paid for ads. Charmin struck a sponsorship deal for the rest of the year with Sit or Squat, an app that helps people find clean public bathrooms, created last October. The sponsorship fits with previous brand efforts to “Charminize” rest rooms, such as its “Pottypalooza” tour bringing clean bathrooms to public events. “We’re not in the business of creating iPhone applications,” said Dewayne Guy, a P&G rep. “We’re in the business of toilet paper.”