If purchased directly from Apple or AT&T, the new iPhone 4 costs $199 for the sixteen gigabyte version, and $299 for the thirty two gigabyte. With this purchase comes a commitment to a monthly service fee for accessing the telephony and data capabilities of the device. These data plans are not required to reach the Apple App store (access to the app store can be made through the iPhone's built in Wi-Fi capability), which currently holds over 200,000 apps, many of them coming at no charge.
These free apps are made economically possible due to the fact that they are ad supported, meaning that the app is free, but advertisements sporadically appear on the screen while the app is being used. For music based apps, these ads are delivered in the form of commercials that play after a few songs have been heard. For the app setting, free delivery has proven to be an effective way of getting the app in the hands of users at no cost, while still allowing a revenue stream to flow into the pockets of the developers. In examining this successful and proven methodology, one wonders if the same practice could be applied to the iPhone hardware. Certainly, Internet Marketing experts would have no shortage of methods for delivering content to these types of customers. In this article we will examine some ways in which Apple could financially justify distributing free, ad-supported iPhones, to an eager public.
In order for Apple to be able to give iPhone's away for free, they must first be able to ensure that they would see revenue come in on the back end. With an ad supported iPhone this could easily become a reality. Let's identify some key ways in which this hypothetical situation could become a reality.
Ads before everything: In accepting a free iPhone, users would have to be made aware that their experience with their iPhone would not be quite the same as that of those who acquired theirs through a purchase. Some of the freedom of use would have to be sacrificed in order to justify their free acquisition of the phone, but no functionality would have to be sacrificed. Before anything else, users would have to be aware of and agree to this altered experience.
With ad supported iPhones, many of the ads would have to be pre-loaded on the iPhone, while others could be periodically downloaded over time. The pre-loaded ads would be able to be quickly accessed by the phone and played for the user right out of the box. Branded iPhones could be possible in this context, as major advertisers might be willing to pay a small premium to have their logo appear on the iPhone, or have some of their marketing materials be part of the home screen. This home screen presence is something that could be extended upon. A small change to the iPhone code could allow for a constant streaming of ads to be delivered at all times in a sort of news ticker fashion on the bottom of the home screen, or any screen.
These ads could be for Apple products, third party products, or placed by Online Marketing companies who paid Apple a premium to be included on the hardware. There could be also be a case in which a certain company wishes to always have their ads featured upon certain actions. For example, Sony could choose to have their ads appear every time the user wishes to make a phone call. If the user attempts to initiate an outgoing a phone call, they must first watch an ad. The user could freely receive calls without delay, but every received call would result in a text message being dispatched that contained an advertisement, the user having to watch a second ad the next time they wish to make a call, or an ad being delivered in a different manner.
In the second and final portion of this article, we will examine some more ways in which Apple could generate revenue streams through the distribution of an ad supported iPhone.