Madison Avenue and the App Store

There are two new reports this week about how to use Apple's (AAPL) App Store as a marketing medium.

The first, in today's Wall Street Journal, cites several success stories, including Zippo's virtual lighter and Lions Gate's (LGF) Stun-O-Matic. The second, a Forrester Research report, warns would-be iPhone marketers about some of the pitfalls.

The two reports agree about one thing: Madison Avenue has latched onto what it believes is a hot new medium. The total addressable market for branded apps, according to Apple, is more than 37 million iPhones and iPod touches — a number that's apparently getting too large for brand managers to ignore.

"A mobile application frenzy has seized the wireless industry and has even spread to brands not normally associated with mobile," writes Forrester's Neil Strother in a paper entitled "Is An iPhone App Right For You?"

The Journal's answer to that question is a resounding "Yes!" According to Yukari Iwatani Kane's piece, the apps cost as little as $12,000 to develop and can yield huge rewards in terms of brand awareness. Zippo's virtual lighter app (flick the iPhone to light the flame) has been downloaded more than 3 million times and waved at countless rock concert finales. Lion Gate's Stun-O-Matic, a promo for its new action movie "Crank: High Voltage," yielded 2 million downloads and generated 800,000 trailer views.

Not so fast, says Forrester's Strother. Although he cites plenty of success stories, from Bank of America's (BAC) ATM finder and mobile banker to Kraft's (KFT) iFood finder, he warns that a bad app can just as easily backfire.

"A poorly conceived application or one that is buggy could spoil your best efforts and damage your brand," he writes. "Early adopters can be unforgiving, as Sony found out when reviewers trashed its underwhelming Underworld game app."

A well-designed app, Strother estimates, can cost anywhere from $50,000 to $150,000, take six to eight weeks to develop, and a couple more weeks more to be approved by Apple. "You should also be flexible in this fast-moving marketplace," he adds. "One application had to be tweaked at the last minute when Apple upgraded the original version of its operating software."

Strother also puts his finger on a peculiar weakness of iPhone as a marketing vehicle. Because it only works on AT&T's (T) network, its potential reach is more limited than, say, the BlackBerry's (RIMM) App World, which theoretically reaches 50 million devices running on multiple carriers. However, he also suggests that marketers consider Google's (GOOG) Android Market, Microsoft (MSFT) Window’s Marketplace For Mobile, Nokia's (NOK) Ovi and and Palm's (PALM) App Catalog, most of which still aren't open for business.

Among his other tips:

• Choose utility to help solve a problem or deliver timely information.
• Choose entertainment to delight users.
• Choose interactive to build engagement.
• Choose a combination to increase value (i.e. offer more than one key feature).

And he offers one last piece of advice that you might think was a real no-brainer: Buy an iPhone.

"One mobile developer described an early meeting with brand managers who asked him to develop an iPhone app: He noticed numerous older smartphones in the room but no one with an iPhone. Bad start. Marketers need to fully engage with these devices to gain a knowledge advantage."