Sebastien Provencher takes an interesting look at UrbanSpoon’s iPhone application and also poses the question, have we already jumped the shark with mobile local search on the iPhone?

This question relates more to the volume of apps vs. early adoption use, than it does to the quality of usefulness of UrbanSpoon’s app. The application has meanwhile gotten lots of attention I’ve noticed; both anecdotal and in media coverage from the New York Times, Information Week and others.

We interviewed UrbanSpoon’s founders recently, who wanted to put out their free app as a marketing tool to gain more awareness around their online brand, which competes in some ways against Yelp, Citysearch, etc.

I’ve been using the application and I like it a lot. But its intended use case is often misunderstood — especially by The Times. It’s not necessarily the best overall tool for local restaurant search, but rather a serendipitous way to find a restaurant when the situation calls for it.

You can define any or all three of its parameters (price, cuisine, location) or have it surprise you with something completely random. In other words, it should be looked at as a discovery engine rather than a pure local search play. And in that way it’s kind of like StumbleUpon for mobile local search: more fun than utilitarian (though the latter shouldn’t be discounted).

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Regarding jumping the shark with iPhone apps, Provencher might be on to something. There is a land grab for apps, with only the bottleneck being the Apple approval process. Many of them are doubling up already and we’re seeing copycat apps (“More Cowbell,” iSaber/Phone saber, etc.).

There will be a shakeout, especially in the handful of local/mobile/social apps like Loopt, WHERE, Whrrl, etc. These are all built around connecting with friends in the context of places at which to eat or meet locally. But just like online social networking, there is a certain fatigue involved in having so many accounts to manage/log in. The success of these apps will hinge on a network effect (as is the case in social networking), and so far the number of these apps greatly fragments the relatively meager volumes of early adopters using them.

So what will grow faster, application volume or user volume? Either way, we’ll see a shakeout and a few winners emerge for local search apps. These will consolidate much of the audience and have the most monetization potential. Yeah, there could be a long tail of quirky iPhone apps, but these won’t mean much from a business perspective.

Monetization could happen through pay-per-call models (it is after all a phone). We’ll also likely see CPA-based promotions, given that the hardware is present at the point of purchase (unlike online local search models that preceded these apps).

One important question, however, is who will sell and manage mobile local ad campaigns to/for the fragmented universe of small businesses. On the national level, we’ll continue to see ad networks like AdMob proliferate. But for SMB local marketing, we could see a breakdown similar to what we’ve seen online.

This breakdown will entail some self provisioning (adjunct to AdWords), some YP bundling, some hand-off to third-party fulfillment, etc. And like online, the lion’s share of this opportunity won’t be in self service but rather in high touch sales to local businesses. In other words, Yellow Pages.

How quickly they can add mobile marketing (calls, promotions, etc.) to the proverbial sales bundle, will define the opportunity. AT&T is out ahead so far, with a relatively popular local search app (YPMobile) and a longstanding plan to deliver calls to advertisers (via Ingenio acquisition) across virtually all media. Mobile will be a part of this vision.

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UrbanSpoon cofounder Ethan Stock will demo the application during a TKG-run session on mobile local apps at SES San Jose.