As anyone who uses a smartphone knows, the cost of performing data-heavy activities like streaming music or videos over a carrier’s wireless network can add up, especially if you don’t have a big data plan. And if you aren’t careful, you can quickly go over your monthly allowance.

A new free iPhone app called Snappli compresses data to reduce network usage and help users avoid costly surprises from watching too many episodes of Arrested Development on Netflix. It does this by directing Web traffic through the company’s servers. And while it would seem that intercepting and compressing data could slow down your Web surfing, cocreator Eldar Tuvey claims Snappli can actually speed up your Internet access.

Snappli, which is based in San Francisco and London, launched its iPhone app in the U.K. in August and rolled it out in the U.S. this month. The company claims that its users can cut their data usage by as much as 85 percent and save about $37 per year. Tuvey built Snappli with his brother Roy. The duo previously built and sold a Web-based enterprise security software company, ScanSafe, to Cisco.

Using Snappli isn’t as easy as just downloading an app. After doing that familiar task, the app prompts you to also download a software profile that sits on your iPhone, allowing Snappli to intercept data and compress it on the company’s servers as it flows to your device from the Web via your wireless carrier’s network. This workaround offers certain features otherwise restricted by Apple. Snappli does not meddle with any encrypted data, such as bank traffic, Tuvey says, and it won’t compress data over Wi-Fi networks.

Within the app, you can adjust video and image compression settings separately with a slider—Snappli automatically sets both of these at 80 percent, but that can degrade the picture quite a bit. You can see how much data you are using overall with Snappli—and how much you’d be using without it—as well as how much money you’re saving (an estimate based on the price and size of your monthly data plan and when your bill is due). The app also allows you to see a breakdown of the consumption of your most data-hungry apps and websites.

Beyond just reducing the resolution of images and videos, Tuvey says, Snappli uses several techniques to compress data. It may compile several images on a webpage into a single image, for example, or compress text and strip out unnecessary JavaScript. Since it’s sending less data to your smartphone, Tuvey says, this can speed up your wireless experience.

“There’s a lot of data that’s completely unnecessary—most websites aren’t optimized for smartphone users, most apps are not optimized in terms of the data they carry,” he says. “We feel there’s a lot of wastage there.”

I tried Snappli out, setting image compression to 60 percent and video to 30 percent—the highest percentages, judging by the app’s on-screen examples, that would not horribly diminish the media quality to my glasses-wearing eyes. I visited a number of websites on an iPhone both with and without it, and found that it was sometimes slightly faster at loading pages, but was quite a bit slower at other times.

As for video playback, I didn’t notice much of a difference in image or sound quality when watching YouTube clips over a somewhat-reliable 3G network, though the clip I watched stuttered twice when not using Snappli.

It did feel satisfying to see Snappli’s estimate of my data savings climb, though. After just a few website visits (and with other operations running in the background), Snappli claimed to have saved me 17 cents, and said I consumed about 10 fewer megabytes than I would have without the app.

But the required installation of two pieces of software—the app and the special profile—could turn off some potential users.

Shaw Wu, a senior technology analyst at Sterne Agee, thinks Snappli would work better and be more appealing to users if it were implemented by Apple or the wireless carriers themselves. He likes the concept, however.

“Using something that’s more bandwidth-friendly is definitely of interest on both ends—both carriers and end users,” he says.