With readers fleeing newspapers and TV viewers zapping past commercials, advertisers are turning to the one device consumers can't seem to escape: their cellphones.
Mobile phones and wireless devices have quietly become the newest, hottest frontier for big brands from Pepsi to Nike, especially those itching to reach the coveted 18- to 34-year-old set.
TV networks are prodding viewers to send text messages to vote for their favorite reality TV character. Wireless websites are lacing sports scores and news digests with banner ads for Lexus (TM), Burger King (BKC) and Sheraton (HOT). A few companies are even customizing 10-second video ads for short, TV-style episodes that are edging their way onto mobile phones.
While the industry is in its infancy, ad campaigns for the tiny screen have increased sharply this year after several years of spotty efforts, and they're likely to take off by early next year, says Tom Burgess, CEO of Third Screen Media, a mobile-ad network.
Driving the surge is the increased use of text messaging, the wireless Web and video in the past 18 months as wireless carriers rolled out bigger, more colorful screens and faster broadband networks. About 30% of the 217 million U.S. cellphone subscribers text message at least once a month, Yankee Group says. Such services are more ingrained in the younger set: At least 55% of 13- to 24-year-olds regularly send text messages. About 10% of cellphone users regularly browse the wireless Web, MMetrics says.
For advertisers, the young audience is just one selling point. Wireless gadgets are always-on, ever-present accessories. The fact that a phone is tethered to an individual means that ads can be targeted. And users can respond instantly to time-sensitive offers.
"The days of doing a TV spot and reaching everybody are dwindling," says Jon Raj, Visa's new-media ad chief. "The mobile phone is very personal, and it's always with you."
Yet it's the intimate, insistent nature of cellphones that has made wireless carriers cautious about embracing mobile marketing, out of fear of turning off subscribers. Pushing tiny buttons to navigate the wireless Web or send a message can be clunky. And because subscribers typically pay for their minutes of data usage, many people don't want to burn them on ads.
"We need to make sure whatever we do is not perceived as intrusive," says Verizon Wireless (VZ) digital media chief John Harrobin.
Today, wireless websites do sport banner ads. But users typically must type in the address to see them. Except for trials, carriers have barred ads on sites accessed from the cellphone's menu of news, sports and other headings, which is the route to the wireless Web most people take. The wireless Web is not the Internet, but rather a similar network, with different addresses and sites streamlined for the small screen.
Carriers, though, are warming to the notion that consumers will welcome useful ads, such as those aimed at subscribers-on-the-go searching for restaurants, gas stations or movies. Or, say, stock prices, sponsored by Fidelity. "It has to be contextually relevant and enhance the customer experience," says Sprint Nextel (S) Vice President Anita Newton.
In fact, she notes, mobile ads could help subsidize data services, possibly shaving current monthly subscription fees of $5 to $20 and drawing more customers. About 42% of mobile customers are open to mobile advertising if it's relevant, if they asked for it or if they'll get coupons or free services, Yankee Group says.
Fielding Fowler of Saginaw, Mich., says he'd welcome coupons "for useful things" such as restaurants or gasoline. But he finds banner ads irritating when he's hunting for sports scores. "You're paying $8.99 (a month), and it's gone from ad-free to bombarding you," says Fowler, 35, a comedian.
Carriers will likely start accepting advertising within eight months, after they resolve battles with content providers over how to split revenue, says Jeff Janer, an executive at Third Screen Media.
U.S. mobile advertising revenue is projected to jump to $150 million this year from $45 million in 2005, Ovum says. That's still the equivalent of a rounding issue compared with this year's estimated $274 billion U.S. ad market. But mobile ad sales could total $2 billion, or nearly 1%, of U.S. ad sales by 2010 and up to 5% by 2015, Yankee Group predicts.
Among the ads gaining favor:
•Text messages. This kind of advertising lets marketers engage customers interactively, building loyalty. Consumers usually type in a five-digit "short code" to, say, enter a sweepstakes or download a ring tone or screensaver. In other cases, they get alerts about offerings they're interested in.
The strategy is a favorite of TV shows such as NBC's (GE)Deal or No Deal and CBS' (CBS)Big Brother to involve viewers. Customers typically pay a few cents to send such a message, but the networks often charge a premium, splitting the revenue with the carrier.
Last year, Big Brother viewers sent more than 500,000 text messages in two days to vote on which evicted houseguest should return. Viewers paid 49 cents a message, making the initiative marginally profitable, says CBS executive Cyriac Roeding. They also got free wallpaper, and about 30,000 opted to get text alerts on new shows. "It creates tremendous loyalty, and you're in touch with the audience even when they're not watching," Roeding says.
When A&E's Dog the Bounty Hunter invited viewers to dial a short code to receive text messages from the main character, 62% of participants said they would watch the show more.
Other brands are joining in. Dove soap prodded consumers to vote on whether women on a billboard were "wrinkled" or "wonderful."
Anheuser-Busch (BUD) prompted people to send cellphone photos of themselves for a contest promoting Bud Light. "You're trying to integrate into the lifestyle of this (young) generation," says A-B Vice President Tony Ponturo.
To tout the benefits of its Los Angeles credit card, American Express (AXP) last year let members and prospects sign up to receive invitations to limited-seating concerts and movie screenings.
Such missives can cost just 2 cents for the advertiser to send. But the Mobile Marketing Association urges advertisers to require consumers to opt in, then confirm that decision, before sending offers. "We need to be careful ... to protect consumers from spam," says MMA chief Laura Marriott.
•Wireless Web ads. Ads on the wireless Web rose sharply this year. Advertisers are spending $75,000 to $300,000 on typical wireless webcampaigns, vs. $25,000 to $50,000 in 2005, Janer says.
Typically, a mobile Web page has one ad at the top or bottom, so as not to clutter the tiny screens. "It's extremely impactful," says Maria Mandel, who heads digital innovation for ad agency Ogilvy & Mather.
Ads generally cost $35 to $50 per 1,000 views, vs. $10 for online ads, Janer says. And 3% to 5% of mobile Web users click on links to learn more or make a purchase, vs. a 0.2% click rate for Internet ads.
The uptick in advertising should keep afloat many mobile websites that have been saddled with huge costs and little revenue.
"We seriously considered shutting down the mobile Web business in 2003 and 2004," says Louis Gump, vice president of The Weather Channel.
Embassy Suites spent a few hundred thousand dollars on mobile banner ads early this year, encouraging customers to click to make a reservation. The campaign generated 55,000 clicks and $3.2 million in revenue, says John Lee, marketing chief for the hotel chain.
Mobile phones, he says, provide an ideal path to the hotel's target audience. Business travelers changing plans or considering a weekend getaway used to make mental notes until they could follow up. "Now, you can just click and do it."
Burger King ads on news and sports sites nudge users to restaurants with a crisp: "Hungry? Click to find a Burger King."
"It's an opportunity to reach consumers close to making a purchase decision," says Gillian Smith, the chain's senior director of media.
But not all advertisers are enthralled. 1-800-Flowers tested a special Mother's Day offer this year that fizzled. "I don't think people are comfortable searching the mobile Web just yet," says Tania Nemaric, company manager of brand communications. "You want to get in and get out. You're being charged for the time."
•Video ads. Anheuser-Busch, American Express and others have released their standard TV ads on cellphone video services. For the first time this year, short video ads were customized for cellphones. When Fox Entertainment (NWS) this summer released a spinoff of its Prison Break series to Sprint mobile phones, each two-minute episode was preceded by a 10-second ad for the youth-oriented Toyota Yaris.
On cellphones, consumers "are actively looking at something," says Kim McCullough, Toyota manager of marketing communications. "We're hoping that greater attentiveness will help our advertising."
•Ads for free stuff. Games on mobile phones typically cost about $5. This year, some games were offered free but included ads for products such as Zagat's dining guide or Progressive Insurance, says Michael Chang, CEO of Greystripe, a mobile ad network.
Traffix (TRFX), another marketing company, plans to offer free, ad-supported ring tones and movie clips.
The greatest potential lies in searches for local retailers, says Yankee Group analyst Linda Barrabee. Yahoo, Google and Go2 provide local mobile searches today, but they have limited or no advertising. In the future, a search will yield sponsored listings first.
Advertisers would pay about 40 cents if a customer clicks on a search listing and up to $7 if the customer calls the retailer, says Dan Olschwang of search provider JumpTap. Eventually, carriers could use technology to pinpoint a customer's location and offer a relevant coupon to a nearby shop, if the subscriber opts in.
Dunkin' Donuts (AED) tried a less-sophisticated version of that last year, sending a coupon for a 99-cent latte at several stores to interested Boston cellphone users. The campaign increased store traffic 21%.
Rollout of such ads has been delayed partly because two big search engines, Yahoo (YHOO) and Google (GOOG), are unwilling to share more ad revenue with carriers, which would link to them from their home pages. Some carriers are making deals with search upstarts, such as JumpTap, which are offering a more generous split and letting carriers affix their brands to the services.
"It's the battle for the customer," says Kevin Beebe, group vice president for No. 5 carrier Alltel, which is close to a deal with JumpTap.
Yahoo Senior Vice President Steve Boom says the search engine can generate more revenue because of its brand and expertise. "The (revenue split) misses the point," he says.
A similar standoff has stalled the full-scale rollout of banner ads on the wireless Web. Carriers want 40% to 50% of ad sales when users reach sites from their menus; content providers are offering less.
Wireless carriers believe they enjoy greater leverage than phone and cable giants have in online marketing. The ability to easily click to sites from wireless home pages is vital, says Sprint's John Styers, a marketing director. Also, he says, carriers have data about subscribers' surfing habits that could let them serve more relevant ads — but only with the consumer's OK.
"We really have to tread lightly," Sprint's Newton says. "The last thing we want is to have consumers be annoyed by advertising and cancel their subscription."
Paul Davidson, USA Today, August 9, 2006.
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