Carriers experiment with mobile-phone ads
Seattle Times technology reporter
Every day after school, Marco Johnson eagerly hops online on his PC to voluntarily view ads that earn him free minutes for his cellphone.
In the past few weeks, the 18-year-old has watched commercials for Mountain Dew, a no-smoking campaign, and music videos from The Shins, a pop band. Through the same campaign, he also takes online surveys and answers questions by cellphone text message, both of which earn him more time.
Through the "Sugar Mama" program that Virgin Mobile offers its young, hip subscriber base, the young man from Bryans Road, Md., rarely has to pay a cent of his cellphone bill, except for text messaging. In fact, every month, he adds about 75 minutes to his account.
If you count ads he watches on his mother's behalf to supplement her Virgin Mobile account, it's even more.
"It definitely has saved me money," he said. "It's my senior year, so it's really hectic. On the weekends, sometimes I talk 10 to 20 minutes. But on Monday, I can go to Sugar Mama and get those minutes back in a day or two."
In its first seven months, the Sugar Mama campaign awarded 3 million minutes to about 250,000 of the registered customers. Without knowing it, those customers have been guinea pigs for the advertising industry as it tries to figure out what role mobile phones will take in getting messages out in the future.
For now, it's the early days of mobile advertising, and there are lots of challenges ahead. Cellphones are guarded by the carriers, which fear the slightest violation of customer privacy could cause them to jump to a new carrier.
But in the past year, carriers have started to experiment with ad campaigns, figuring that if they don't take control of the opportunity, an advertising giant like Google or Yahoo! eventually will.
Jayne Wallace, a Virgin Mobile spokeswoman, said Sugar Mama was considered cutting edge when it was launched in May because few carriers then even talked about ads.
"We were hearing that people weren't embracing the idea of getting ads on their cellphones, and yet when we talked to our customers they said they might consider advertising," she said.
The caveat, Wallace said, was that customers were willing to accept ads if they involved something worth their time — such as free minutes.
Other carriers and advertisers have started experimenting, and all sorts of business models are under development.
Examples include mobile Web sites that subsidize their content by placing banner ads at the top of sites; text-messaging campaigns that encourage interaction, such as voting on "American Idol"; and contextual links returned from a mobile search based on subscriber location.
Further down the road is the possibility that ads will be pushed to a phone automatically, based on the user's location, delivering a coupon for a store he or she just passed by.
The opportunity promises to be large because of the nature of the mobile phone. It is a personal device advertisers can use to build interactions with customers. Phone users also don't leave the house without their phone, and because of this, the ads can be targeted and interactive.
In addition, if an advertiser is thoughtful enough, consumers may not even consider the content they receive to be ads; they may find the information relevant or helpful.
Advertising experts say this could be the primary difference between mobile and other media, including TV, radio and the Internet.
Consider a case in which you snap a photo with a camera phone and a message pops up on the screen that says you can send this photo to a friend for a price. Helpful or annoying?
Or, say, you lock your keys in the car and search for a locksmith. The results could include a sponsored ad for the closest shop. Helpful or annoying?
Kevin Heisler, an analyst with Jupiter Research, said that with that kind of relevance mobile ads could see much higher response rates than online advertising. "Even if they just do a small amount of targeting based on demographics, the conversion rates for campaigns will be astronomical compared to online advertising," he said.
"The great thing about the Internet and Google and other search engines is that they have massive reach," he said.
"But at the same time, the engines don't have the capability of doing geo-targeting — you don't know who the individual user is. At most, you can find the geographic region, and then it's a 20-mile radius. If I were in Manhattan, that could be Long Island or New Jersey."
Because of this, Heisler said, the amount of spending on mobile marketing is expected to double in the next four years from $1.3 billion in 2006.
Omar Tawakol is the chief advertising officer at Medio Systems, a Seattle company creating a mobile-search application to deliver ads based on an individual's searches.
He said the mobile-phone ad platform will be completely different than the Internet. Typically, he said, people do research online, but on the mobile phone they look for answers. They want to know where the nearest restaurant is or where you can buy a Nintendo Wii. "Ads that work are viewed as content and wanted by the consumer," Tawakol said. "Mobile search is one of those types of ads."
In addition, because the mobile phone is a personal device and is monitored closely by the carrier, the advertiser could potentially know a lot about a person, including gender, age, location and preferences based on habits.
Stacy Doren, director of media and online with Levi Strauss Signature, said her company opted to participate in Virgin Mobile's Sugar Mama campaign because it reaches a key demographic interactively.
Before starting a video campaign on BMX bikers, Levi Strauss surveyed Sugar Mama participants to find out such things as how many pairs of jeans they own and how many they wear.
But the piece of the campaign that sold Doren is that after subscribers watch the ad, typically a video online, they must answer a couple of questions to ensure they were paying attention.
For instance, after watching an Xbox 360 ad, Sugar Mama asks whether the ad was "phenomenal, sweet, good, OK or lame?" The second question asks which game console rocks the hardest: Nintendo, Sony, or Xbox?
The questions, although simple, require interaction.
Back in Maryland, Marco Johnson said the ads work in some cases. For instance, he's not interested in learning more about Mountain Dew because he already drinks it, but after seeing The Shins video he clicked on a link to learn more about the band.
Doren said she's excited to see how well the campaign works, and eagerly awaits the day mobile starts delivering the videos directly to the phone, not just to the PC.
"I think that [the mobile phone] offers even greater targeting than they are able to offer online. Through the carrier, they know a little more about the consumer, like where they live and their age."
If she knew those things, Levi could create even more targeted messages that could include coupons for the nearest store.
Still, there are challenges and roadblocks limiting how fast ads will make it onto the phone in a big way.
One concern is the possibility of spam. Because people pay for access to their phone, whether it is a call or through data charges, limiting the spam that has inundated the online world is considered crucial.
Another issue involves subscriber information. Carriers are reluctant to give away information about their consumer base and will do so only with the subscriber's permission.
Sprint Nextel, which started to experiment with banner ads in October, said it offers brands general information about its audience, but noted the information is stored on a Sprint server and the company does not give the actual data to anyone, including the advertiser.
Seattle's aQuantive, which helps brands create online-ad campaigns, has started to pay attention to mobile advertising and other emerging tools, but is treading carefully.
"Privacy is a huge concern for marketers and the consumers," said Jeremy Lockhorn, aQuantive's director of emerging media. "The last thing we want to do is cross that line into violating a person's space. I would err on the side of taking extra time and waiting until consumers are going to be comfortable with what is happening."
Lockhorn said he has clients asking "all of the time" about implementing a mobile component.
Medio's Tawakol said the mobile phone is the ultimate platform because advertisers want to reach a lot of people at once, but in a one-on-one way.
"The convergence of having the biggest reach and the most personalization promises this will be the most significant ad medium ever," he said. "It's just a question is how fast are we getting there."
Tricia Duryee: 206-464-3283 or firstname.lastname@example.org
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