Carriers warming up to mobile marketing

The major U.S. carriers are rushing to cash in on the mobile marketing craze by selling ad space on their WAP decks. But consumers aren’t thrilled about using the third screen as a billboard.
Sprint Nextel Corp. was the first tier-one operator to jump into the advertising waters, announcing a few months ago that it will partner with Enpocket to place marketing messages on the home page and for its wireless Web service and other navigation pages. Verizon Wireless followed Sprint Nextel’s lead last month, saying it will allow banner ads on a variety of its on-deck content sites. Verizon Wireless will tread carefully, spokesman Jeffrey Nelson said, and has yet to announce any deals with advertisers.
And Cingular Wireless L.L.C. last week signaled its willingness to step into the arena, discreetly saying it was exploring advertising options.
Marketing messages are nothing new in the world of WAP, of course. Wireless Web surfers have long been exposed to ads from carmakers, insurance firms and a host of others as they search for mobile content or information. Those ads have been placed by content providers, however, and viewed only by users visiting such sites.
Analysts have little doubt about the potential of the mobile advertising market. Ovum Research said the U.S. space tripled in the last year alone, jumping from $45 million in wireless ad spending in 2005 to $150 million last year. EMarketer, which defines mobile advertising spending differently, predicts the market will explode from $420 million last year (including mobile-related Internet advertising) to $900 million in 2007. Informa Telecoms & Media, meanwhile, forecasts an $11 billion worldwide market by 2011.
But carriers and others looking to cash in face a difficult task in delivering effective advertisements that consumers will tolerate. A recent study by Forrester Research Inc. indicates that a whopping 79 percent of online consumers are annoyed just by the thought of mobile ads on their phones. Only 3 percent, by contrast, said they would trust text marketing messages.
While users long ago got used to banners, pop-ups and other Internet advertising techniques, wireless users see their handsets as a more personal device than a computer, Forrester concluded, and are far less willing to tolerate unwelcome messages.
The firm urged carriers and advertisers to target their efforts with offers that are relevant and compelling, citing several examples: McDonald’s found success by placing ads on the wireless site of Match.com, which lures young consumers. A Boston radio station uses mobile alerts and promotions and allows music fans to interact with disc jockeys during broadcasts. And a small grocer is finding success after it replaced its loyalty card program with one that uses mobile phones to identify shoppers.
“Broader mobile data adoption is finally providing marketers with a real opportunity to reach customers, particularly the young and socially connected,” said Forrester analyst Charles Golvin. “But marketers must adopt a more nuanced campaign approach in order to reach these consumers due to the highly personal and intrusive nature of the mobile medium.
Of course, users may be more inclined to accept any type of ad in exchange for discounted or free services. Amobee Media Systems, which has offices in London and San Francisco, said trials with “multiple tier-one operators” have found that users are 50 times more likely to accept advertising-supported content than to pay for a download.
While that figure may be overly generous, there’s little doubt that some users will accept ads for discounted voice and data services. But plenty of uncertainty remains whether established carriers will use advertising revenues to subsidize services or simply pass the new revenues along to shareholders.
And while carriers step out on the perilous tightrope of mobile advertising, a handful of startups are already raking in revenues by selling ad space on off-deck sites. AdMob Inc., a Palo Alto, Calif.-based firm, claims to deliver 250 million mobile ad impressions per month. The company serves as a kind of wireless marketing clearinghouse, allowing advertisers to find publishers with space to rent. And it is in no rush to team with mobile operators, according to CEO Omar Hamoui.
“I think (all the carriers) see mobile marketing as a big opportunity, but they still don’t know quite where to take it,” Hamoui said recently. “I think the carriers could be a big opportunity for us, but really our focus right now is on the industry players. To be honest with you, that’s larger than the U.S. carriers. That’s just all untapped.”