Mobile advertising has come a long way since the early days of “American Idol.”
The hit show is credited with catalyzing text messaging in North America, generating more than 13 million messages during the 2004 season from fans voting via their mobile phones. Mobile marketing has moved far beyond simple text-to-vote campaigns, though, using cross-promotional opportunities to reach highly segmented markets.
Simon & Schuster subsidiary Scribner recently sent 100,000 mobile users messages in a highly publicized effort to push Steven King’s new novel, “Cell,” which centers on a zombie-inducing pulse sent through mobile phones. Nike Inc. is targeting workout enthusiasts with daily texts including motivational messages and training tips.
But while U.S. firms may be pushing the mobile advertising envelope, Charles W. Fritz is gambling that European marketers are even more advanced. Fritz’s NeoMedia Technologies Inc. is in the midst of a spending spree, investing roughly $50 million in just a few weeks to snap up a handful of mobile marketers from overseas and bringing their expertise to the United States.
“We recognized maybe a year ago that there was an amazing emerging market called mobile marketing, and we recognized that market was going to need some enabling tools,” said Fritz. “We quickly realized that the state of the market in the U.S. was just starting, but in Europe, it was maybe 18 months ahead of us.”
NeoMedia’s acquisitions include 12snap AG and Gavitec AG, two German mobile-marketing companies, as well as Sponge, a London-based outfit that delivers content and applications to wireless users. The publicly held, Florida-based company also bought two U.S. firms: Mobot Inc., which develops mobile visual-recognition technology, and Connecticut-based mobile marketer HipCricket Inc.
While the European firms have gained traction with established text-to-win campaigns and on-pack promotions urging customers to send a message to a short code, they also have broken ground with innovative efforts that not only build name recognition but also generate substantial revenues. 12snap, for instance, uses “reverse auctions,” offering a new car to lowest unique bids sent via text message.
“You text in at a premium-say, a $1.50,” Fritz explained. “If yours is the one that is the lowest unique bid, you win. People are sending 10 text messages to win a car. They’re getting tremendous uptake on that kind of stuff.”
Perhaps the most promising business model in mobile marketing, though, is the oldest one in broadcast media: ad-supported content. Interactive campaigns and personalized messages have captured the wireless industry’s imagination, but the old commercial-driven paradigms of radio and television may be the primary way advertisers reach consumers who increasingly look to their phones as on-the-go computers and entertainment centers.
Ad-supported content is already firmly established on the Internet, as media giants like ESPN and CNN allow surfers to view clips of TV broadcasts in exchange for sitting through commercials. And while multimedia services have yet to gain mass-market traction, the model is gaining ground among tech-savvy wireless consumers who access news updates and sports scores on their phones.
Perhaps most importantly, carriers are beginning to pay attention. Verizon Wireless is considering such models for its Vcast service, testing a program to put ads on its phones to create a two-tiered payment system. The move could help Verizon Wireless gain market share quickly in the race among operators to become multimedia service providers.
“Major money is going to be in motion in the decade, and yet no one really understands exactly where it will land, or even if it will land, or just disappear altogether,” Verizon Wireless Chief Marketing Officer John Stratton said at Advertising Age’s Madison & Vine Conference earlier this year. Ad Age is a sister publication to RCR Wireless News. “(Advertisers) need more than an audience. They need an audience that cares about what they have to say. They need their message to be relevant to the audience they are saying it to.”
California-based go2 is establishing itself on the crowded mobile-search playground, providing free local search supported by advertisers. The company said it delivered more than 50 million ad impressions last year from marketers including ABC Inc., American Express Co., Jamdat Mobile Inc. and Progressive Casualty Insurance Co. to consumers who used their phones to find local business information.
The company claims traffic to its WAP-based offering increased 51 percent last year from 2004, with more than 24 million unique user sessions. And while go2 offers mGuide, a premium service for Sprint Nextel Corp. subscribers, Chief Executive Officer Lee Hancock said his company’s studies indicate users are very comfortable accepting advertisements in exchange for the free service.
“We did a survey, and one of the questions was, `Would you rather have a free go2 with a little advertising, or would you rather pay?”‘ Hancock recounted. “I think 83 percent said they would prefer to have a free go2 with some ads.”
Like other providers, go2 employs several ad-driven models, receiving commissions based on click-throughs, calls, or sales, as well as straight message-placement revenues. And while some local search offerings are both ad-free and free to end users aside from data or messaging charges, Hancock said most providers likely will face two options: charge users a premium or accept advertisements.
AvantGo, a mobile Internet service from Sybase Inc. subsidiary iAnywhere, is targeting college hoops fans with ad-supported content from the NCAA tournament from The Sporting News.
The free offering, which is available to smart-phone and PDA users, delivers scores, news, statistics and game recaps, and is underwritten by auto insurance company Esurance Inc.
The service underscores AvantGo’s efforts to allow advertisers to reach highly targeted demographic markets on wireless phones through appropriate content and services.
“We started with the concept that people are not going to pay for content in general, and we’ve been pretty right about that,” said Neil Versen, senior director of AvantGo.
“We were able to see early on that we could drive performance metrics, which gives us the ability to drive very high CPMs,” or cost per thousand impressions. (The letter “M” is the Roman numeral for 1,000.)
Versen said AvantGo has another advantage over many mobile marketers in that all of its offerings are strictly for smart-phone and PDA users. Not only does that guarantee a more desirable demographic, he said, but users can be segmented by personal tastes, profession and business interests.
Also, the company’s advertising messages are viewed offline by consumers who’ve synched their handsets with a PC for later use. And consumers are more likely to read a message and find out more about a product offline than when they’re searching for something specific online, Versen said.
Once engaged, users can opt to receive brochures or e-mails about advertised goods and services, and can have information sent directly to the phone. The company’s clients include BMW, Delta Airlines Inc., Microsoft Corp., Rolling Stone and The New York Times.
“It’s really about giving the marketer greater control over the sales funnel,” Versen said. “When I’m at the Web site, I’m at the top of the funnel, but how do you get me through the sales funnel? Mobile devices have that capability.”
