Ads Unplugged

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Advertisers' best hope for wireless — as with many of today's newest technologies — may be with the always-connected, on-the-go youth market.

Banks, airlines, and other industries with ongoing relationships with their customers may gain more from wireless connections than retailers.

Here's a news flash: Americans are going wireless. More than 109 million consumers in the U.S. own cell phones and more than 7 million own Personal Digital Assistants (PDAs). Analysts at Jupiter Media Metrix project that the number of Americans who actually use these gadgets to access the wireless Web will reach 96 million by 2005, up from just 4 million in 2000. That's about a third of the projected U.S. population. The big question now is: How can marketers cash in on all that connectivity?

There's been a lot of media hoopla lately about the prospects of wireless advertising, and as companies continue to roll out new platforms and vehicles to test the possibilities, debates are likely to get uglier before the jury gives its verdict. But, ultimately, like all new marketing efforts, the success or failure of wireless advertising will depend on one key factor: consumer response. The type of products advertised, the format and aesthetics of messages transmitted, and the demographics of consumers targeted will all play roles in shaping that response, for better or worse. Marketers are as eager as new papas to see wireless advertising take its first steps, but are consumers ready to get up and go?

Wireless advertising is still in its infancy, but early results show some promise. In March, for instance, Redwood City, California-based SkyGo, a wireless marketing firm, announced the results of a four-month study of 1,000 mobile phone consumers in Boulder, Colorado. The study tested 550 unique advertising campaigns for both local and national brands like Subway and CompUSA. The trial ads were delivered using Wireless Application Protocol (WAP), so they looked similar to the banners ads on the Internet. Consumers could choose to view the ads, save them for later, or delete them immediately. An impressive 64 percent of the ads were opened, SkyGo reports, and the trial run managed to deliver real profits to at least some marketers. “We got more of a kick on store sales, which was our focus, and also some surprisingly nice online business,� says John Siewierski, founder of Boulder-based Doc's Ski & Bike, a sporting goods store and e-tailer (www.geardirect.com).

Another early experiment with the technology courted sports enthusiasts in Raleigh, North Carolina, last fall. As residents with cell phones and PDAs scrolled local sports scores or event listings on their tiny screens, up popped the logo of the Hurricanes, the local National Hockey League franchise, and a line or two of text inviting them to buy season tickets. Cell phone users who clicked on the ad were put through to Ticketmaster's call center, while those using PDAs were automatically linked to Ticketmaster's Web site. During the one-week campaign, approximately 150 of the 1,500 people who saw the ads bought tickets, a whopping 10 percent response rate — especially impressive when compared with online banner advertising, which averages rates of less than 0.5 percent.

But tests are still just tests, and so far, the technology's current drawbacks seem to be keeping the majority of advertisers at bay. For one thing, wireless advertising is expensive — $35 to $65 per 1,000 impressions compared with $5 to $20 for online banner ads. And at present, the equipment just can't perform with the ease and finesse of a PC. Because the screens are much smaller, ads are pretty much limited to a small logo and a few lines of text. “We need color screens, location-based tracking, and always-on technology,� says Kevin Haley, wireless product manager for Advertising.com, a Baltimore-based advertising service provider. “It will be another 12 months before those reach a large scale, and two years before they reach a mass distribution.�

There's also the nagging question of whether Americans will ever embrace wireless access with the same gusto as their counterparts in Europe and Asia. Jupiter Media Metrix estimates that global advertising, commerce, and subscription revenue from mobile phones will total $7.5 billion by 2003, but North America's share will account for less than 10 percent. Furthermore, the research firm reports that of the more than 109 million wireless phone service subscribers in the U.S. today, just 600,000 of them, or one-half of 1 percent, surf the Net from their mobile phones. Even if that number jumps into the millions in a few years, as projected, experts anticipate that the majority of time consumers spend on their phones will be used for what the instruments were originally intended: phone calls. Says Paul Mulligan, senior analyst with eMarketer: “The fact that many people will have the ability to go online won't mean that they actually will take to surfing the Internet over their mobile devices.�

Some surveys have detected resistance to the very idea of receiving advertisements so close to home, especially among older and more affluent consumers. In a study by Washington, D.C.-based market research firm the Strategis Group, 75 percent of respondents aged 30 and older say they would not be willing to receive ads, compared with a “nay� from 55 percent of respondents under 30. The rich are also more wary: 70 percent of those earning between $40,000 and $80,000, and 79 percent of those earning $80,000 or more, say they'd be similarly disenchanted with such an intrusion, compared with 58 percent making under $40,000.

Advertisers' best hope for wireless — as with many of today's newest technologies — may be with the always-connected, on-the-go youth market. Windwire, the North Carolina-based mobile marketing firm that managed the Hurricane's ticket-selling campaign, found that of those who viewed the ad and answered their survey, 84 percent were between the ages of 23 and 36. In a separate study, Strategis also found that the younger set are more willing than other groups to receive advertisements, coupons, and promotions over their mobile phones — 45 percent of the 18- to 29-year-old group is ready and willing, compared with just 29 percent of all users. They are even more willing to accept ads if it comes with perks, such as a free phone or cheaper service.

“If agreeing to get ads meant receiving only one every three or four minutes, that wouldn't be terrible if it lowered the cost a little,� says Jake Howlett, a 23-year-old Washington University law student who frequently uses his Palm Pilot to look up the latest sports scores on ESPN.com. This cohort is also the most willing to make purchases using a handset: 62 percent of them, compared with 41 percent of the total sample, say they are comfortable purchasing goods and services over their wireless phone, according to Strategis.

And even in this high-tech arena, some of the old-fashioned, gender-based stereotypes seem to hold. SkyGo found that men are generally more inclined to respond to the ads and visit WAP sites than women are (56 percent vs. 38 percent). Men are also more likely to select weather, news, and sports information, while women gravitate toward shopping sites. Women also recall ads for apparel and beauty products, travel and leisure, gifts and flowers, and home and garden supplies more frequently than men do, while the boys are more likely to recall electronics, computer, and entertainment-related ads.

Above all else, marketers who plan to try out this new medium must make sure their ads are very targeted, compelling, and convenient so that consumers perceive them as a service rather than advertising, conclude SkyGo execs. The firm found that participants responded best to campaigns that do something unique or interactive. Ads featuring trivia quizzes, for instance, received the highest click-through response in the study (52 percent). Next came invitations to participate in polls; register for newsletters and services; and have information sent to their online accounts by e-mail. Among the highest scoring campaigns was one for a local restaurant that allowed callers to find out about the most popular entrées that evening.

Acting locally may be a good motto for those looking to make use of wireless, experts say. As mobile devices become more advanced, they will be “always-on,� no longer requiring a recharge, and as such, will provide marketers with an even greater ability to send timely alerts and offerings. In addition, as tracking technology becomes more accurate, advertisers will be able to target their ads even more effectively. In Europe, location-based campaigns — in which cell phone users inform advertisers of their whereabouts in exchange for discounts — have already shown signs of success. Shoppers in Britain, who inform the ZagMe service that they plan to be in the Lakeside Shopping Centre in Thurrock, Essex, for instance, receive one or two messages each hour alerting them to discounted products available in nearby stores.

But Americans aren't yet used to being stalked by advertisers. When Phoenix-based computer scientist Rodney Joffe recently received an unsolicited text message from a local mortgage broker over his cell phone, he thought it must be a mistake. So he called the company to have his name removed from their list. When he received a second unsolicited message from the same company, he did some research and says he discovered that 170,000 people in the Phoenix area got the ad, and no one gave the mortgage company permission. Joffe, who says no circumstance would entice him to ever accept ads on his cell phone, has since sent the company a letter requesting $1,000 in damages. If they do not reply, he says he will file a complaint in small-claims court, the first step in a class-action lawsuit.

The potential for backlash is leading some experts to suggest using wireless ads to deepen relationships with existing customers rather than to try to attract new ones. Barry Peters, director of emerging media at Lot21, a California-based online advertising service, suggests that banks, airlines, and other industries with ongoing relationships with their customers may gain more from wireless connections than retailers.

“Banks have a constant dialogue with their customers, so they might offer wireless options to enhance their online banking services, or an airline might notify its customers when their flights are delayed,� he suggests. If companies are proactive, by alerting customers over their cell phones when there are problems, for example, they may cut costs at customer service centers by reducing the number of phone calls coming in. For a highly competitive industry like the airlines, that may be the best advertising money can buy.

LOSE MY NUMBER

Forty-five percent of 18-29-year-old cell phone users, compared with only one-fifth (21 percent) of the 45- to 54-year-old crowd, say they'd be willing to receive advertisements or promotions on their mobile phones — if the ads were for the kinds of products or services they'd use.

WILLING NOT WILLING
All cell phone users 29% 71%
AGE
18-29 45% 55%
30-44 26% 74%
45-54 21% 79%
55 + 25% 75%
INCOME
Under $40,000 42% 58%
$40,000 to $80,000 30% 70%
$80,000 and above 21% 79%
GENDER
Male 28% 72%
Female 29% 71%
Source: The Strategis Group
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