Agencies Eye Potential in Wireless Apps

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New york interactive shop Razorfish opened a Helsinki laboratory last year to research and develop wireless applications. That puts the shop at ground zero in Finland, a country of 5 million people with 73% wireless penetration, according to International Data Corp. In comparison, wireless penetration in the U.S. is only 29% out of a population of 272.6 million.

This seems a natural move for an agency that's banking on the proliferation of wireless devices in the U.S.

Razorfish is one of a handful of interactive agencies and ad-serving companies exploring ways to help marketers transition their interactive advertising from PCs to wireless devices. It's a place marketers will want to be: Worldwide sales of mobile handsets reached 283 million units in 1999, a 65% increase over 1998, according to Dataquest, a unit of Gartner Group. That's a lot of little screens in front of consumers' faces -- little screens that could be plugged with marketing messages.

While the U.S. set the stage for the Internet, Europe and Asia are leading the way in wireless (see story on Page S40). So it's not surprising agencies and marketers interested in wireless marketing applications are devoting great attention to Europe and Asia.

SETTING STRATEGIES

But to the extent that they can help U.S. marketers at least prepare for the wireless platform's ubiquity -- something analysts say is about two years out -- agencies and ad servers are helping clients set strategies.

For Siegelgale, a New York-based branding and e-services consultancy, much of its actual client wireless work is in Europe, "where the [wireless] adoption rates are much higher," says Michael Megalli, senior consultant at Siegelgale. For U.S. clients such as Eastman Kodak Co. and an undisclosed healthcare site, however, Siegelgale is developing wireless strategies, Mr. Megalli says, so they are prepared to move vbtheir marketing messages to wireless platforms once standards have been set.

CREATING MICRO-ADS

"We advocate putting [a client's] message out remotely where it is most relevant to users," he says. "Wireless is the ultimate realization of that potential. In location-based services, location becomes a mode of personalization."

While few agencies are involved in actual wireless-based ad development now, J.G. Sandom, president of Rapp Digital, New York, the interactive arm of Omnicom Group-owned Rapp Collins Worldwide, says he believes the agencies ultimately will be responsible for creating "micro-ads" for wireless devices.

"They will become as common in the wireless world as banners are on the Web," he says. "Wireless users -- a young, single, upwardly mobile audience -- will be very attractive to advertisers."

Rapp Digital has been testing delivering micro-ads via wireless servers.

"Absolutely, there is a place for advertising on wireless devices," Mr. Sandom says. "Let's face it, wherever there is space, there will be advertising."

`HOW TO BEST COMMUNICATE'

Other interactive agencies exploring wireless advertising for clients include San Francisco-based Bravo! Marketing, which last month began offering wireless Web-site development, customizing content for the small screens. Baltimore-based Advertising.com, a company that provides online direct marketing services, last month also launched a service that enables consumers to earn money in exchange for receiving marketing messages on their wireless devices.

Other wireless agency pioneers include New York-based i-shops Razorfish and K2 Design.

K2 recently partnered with wireless software developer ThinAirApps to develop and market wireless applications for clients.

"We have been looking at this as well as broadband because our clients are not looking to develop strategy as to how to best communicate through a Web site, but as to how to best communicate," says Matt DeGanon, executive chairman of K2. The agency has helped develop a Web -- but not yet a wireless -- presence for clients such as Audi of America, Chase Manhattan Bank and Bayer Corp. "The role of the interactive agency is to develop communications that are appropriate and effective over the device."

In addition to its Helsinki presence and work there, Razorfish is one of a number of agency members of the Wireless Application Protocal (WAP) Forum (www.wapforum.

com), an industry organization developing global specifications for information exchange via wireless devices. The shop has also created a New York unit devoted to mobile application development.

"Advertising is going to look different on a wireless device than on the Web," says Josh Rubin, mobile strategist at Razorfish, noting that wireless technology in the U.S. still is crude enough to allow only rudimentary, text-based ads. "There are no pretty pictures yet."

But with a standard in place, increased bandwidth, longer battery life and devices with bigger screens, there will be pretty pictures and audio, he says, and interactive shops should be ready to help marketers create them. Razorfish already has several European clients for which it is developing wireless applications, including Finnair Group.

Even some ad-serving companies and ad networks are jumping in the wireless game. For example, 24/7 Europe, a division of New York-based 24/7 Media, in February developed a wireless ad server, and is already testing the server in Europe with several clients. Winstar Interactive, a subsidiary of Winstar Communications, last month opened a unit to sell ads for wireless-based Web sites.

New York-based Real Media is running ad campaigns for wireless phones in Europe and is planning to do so in Latin America. The company also is working on a Palm VII e-mail advertising program with ThinAirApps.

`PLATFORM-AGNOSTIC'

"Internet advertising will become platform-agnostic," Real Media Chairman Dave Morgan says. "It is essential that our publishers are able to deliver and sell ads on all of these [platforms]."

Still, wireless devices that use location-targeted advertising via cellular positioning systems (similar to satellite-driven global positioning systems) could wreak havoc among privacy advocates, who are still reeling from the latest controversy surrounding PC-based ad-serving companies such as DoubleClick. That could be a big hurdle for interactive agencies and ad servers to overcome.

"The issues to address include privacy and whether the user is going to be comfortable with that concept," Mr. Megalli says.

Mr. Sandom agrees. "The technology is there and all manufacturers are looking at it, but privacy is the big issue. There is an opportunity where advertising can become targeted and relevant to the user because it is geo-based," he says. "What could sink that, though, is this concern about privacy."

But the industry stands behind the concept.

"In that kind of environment, you will have a convergence of marketing and advertising," Mr. Megalli says. "One is providing a service, and the brand message is carried with that service. That will be much more compelling to users."

However, Mr. Sandom says, "The value exchange is going to shift. . . . If you don't want to have the ads, you will have to pay for the service . . . People will not stand for an information glut if they have to pay full freight for Web access on their handheld devices."

In the end, consumers may not want any marketing messages delivered to something as intimate as a wireless phone. Wireless-based advertising is a violation of personal space, says Jack Trout, president of marketing strategy consultancy Trout & Partners.

`KILLING THE GOLDEN GOOSE'

"The more stuff you throw at people, the more you hustle people, the more resistant they become," Mr. Trout says. "In a way, people start to train themselves to get away from the advertising, and that's not good for the advertising business. It's called killing the golden goose, folks."

As a result, perhaps more than technological limitations or privacy issues, a lack of consumer acceptance could be the biggest obstacle to agencies and ad servers helping marketers move to wireless devices.

"I look at [wireless devices] as an advertising platform and I laugh," says Jim Nail, a Forrester Research senior analyst. "The phone just doesn't seem like a good place to sell things." Wireless marketing must overcome a few hang-ups before it connects.

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