Special Report: Devices create channel for ad dollars

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For better or worse, they're ubiquitous. Cell phones are glued to the ears of occasionally intent listeners and a pack of rabid talkers.

No longer limited to globe-trotting road warriors and multitasking business executives, cell phones have become everyday tools and are helping spawn a wave of wireless devices and services. Platforms range from wireless phones to handheld electronic organizers and pagers. Wireless wrist instruments, wearable computers and a bevy of futuristic devices are also coming.

MOVING TARGETS

For marketers, every mobile wireless user is a moving target. Marketers are banking on the slew of gadgets to deliver new revenue streams from advertising and promotions. New software designs and interfaces, support from telecommunications carriers and easy ways to participate in promotions are expected to help grow the nascent business of ad delivery via wireless devices.

"We're in the embryonic stage of Internet access on mobile phones--no, I would say at the larval state," says Mike Isgrig, director of product marketing for Ericsson Mobile Phones.

But between the present and the future is the vexing matter of standards. Europe and Asia, already far ahead of the U.S. wireless market, are eyeing with anticipation the arrival of 3G or Third Generation, a third wave of wireless technology that merges wireless with broadband to seamlessly mesh voice, high-speed data and e-commerce on a mobile phone. The first wave was voice; the second wave delivered voice and limited data.

The future may be 3G. Or it may be like Time Warner's mid-'90s scheme to wire homes into a powerful interactive network--a heavily hyped, cool idea that went cold when people analyzed the technical challenges, costs and questions about financial return. Mark Zohar, an analyst at Forrester Research, is one of the 3G skeptics, calling it a "red herring" that isn't needed.

WORKING FOR COMPATIBILITY

If it comes, 3G is a few years away in the U.S. If it doesn't materialize here, U.S. wireless networks have various options to enhance their existing systems.

There are efforts globally--such as the Wireless Application Protocol Forum--to allow wireless devices and services to interact. WAP Forum members include major wireless phone makers, Palm Inc., marketers such as Charles Schwab & Co. and i-shops Agency.com, Ogilvy Interactive, Rapp Digital, Rare Medium and Razorfish.

The presence of marketers and agencies in the WAP Forum reflects the marketing world's strong interest in bringing compatibility to wireless. But for now, wireless phone makers, carriers, Net players and marketers interested in the wireless Web must cope with wireless systems in the U.S. that are incompatible with platforms offered in Europe and Asia. Even inside the U.S., wireless systems are incompatible.

Given the more advanced and more compatible state of wireless systems in Europe, it's not surprising that wireless developers--and those plotting wireless marketing schemes--are devoting much attention to Europe. Much of American interactive agencies' and ad-serving networks' wireless work is with European and Asian companies.

While standards issues get debated, U.S. marketers--and agencies--are hindered in forging ahead with developing compelling and functional wireless applications and ads for clients.

But there are 107.5 million cell phones operating in North America, representing nearly 20% of the world's total, according to Gartner Group. And the wireless Web is coming into the states, bringing with it many possibilities for marketing and advertising.

PICK A PARTNER

Nokia, Motorola and Qualcomm already offer Web phones, and Palm Inc.'s Palm VII also delivers the wireless Web. Ericsson is preparing to launch its first U.S. Web-browsing phone in April with carrier partner AT&T Wireless.

Nokia, the No. 1 wireless phone marketer, is working on wireless initiatives with partners including Microsoft Corp. and Amazon.com. Nokia and Amazon in late February announced an e-commerce agreement that will include joint marketing, starting in the U.K. and then expanding to other countries.

Motorola, the No. 2 wireless phone marketer, currently offers Yahoo! and America Online on its wireless Web phones and expects to add more content partners in coming months. As for new advertising models, the company is rather coy. "We're exploring it, but data delivery through phones is still new," says Geoffrey Frost, VP and director of global marketing communications for Motorola's Personal Communications Sector. Mr. Frost said display technology, resolution and screen sizes will need to evolve to accommodate different types of advertising and promotion.

'INCREDIBLE HYPE'

He notes that the real opportunity is with location-based services and instantaneous e-commerce options with easy-to-use interfaces. Motorola in late February partnered with Amazon.com's U.K. unit in part of what is expected to be a far-reaching e-commerce deal with the Net's leading e-tailer.

Motorola predicts more than half of Net connections will come through wireless devices by 2003.

Devices are getting more plentiful--and cheaper. Start-up Scout Electromedia, San Francisco, for example, plans to introduce a "wireless consumer lifestyle product" in June to deliver content about local entertainment happenings to trendy young urbanites. Price: Less than $100. The gizmo will deliver promotional messages targeting trendy city dwellers.

Wireless marketing is wide open, but with no clear direction.

"There isn't a business model," says Ken Dulaney, VP-mobile computing for technology researcher Gartner Group. "Most people today are really experimenting with these platforms and there's incredible hype."

Ericsson's Mr. Isgrig agrees. "We are investigating lots of different things. Clearly, there are some fairly conceptual ideas revolving around advertising. There are almost unlimited opportunities for advertising, but there are questions conceptually about how it would be set up."

For example, would advertisers flash content at different intervals on the phone, or would the phone go out and search the Net for information?

Advertising when a unit is not in use--such as when it's in standby mode--presents yet another opportunity for marketers. But would bigger screens be necessary? Wireless phone marketers such as Nokia, Motorola and Ericsson have introduced increasingly smaller devices in the past year.

Mr. Dulaney notes that most of what exists today in terms of advertising on wireless devices is driven by content and Internet service providers, such as major portal vendors packaging content with Sprint PCS' wireless Web service.

TIME-CRITICAL TRANSACTIONS

But the tiny, low-resolution, b&w screens on many wireless phones and organizers make it difficult to do traditional advertising. However, audio ads are a possibility, and viewers might be asked to make a choice by clicking on a button to accept a product or service. Ads could be stored for later playback or lengthy messages could be sent to a PC. Viewers also could take immediate action via an attachable keyboard. Touch screens offering ad messages or promotions are another possibility.

The real opportunity is for an advertiser, say a Charles Schwab & Co., to market a private-label wireless device and conduct one-to-one marketing with loyal clients, Mr. Dulaney notes.

Like free PCs, a free or heavily discounted wireless phone or electronic organizer might entice users to accept ads or allow marketers to learn more about them.

The potential for direct marketing is enormous if marketers are already well-acquainted with end users.

Mr. Dulaney describes four wireless transaction types: broadcasted information (flight delays, news flashes); database updates (schedules, reminders); a single-level data entry form (a stock quote that's typed in); and a multilevel data entry screen (to rebook a flight and other, slightly more complicated transactions).

"Time-critical transactions are better suited for the wireless Web," he notes.

Simple transactions are well-suited for wireless devices. For example, a user could get 10 or 20 minutes of free air time if he or she acts on an offer. The minutes would be sold to advertisers who run their programs in much the same way as a frequent-flier program.

CUSTOM PROMOTIONS

Place- and time-based, impulse advertising takes on a whole new meaning in such a context.

"Advertisers have the ability to know where people are. They could send you a message during your layover at [Los Angeles International Airport], send scrolling messages on promotions or specials in [airport stores] or headlines," Mr. Isgrig explains. The process works because the phone communicates with the cellular site or tower, so advertisers working with carriers know when to serve a message--assuming phone companies can work through potential consumer privacy issues.

Carriers such as Sprint PCS, AT&T Wireless and Bell Atlantic Mobile will drive ad and promotion deals, as well as specialty content aggregating companies such as AvantGo.

Wireless phone marketers can also get in on the action. For example, Mr. Isgrig explains, if AT&T Wireless clinches a deal with Amazon.com, Ericsson can code the interface in every mobile phone it manufactures with AT&T service. Big content providers such as Bloomberg, Walt Disney Co.'s ABC News and others could cut special deals with carriers and offer custom promotions.

'EARLY IN THE GAME'

Phone makers such as Ericsson, which has built a vast global telecommunications infrastructure, can also build software functions into Web phones such as bookmarks and Web links.

A recent Ericsson deal with Microsoft Corp. promises just this sort of potential. Microsoft and Ericsson in December agreed to form a joint venture to develop and market wireless Internet solutions.

Ericsson is preparing for wireless ads. The company last week announced a wireless version of Internet Advertiser, a technology used by Internet service providers to offer ad-supported Net access. With the new version, ISPs can push targeted ads to wireless devices such as phones and electronic organizers.

The market for wireless devices is emerging, even if the path isn't clear. Says Ericsson's Mr. Isgrig: "It's early in the game."

Contributing: Jennifer Gilbert, Bradley Johnson

Copyright March 2000, Crain Communications Inc.

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