Outlines of a New Industry Emerge

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NEW YORK (AdAge.com) -- Even as they wax poetic about the potential for pumping ads out to handheld wireless devices, marketers ponder this nagging question: Will consumers really be willing
A Subway ad as it appeared on a cell phone screen.
to pay for the additional airtime required to access ad-laced digital message streams? And, beyond that, will the consumers even want to be bothered?

The implications are huge. "Almost any phone can receive text messaging, and over 100 million people use wireless devices," Rachel Barenbaum, president and COO of PlanetHopper, a New York wireless marketing firm, pointed out.

Beyond the extra cost issue, marketers experimenting with wireless advertising are faced with other problems, such as small screen sizes, inconsistent data speeds and unstable connections.

Major new ad venue
Despite these difficulties, many providers are convinced that devices such as cell phones, two-way pagers, text-messaging devices, Palm Pilots, Visor digital assistants and Pocket PCs will ultimately become a major advertising venue.

A recent Jupiter study indicates that 46% of consumers declined to accept advertising on their cell phone or handheld organizer in exchange for financial incentives. Thirty-six percent agreed to accept ads in exchange for access to content or airtime discounts.

Despite suggestions of consumer resistance, technical hurdles and a tepid economy, wireless ad companies are barreling ahead,

An ad for Lexus as it appeared on a Palm handheld screen.
accelerating the pace of trials with marketers and wireless carriers such as AT&T Wireless, Nextel and US West.

Expanding networks
Interactive ad serving companies DoubleClick, 24/7 Media and Engage also are trying to get into the act, moving in fits and starts to form their own wireless ad networks.

WindWire, a Morrisville, N.C.-based company, has built the WindCaster Network. Its WindCaster for Advertisers product is designed to help agencies and advertisers create their own virtual networks of wireless publishers. The network also lets them buy additional inventory. WindWire's solution enables marketers to serve targeted ads and promotions via all wireless devices and networks, interactive ads and coupons; control a campaign budget and CPM rates; and change campaign parameters hourly. Effectiveness reports are managed by CPM and click-through rates on a daily, weekly and monthly basis.

Wireless coupons
David Wilson, WindWire executive vice president and co-founder, said the network, built on Java, is the only national wireless ad network that works with any operating system and all types of browsers.

"We're able to serve ads, coupons and promotions across any device," he said. WindWire licenses the WindCaster Network, which went live in September, to publishers and content providers, agencies and marketers. WindWire says it has delivered 2 million ads to consumers since October with a click-through rate of 15% and a call-through rate of 12%.

In recently concluded trials, WindWire, with carrier partner GoAmerica, served wireless ads from marketers that included the National Hockey League's Carolina Hurricanes, Nike and other national advertisers, publishers and agencies. Among WindWire's agency partners are The Carat Group, a division of Aegis Group, London; San Francisco-based ad agency Lot21; Mass Transit Interactive, New York; and Dentsu USA's Renegade Marketing Group. WindWire is looking to launch a product targeting wireless carriers later this year.

Apart from wireless ad networks, companies such as PlanetHopper are teaming with marketers to deliver wireless coupons and promotions. PlanetHopper's Digital Deals are entertainment-based, limited-time offers that target 18- to 35-year-olds through text messages on mobile phones. PlanetHopper's partners include General Cinema Theaters and Shecky's Bar Club & Lounge Guide for Los Angeles and New York.

Movie theater alerts
PlanetHopper sells the Digital Deals to city guides which place them on their Web sites. The guides pay PlanetHopper monthly fees for set-up, placements and other services. So, for example, a cell phone will beep alerting the user to a new text message from, say, General Cinema. A Digital Deal would alert moviegoers to a special offer of $4 movie tickets for the next two hours at a nearby General Cinema location. Or, the Deal might promote a buy-one-get-one-free drink deal at the theater concession.

PlanetHopper's Rachel Barenbaum says the company is pursuing partnerships with Major League Baseball and other sports franchises, record and concession chains, sporting goods retailers and others. The company works with radio stations to drive listeners to sign up for a service that updates them to the latest deals at www.planethopper.com. The company is also working with credit card companies and sports teams to finesse group marketing deals. Ms. Barenbaum points out that kids ages 14 to 18 make up the fastest growing group of cell phone users.

Ericsson a big mover
Wireless infrastructure providers such as Ericsson are also getting into the ad delivery game with Mobile Advertiser, a product for service providers. The Swedish wireless giant isn't looking to get into the ad business, but it is hoping to influence the nascent market and, in so doing, stimulate demand for its wireless network gear.

Indeed, there are various players eager to feed from the wireless ad trough -- carriers, handset makers, advertisers, media entities and publishers, ad-serving companies and dedicated wireless ad network providers such as Mediatude, WindWire and SkyGo.

"I think you will see companies take a position in the food chain between media buyers and mobile portals and mobile operators," said Mats Eriksson, investment manager, content aggregation, Ericsson Business Innovation.

SkyGo, which conducted a market study with Ericsson cell phones, believes handset marketers have a role in shaping the market "to the extent that they believe advertising will be a force in driving wireless," said Perry Allison, SkyGo's vice president of strategic alliances. Ms. Allison said a handset's screen size, user interface and design features are driven by manufacturers such as Ericsson, Nokia and Motorola, and as such they'll play an important role.

Carriers are the gatekeepers
"Right now, carriers are really the gatekeepers because they own the relationship with the customer," Ms. Allison said. "They're very cautious about it because anything that would impact their churn is something that they need to look really hard at before the do it. ... Virtually all the carriers are looking at this space."

Sprint PCS and AT&T Wireless' PocketNet, industry observers say, have so far done the most to offer wireless data, mostly by providing access to content such as weather, sports scores, news, stock quotes and trading. The carriers' content and financial services partners have used their onscreen portals to maintain brand awareness and loyalty.

The arrival in the U.S. of broader band 2.5 gigahertz handsets later this year promises more improved technology capable of delivering new kinds of wireless ads.

The fabled 3G, or third generation, wireless handsets, which are several years away in this country, are said to offer even more bandwidth and the capacity to deliver rich media advertising in color, along with animation, sound and streaming media. The technology will make possible dramatically new sorts of games, mobile commerce and other forms of rich content streams to wireless devices.

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