GEOWORKS ADOPTS AD-BASED BUSINESS MODEL

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Geoworks Corp., adding yet another new business focus, has embarked on a crusade to elevate the wireless environment to the broadcast advertising status of television and radio.

The company revealed plans to launch a series of wireless information services, sponsored by advertising, which customers can receive free of charge. Geoworks said it will unveil the first service package this week.

While offering information services on wireless devices is nothing new, the business model of broadcasting advertising to wireless devices as a means of subsidizing content is.

Dave Grannan, Geoworks chief executive officer, said the catalyst behind attempting such an advertising-based business model is that he feels customers likely will not pay for information services of any type.

“The common theme we all found is historically, people are not willing to pay for any kind of wireless information service,” he said. “It’s not that they don’t find it relevant. They do. It’s just that they can get it from other sources for free.

But Grannan said an information services suite that allows users to select exactly what type of information interests them is of value-to advertisers, because it gives them the ability to better target potential customers based on their interests, as well as reach them wherever they are. It’s much like the network TV or radio model, under which the public views or listens to programs for free, subsidized by advertisers wishing to reach them.

“We have to demonstrate this is as effective an industry as television or radio for advertising,” Grannan said.

To do so, Geoworks faces several challenges. First, wireless users are not accustomed to seeing advertising on their devices, a risk that worried Grannan.

“We were concerned people would feel they were being spammed, or it might be too intrusive,” he said, adding that the company conducted extensive market research to find an acceptable model. “We found people would accept advertising if it was connected to something of value,” he said. “Part of any advertising-based service is bringing compelling advertisers you care about. In our market research, we found the more relevant the advertising, the less intrusive it is. If the ad is from a business you visit often, it wasn’t seen as an ad, but as a service.”

For instance, when receiving a stock quote, that message could be branded with the name and number of a brokerage customers could use to place trades. Or an alert reminder of a parent’s birthday might be followed by an 800 number for a national flower delivery service.

For those information categories that don’t naturally suggest any type of service, such as general news or horoscopes, Grannan said the company will send advertising the customer has requested. When users provision their information services at the Geoworks Web site, they are asked to select subjects on which they would like to receive advertising, which they can change on an ongoing basis.

“We’re not going to send information to customers they haven’t requested,” said Bob Bogard, Geoworks’ public relations manager.

Another challenge is that of competition.

Darryl Sterling, a senior analyst at the Yankee Group who follows wireless messaging, said he believes most information services will use the advertising model eventually, but they require a customer base first to attract advertisers, estimating it will take between 40,000 to 50,000 customers to attract the larger advertisers.

“They’re going to be in a gray period before their base gets that large, and they’ll have to compete with the others until then,” he said. Others offering similar information packages already have a subscriber base from which to market their services; Geoworks does not.

Perhaps the greatest challenge, though, is that of changing the wireless paradigm. Proving wireless is just as good an environment for advertising as TV or radio could be difficult.

“It’s not that easy,” Sterling said. “You’re not talking about the value of the services. You’re talking about changing people’s consumption habits, and that’s not an easy thing to do. It’s going to be years before it catches on … It’s not out of the question, but it’s not going to happen overnight.”

But time is not something Geoworks necessarily has on its side.

The company originally made a name for itself making operating systems for smart phones. Its software powers the Nokia 9000 series. But the emergence of Microsoft Corp. and the Symbian venture into that space left little room for Geoworks, whose stock has fallen to $3. To survive, the company has reinvented itself. First, it created the Premion Server+. Then it introduced a graphical user interface that can run over any phone OS to provide carriers’ better branding capabilities, called the Premion Interface+. Most recently, the company started a consulting service.

Its entrance to the content provider business marks its latest strategic shift, one that has it marketing to end users. Geoworks said it will direct the service at all wireless customers with SMS-enabled phones and alphanumeric pagers, not carriers, through its Premion Server+-which can retrieve the content, format it for each device and send it via various transmission technologies.

Grannan said Geoworks hopes to generate revenues by either collecting a percentage of every e-commerce transaction made as a result of the advertising, or on a flat-cost basis. Under the transaction revenue model, the ad sent essentially functions like an electronic coupon, which the advertiser can track to determine what prompted the sale. For every sale made as a result of a wireless advertising promotion, Geoworks would get a cut. For general advertising that does not directly correlate into a trackable sale, Grannan said Geoworks will charge a flat fee for every thousand ads sent.

Geoworks has signed about 14 advertisers interested in the service and intends to name them and possibly others when it rolls out its first service this week. He said the company plans to roll out other services in coming quarters, as well as launch the service in the United Kingdom.

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