Wireless carriers and Wall Street are excited about the huge revenue potential advertising via mobile phones could bring in the future, but just how to offer it to customers is a looming question.
Regulatory requirements to allow wireless 911 location will drive the advent of location-based services in the coming years. This will give carriers the opportunity to follow their subscribers with customized real-time paid advertisements that in turn could translate into additional transaction-based revenue.
The opportunities seem endless for operators, content providers and advertisers. They salivate at the prospect of a customer receiving a notice of a discount for clothing at Eddie Bauer as they walk by the store with their phone in hand.
“Certainly a differentiation of our access to customers and information is the fact we can change with them on location,” said Carlton Hill, director of product development and management with BellSouth Cellular Corp. “Anything that exploits that is of interest to us.”
However, many operators remain cautious over the prospect as they try to understand what their customers want from advertising.
Perhaps the wireless industry can look to preliminary results from the Internet service providers offering free Web access and e-mail in exchange for bombarding users with advertising.
“There’s all sorts of experimentation about how you get people to look at advertising,” said BellSouth’s Hill. “Portals in the wired world offer information in exchange for advertising. Will people come because they give them free e-mail, and will they read banners? There’s a pie-in-the-sky feeling that that’s where we’re going. Probably one of the big niches is localized information.”
Jupiter Communications Inc., an Internet research firm, believes about 8.8 million U.S. households by 2003 will use free ISPs as their primary access to the Internet, representing 13 percent of the total U.S. online consumer market. Jupiter, however, predicts that free ISPs won’t displace the traditional paid access model, but will open the door to more flexible offerings from ISPs and provide new opportunities to affinity groups. The research firm also recommends ISPs don’t just rely on revenue from advertising. They should provide advertisers with a highly targeted user base to generate sufficient premiums from advertising.
The same will be true in the wireless world, according to Cliff Raskind, wireless analyst with Strategy Analytics.
“Advertisements to a consumer who is known to have an interest in a certain retail category as the consumer comes upon a store will have high value, and we’ll be able to see more offsetting of costs,” said Raskind. “To have a truly ad-supported model, you have to have highly targeted advertising. Location-based technology will make the difference here.”
While some free ISPs are targeting their user base with more customized advertising based on demographics and geography, others disconnect service if customers don’t view advertisements within a certain time frame. Early anecdotal evidence suggests some users are irritated with the constant advertising bombardment and are going out of their way to avoid the ads. It’s also unclear how many people are actually looking at the ads.
“Everyone thinks there is potential,” Strategis Group wireless analyst John Dorfman said of wireless location-based advertising. “The key is not to offend the user. The whole value or transaction train doesn’t roll if the user turns the phone off because it’s annoying.”
“We’re an advocate of our customers, and we want to make sure we’re always protecting their experience,” said John Yuzdepski, vice president of product management and development with Sprint PCS. “Bombarding the customer with short messages or content and unsolicited advertising will not be the way the industry will shape up. These devices are very personal.”
Geoworks Corp. has offered since September a free, advertiser-supported service that sends consumers discounts and promotions from retailers directly to their mobile phones and pagers. Consumers choose to sign up for the service by accessing a Web site, www.mobileattitude.com, selecting the promotional categories that fit their interest and indicating what days and times are most convenient for them to receive discount messages.
Messages are tailored to zip codes and demographics. Geoworks recently partnered with Jiffy Lube to offer discounts on oil changes to San Francisco Bay area subscribers and initiated special Valentine’s Day promotions.
“We didn’t want to offend anyone,” said Bob Bogard, manager of public relations with Geoworks. “When we did focus group testing, we found that because people are able to control when and where, they no longer look at it as advertising, but a service. If it’s sent out of the blue, it’s perceived as advertising.”
Geoworks declined to reveal how many customers are using the service, but indicated the take rate of the discount offers is about 8 percent. The average take rate for direct mailings is between 1 percent and 2 percent, while take rates for Web advertising is around 5 percent, said Rhonda Jobe, vice president of marketing with Geoworks.
“We don’t do straight-out advertising,” said Jobe. “There’s always something in it for the customer. We have either free or heavily discounted offers to keep the service alive. People never know when free things will be offered.”
The technology
The ability to trace customers’ whereabouts will become available in a few years, and some companies are working on the middleware technology that will allow carriers to decide who to send ads to, what ads to send, at what time and through what billing method.
“Most of us haven’t harnessed that information yet,” said BellSouth’s Hill. It’s about really tweaking information sets to provide something useful to customers.
Geoworks said it is working on such capability today. It is modifying its proprietary Premion Server+ technology, used for its Mobile Attitude service, to allow location-based capabilities in the future. The Premion Server+ works as a channel-hosting platform that supports pull, straight push and times push technology.
OpenGrid Inc., a wireless Internet solution company, recently teamed with advertising technology company Mediaplex Inc. to pioneer a technology solution for location-based wireless advertising. The new solution will use the Mediaplex-led adXML open standard, a self-describing XML-based vocabulary, as the transmittal language. adXML has the ability to integrate an advertiser’s internal business data, such as inventory, pricing and customer information, with that advertiser’s Internet advertising in real time. This technology will be overlaid with the OpenGrid Interchange platform, a technology that allows intelligent interaction with wireless messaging, content, commerce and promotions. The solution, said the companies, is scheduled to roll out this quarter.
For example, a customer walking around downtown San Francisco has a registered profile and likes to drink coffee, and there happens to be a Starbucks coffee shop a few blocks away. The server sends the information to Starbucks without giving away the customer’s identity, requests a discount and sends it to the customer. The customer then can act on the ad or request that he or she not be bothered again. Perhaps the phone will give the subscriber directions. Once the customer arrives at Starbucks, he or she shows the clerk the ad streamed across the phone and receives a discount on coffee, explained Jens Horstmann, OpenGrid president.
“We call our technology an application service platform,” said Horstmann. “It will be infrastructure people can plug applications into. We’ll eventually offer advertising and expect other companies to offer applications for this platform … This is a new medium, and no one knows how this will play out. We want to trial it and get some real companies in the mix.”
