Ads Unplugged - wireless marketing

American Demographics, June 1, 2001

Advertisers' best hope for wireless - as with many of today's newest technologies - may be with the always-connected, on-the-go youth market.

Banks, airlines, and other industries with ongoing relationships with their customers may gain more from wireless connections than retailers.

Here's a news flash: Americans are going wireless. More than 109 million consumers in the U.S. own cell phones and more than 7 million own Personal Digital Assistants (PDAs). Analysts at Jupiter Media Metrix project that the number of Americans who actually use these gadgets to access the wireless Web will reach 96 million by 2005, up from just 4 million in 2000. That's about a third of the projected U.S. population. The big question now is: How can marketers cash in on all that connectivity?

There's been a lot of media hoopla lately about the prospects of wireless advertising, and as companies continue to roll out new platforms and vehicles to test the possibilities, debates are likely to get uglier before the jury gives its verdict. But, ultimately, like all new marketing efforts, the success or failure of wireless advertising will depend on one key factor: consumer response. The type of products advertised, the format and aesthetics of messages transmitted, and the demographics of consumers targeted will all play roles in shaping that response, for better or worse. Marketers are as eager as new papas to see wireless advertising take its first steps, but are consumers ready to get up and go?

Wireless advertising is still in its infancy, but early results show some promise. In March, for instance, Redwood City, California-based SkyGo, a wireless marketing firm, announced the results of a four-month study of 1,000 mobile phone consumers in Boulder, Colorado. The study tested 550 unique advertising campaigns for both local and national brands like Subway and CompUSA. The trial ads were delivered using Wireless Application Protocol (WAP), so they looked similar to the banners ads on the Internet. Consumers could choose to view the ads, save them for later, or delete them immediately. An impressive 64 percent of the ads were opened, SkyGo reports, and the trial run managed to deliver real profits to at least some marketers. "We got more of a kick on store sales, which was our focus, and also some surprisingly nice online business," says John Siewierski, founder of Boulder-based Doc's Ski & Bike, a sporting goods store and e-tailer (www.geardirect.com).

Another early experiment with the technology courted sports enthusiasts in Raleigh, North Carolina, last fall. As residents with cell phones and PDAs scrolled local sports scores or event listings on their tiny screens, up popped the logo of the Hurricanes, the local National Hockey League franchise, and a line or two of text inviting them to buy season tickets. Cell phone users who clicked on the ad were put through to Ticketmaster's call center, while those using PDAs were automatically linked to Ticketmaster's Web site. During the one-week campaign, approximately 150 of the 1,500 people who saw the ads bought tickets, a whopping 10 percent response rate - especially impressive when compared with online banner advertising, which averages rates of less than 0.5 percent.

But tests are still just tests, and so far, the technology's current drawbacks seem to be keeping the majority of advertisers at bay. For one thing, wireless advertising is expensive - $35 to $65 per 1,000 impressions compared with $5 to $20 for online banner ads. And at present, the equipment just can't perform with the ease and finesse of a PC. Because the screens are much smaller, ads are pretty much limited to a small logo and a few lines of text. "We need color screens, location-based tracking, and always-on technology," says Kevin Haley, wireless product manager for Advertising.com, a Baltimore-based advertising service provider. "It will be another 12 months before those reach a large scale, and two years before they reach a mass distribution."

There's also the nagging question of whether Americans will ever embrace wireless access with the same gusto as their counterparts in Europe and Asia. Jupiter Media Metrix estimates that global advertising, commerce, and subscription revenue from mobile phones will total $7.5 billion by 2003, but North America's share will account for less than 10 percent. Furthermore, the research firm reports that of the more than 109 million wireless phone service subscribers in the U.S. today, just 600,000 of them, or one-half of 1 percent, surf the Net from their mobile phones. Even if that number jumps into the millions in a few years, as projected, experts anticipate that the majority of time consumers spend on their phones will be used for what the instruments were originally intended: phone calls. Says Paul Mulligan, senior analyst with eMarketer: "The fact that many people will have the ability to go online won't mean that they actually will take to surfing the Internet over their mobile devices."