Co-op Advertising

Wireless manufacturers have been doing their part to lure wireless users beyond the voice arena to the smart-phone arena. But so far, cost has been a deterrent for both carriers and potential subscribers. It stands to reason that if you remove the barrier, wireless data will take off. This is where co-op advertising comes in.

"The idea is to provide (content) to customers at a very reduced price because advertisers have injected their message into the content," said Konstantin Zsigo, Zsigo Wireless Data Consultants president.

Some call it co-op advertising, while others, like Zsigo, prefer "advertising-sponsored content." The idea could bridge the gap between the currently dominant voice service and the potentially high-graphics, Internet-rich data environment of the future.

"In the future, the majority of access to the Internet will come through devices other than computers," said Melissa May, AirTouch Communications spokesperson. "They'll be devices that are extensions of cellular phones."

Advertising-sponsored applications already drive many of today's popular on-line services. The trade is simple: The portal provides the user with an application -- searching tools, in the cases of the portals -- free of charge. The portal sells advertising space on the web page, shifting the application's cost from the user to the advertiser.

A second tier of co-op advertising, in which a sponsor swaps content for exposure on a web site, also is widely used. For instance, national Internet access provider Earthlink has joined with the Cable News Network to bring news, sports, financial and entertainment coverage to users of Earthlink's Personal Start Page.

This same premise could be applied to the wireless-data environment.

"Screens on wireless phones should be treated as media," Zsigo said. "Just like Yahoo and Lycos sell advertising on their Internet search engines to reduce the price of content to free, we think a similar approach can be taken for search engines that will soon reside on wireless handsets."

Reality Check Industry watchers say, however, that wireless phones have years to go before they adequately can mimic traditional PCs for graphics and ease of use.

"There are limitations to screen size and power budget," said Robert Rosenberg, president of Insight Research, a marketing research company.

But the limits may not last long. Japanese technology developer Kyocera recently introduced the DataScope, billed as the world's first portable wireless video-phone. An adapter allows the DataScope to access the Internet and compose e-mail.

Other companies, including Matsushita and Mitsubishi, already have rolled out phones with built-in Web browsers. But whether the technology will find a large audience outside Japan is uncertain; Kyocera has said it has no current plans to ship the DataScope beyond Japan.

One of the wireless industry's Internet pioneers has been AT&T's PocketNet. The service features voice and on-line capability that includes access to news from ABC.com and ESPN sports information.

But two of the service's phone models -- made by Samsung and Mitsubishi -- have limited graphics capability, and the service's current coverage area has big holes. Some of the nation's largest cities, such as Atlanta, Los Angeles, Kansas City and New Orleans, are not yet reached by PocketNet. An Internet plan in which the phone can be connected to a laptop for use as a wireless modem is available, but the plan adds a charge for each kilobyte transmitted through the service. That could rack up hefty bills for frequent on-line users, though local and national unlimited-access plans are available.

Such costs may keep subscribers, and therefore carriers, sticking to voice for some time. Many carriers that built client bases on cheaper voice-oriented services don't appear ready to veer radically from that ideal.

"We have kind of a little joke, that 'This is the year of wireless data,'" said AirTouch's May. "But it really hasn't panned out yet. Maybe the companies have not been sophisticated enough in selling the applications. ... Many of them, for one reason or another, are not ready to commit.""

Current revenues may be why. Of the nation's roughly 60 million wireless subscribers, about 51 million use cellular and will generate the large majority of wireless services' estimated $33 billion in revenues by the end of 1998, according to Rosenberg's research.

"Competition between analog cellular services and new PCS services will continue at least until 2000, with cellular services continuing to be preferred in parts of the wireless market," Rosenberg said.

"Carriers are trying very hard to make voice work and make it become profitable and reach a critical mass where it takes off by itself," said Jim Wurm, Airadigm director of marketing. "Once that happens, we'll turn to data. There's not a lot of time to think about data yet."

Software Development Still, the technology -- promoted with competitive pricing subsidized by advertisers -- could eat away at voice's dominance. The key lies with ease of use and the ability of manufacturers and software developers to overcome what many say is the Internet's clumsy interface.

Software developers appear poised to capitalize once technology catches up with expectations.

Zsigo's company is creating a channel of software developers, certifying them according to skill and expertise. Carriers and networks wanting customized applications or advertisements can use Zsigo's channel of developers to develop graphics and code that will take it to the subscriber. Zsigo Wireless will broker the software development to its channel while providing project-management services to carriers, Zsigo said.

Wink Communications also is developing software that will allow advertisers to reach subscribers on highly graphical screens.

"It has to be intuitive for the subscriber and very natural for them to interact with that contact," said Dave Marutiak, Wink director of wireless technologies. "And it has to have helped reduce the price of the contact such that the subscriber doesn't look at it as something he has to pay for."

The technology will help determine the speed at which advertisers develop their relationships with carriers, Zsigo and others said. Advanced but comparatively limited screen capabilities will foster easy content-for-exposure exchanges, while the advanced graphics screens of the near future likely will lure larger advertisers willing to pay for sophisticated, interactive ads.

"Eventually, we feel confident that networks -- ABC, CBS, NBC, Fox -- will become involved in the smart phone space because it provides the interactivity they are looking for from advertising," Zsigo said. "In the short term, while the installed base remains small, we will see only simple 'content for exposure' swaps."

Larger advertising arrangements would appear ready-made for carriers targeting a national, general audience of users. Whether smaller carriers who cater to niche markets, such as business data retrieval, can compete is uncertain.

The GSM alliance is looking at ways to establish a footprint against larger names like AT&T Wireless and Sprint by bringing mobile Internet access to users.

Said Airadigm's Wurm: "It's a tough world out there on the consumer side when you're going against the big giants that have about five times the advertising you do."