Selling Wireless Advertising

What should you know before jumping into wireless advertising?

Whether or not they have a winning season on the ice, the Carolina Hurricanes already have a winning wireless-advertising campaign.

The NHL team, the first to advertise over wireless devices, is increasing brand awareness and promoting season-ticket sales among wireless consumers in North Carolina, South Carolina and Virginia via WindWire's wireless-advertising network.

When they receive call-through ads on their Web-enabled handsets, wireless consumers can call Hurricanes' customer service for ticket and promotion information, saving them time while expediting the sale, said Howard Sadel, Carolina Hurricanes' director of new media and graphic communication.

The Hurricanes have reported a 15% call-through success rate from its current campaign - 15% of all consumers who received Hurricanes wireless ads called through to the ticket office - since it began in October 2000.

And this may just be the tip of the iceberg. The Kelsey Group predicts that wireless advertising will generate revenues of $17 billion by 2005. According to Forrester Research, "The market for wireless advertising ... has the potential to be a high-value market, capable of commanding rates two to three times higher than those of the fixed Internet."

But despite all of the wireless-advertising hype, not much is known about what kinds of ads will work, which business models to employ or how consumers will respond. Before a profitable wireless-advertising industry can take off, a lot of infrastructure must be installed and a lot more people must begin using their wireless phones for data services. But as with other media, you can bet that the wireless industry won't be ad-free for long.

What Will Work? Wireless ads must reach the right audience with the right message at the right time. According to industry analysts, wireless users will more readily accept advertising delivered within the context of relevant, highly targeted, value-added messages that match their personal profiles.

The most common example of wireless advertising is walking past a Starbucks and your phone rings with a 20% off coupon.

"That may happen if you optin to it, but the real advertising opportunity is on the pull side," said David Wilson, WindWire co-founder and executive vice president.

According to Wilson, carriers should use response-advertising models because they encourage subscribers to use both voice and data minutes.

"One click and you're calling a number," he said. "For the advertiser, you immediately go from delivering an ad to a consumer who with one press of a button can call your number. At the same time, that generates a phone call for the carrier. Advertisers could pay for or sponsor calls. Either way, the carrier will get money every time a consumer responds to a call-through ad."

Although the Hurricanes' advertisement was provided through WindWire's network, Wilson said the company is in discussions with major carriers who want to offer similar advertising services to subscribers. WindWire's WindCaster solution delivers ads, coupons and promotions to Internet-enabled devices based on the type of content the wireless user is viewing. For instance, sports fans checking yesterday's scores on cellular phones can see special ticket offerings for their favorite team.

Carriers can control exactly who gets ads and who doesn't, as well as what type and how many ads they receive. For every dollar the advertiser receives, the carrier, the content provider and WindWire each get a piece.

In a recent Strategis Group survey of 500 wireless subscribers, 77% of users said they would be willing to receive advertising on their handsets to reduce or eliminate other charges. The study also revealed that 34% of wireless users are interested in wireless-portal services, and a majority of those would be willing to receive advertising in return for discounted monthly fees.

But Barry Peters, Lot21 Interactive director of emerging media, said this model won't work for business customers, one of advertisers' primary targets right now.

"We've seen this in landline, offering free long distance for listening to a 10- or 15-second ad; that's been tried for 15 or 20 years and has never taken off," he said. "The typical cell-phone user in the United States is very task-oriented. They have a cell phone as a utility. If you put a 15-second ad in front of them before they call their voice mail at work to see if a purchase order goes through, that's not going to fly."

According to Peters, teen subscribers might be a better audience for such a wireless-advertising model, because advertisers could subsidize teens' phones in exchange for their listening to ads.

Lot21 created the first ads to run on AvantGo's wireless home page for Intraware, an IT marketplace for Web-based software and services. As a gateway advertiser, Intraware sponsored all content selected by the user, making the buy significantly cost-effective. The ads ran for two weeks and reached more than 500,000 subscribers. As a result, record-level return-on-investment results were achieved, including 97% reduction in Intraware's member-acquisition cost.

But Peters said wireless advertising will be more of a customer-relationship-management tool. For example, United Airlines won't pay for sending messages to consumers that say "call now for a special deal." But it will negotiate a deal with the carrier to contact existing customers to let them know that their flight is delayed.

"Wireless as a medium is not going to be an effective customer-acquisition tool because of the privacy issues and subscription models," he said. "I'm not going to pay to have someone telemarket to me. What I will do is pay so I can remain in contact with content that's important to me."

"Either the carrier's going to have to pay for content and give it to customers for free and then reduce their margins if they don't raise their bills, or they're going to have to sell ads on that content in collaboration with the content provider and make the content free," Wilson said.

Free content or not, you always must provide value to subscribers.

"There's a fine line between content and advertising; it has to be perceived by the user as some sort of value no matter how it's positioned in the industry," Peters said.

Advertising.com, which is currently delivering ads to WAP-enabled wireless devices, recently announced the Wireless Advertising Marketing & Measurement Initiative (WAMMI), to identify, test and measure the most effective wireless-advertising methods.

WAMMI will test six emerging wireless channels: messaging, wireless Internet, location-based advertising, interactive, retail integration, and time-sensitive advertising, and provide valuable insight into how to develop, package and deliver messages that will reach millions of consumers in a wireless environment.

The WAMMI research will encompass the full scope of wireless devices across multiple geographic markets, and provide insights into the target audiences' behaviors and levels of acceptance of wireless advertising.

Advertising.com is soliciting carrier involvement in the strategy, which Jeff Dickey, chief strategy officer, said is "a starting point to give some idea of what the roadmap is going to look like."

Perhaps carriers' biggest challenge moving forward is not increasing churn rates with wireless advertising.

"Carriers can add 5% to 10% to their revenue from advertising, but they must be careful that they introduce advertising in a way that that revenue won't be offset by churn," Wilson said.

To prevent that nightmare scenario, you need to understand your customers, their needs and how you can deliver value to them. And if you do that, the wireless-advertising future looks bright.

"As 3G networks unfold, there will be significant emphasis put on advertising, and we expect that wireless carriers will become information-service providers," said Paul Palmieri, Advertising.com wireless group vice president and general manager. "Just as AOL gets 60% of their revenue from advertising, wireless carriers will do the same."

Here are several things to consider before jumping into wireless advertising:

- Customer acceptance and retention are king in wireless advertising. Formal outsourced tests are one way to benefit from consumer-acceptance research.

- When companies beat on your door to deliver ads to wireless devices, require detailed demonstrations of their technology.

- Experiment and do internal testing of different types of advertising and privacy standards you want to follow.

- Don't sign exclusive representation agreements: If you want to monetize content, there's a better opportunity to sell the inventory if you don't sign these agreements.

- Until advertisers are lining up to give large percentages of their media budgets to wireless, get advertisers used to advertising on your gateway network by borrowing scale from other forms of media.

- About five different parties could be involved in splitting the wireless advertising dollar. Revenue sharing is important, so sort out which business models work.

- Ad placement will be a more profitable model. Don't settle for sponsorship.

- Permission from the consumer is an opportunity to begin a profitable conversation: If you can use the consumer's permission to bring that consumer timely, personal and relevant ads, then you'll deepen that relationship and not only foster connectedness to your network and service, but also a much more profitable conversation with that consumer for the long haul.

Source: Paul Palmieri, Advertising.com wireless group vice president and general manager