Wireless Ads: Loved/Loathed

For wireless advertising, providers should plan good business models and protect their subscribers.

Paul Reddick won't predict precisely when e-coupons and advertisements will pop up on wireless phones everywhere. But the Sprint PCS vice president of product management and development knows wireless advertising is coming.

"We don't think any wireless provider would be betting the farm on what they can do in advertising revenue in 2001," Reddick said. "However, we also don't think it's wise for wireless providers to stick their head in the sand and not consider what the opportunities are down the road."

Most analysts don't think the market will be a viable one until 2002, at the earliest. But today, the financial opportunities look golden. A recent report by the Kelsey Group, a research company, predicted that wireless-advertising revenues would reach $17 billion in 2005.

According to a 2000 Ovum report: Wireless advertising "has the potential to be a high-value market, commanding advertising rates two to three times greater than those of the Internet. (Wireless providers) are in a powerful position to aggregate and control that income. However, it's a market without formats or standards, and will require careful construction if it is to avoid alienating users."

"Wireless advertising is viewed as one of the business models that can help drive additional revenues with wireless data," Reddick said. "There's a lot of interest, but there are a lot of things to be worked out before we do it, not the least of which is what's in the best interest of the user."

Wireless advertising could be a boon or a bust. Before moving forward with this stage of the m-commerce revolution, providers must learn how to balance taking advantage of this new revenue stream with protecting the best interests of their subscribers.

Proceed With Caution Advertising has proved a significant revenue source for the wired Internet, and many think wireless-Internet advertising will be even more successful, especially when you factor in wireless' personalization, timeliness and localization value propositions.

"One of the reasons people are so excited by it is that it becomes much more personal because your wireless phone is like an extension of you," said Roger Walton, Ovum senior associate analyst.

Wireless will enable personalized and high-value advertising, but poses several challenges for providers, advertisers and customers.

With the Internet, "there are some well-established companies that do ad serving and banner serving. They target well, distribute well, and there are a lot of measures on effectiveness of pull through and sales completion and its effect," Reddick said. "In wireless, it's a new business; those things would have to be figured out."

But it's not too early for providers to start planning because advertisers already are.

For example, consumer electronics giant Best Buy currently is planning to deliver personalized, location-based marketing initiatives via wireless devices.

According to Mark Ebel, Best Buy director of digital communication services, the retailer will partner with wireless providers soon after completing its consumer testing. Best Buy is looking at "show-me" coupons that will allow consumers to take 10% off, sales alerts for particular products and time-sensitive promotions.

"Best Buy and other retailers can focus promotions and advertisements during (providers') non-peak times so that they have better utilization," he said. "If we had a shopping experience in such a way that we would drive incremental minutes, that would be a good thing for a provider."

But providers' issues are bigger than that, Reddick said. The biggest challenge will be making the advertising relevant to the end user. Providers know that although there is an opportunity for additional revenue, there is an even larger opportunity to screw up.

"If it's not something I want to see, trust me, I'll be calling my pro- vider and complaining," Reddick said. "That's the concern we would have."

Because of such concerns, consumers must be key participants.

"Opt-in plans that allow consumers to register to receive coupons or promotions seem the best route," said Tim DePriest, AdForce vice president and Wireless Advertising Association (WAA) chairman. "Opt-in programs on the Internet are highly successful because people know that they're not going to be bombarded; they're getting their preferences and more choice over the process."

To ensure that advertising will be a value-add instead of a churn-generator, Sprint PCS will not deliver ads to consumers without their consent.

"A wireless device is a very personal device, and the advertising could potentially be offensive to the end user, so you have to be very careful about (if it is) something that provides value to the end user," Reddick said. "People definitely will not react well to spam, especially if it's on their nickel."

Don't worry about Best Buy spamming your subscribers.

"Wireless will drive marketing and advertisement," Ebel said. "We really need to find a value experience for the consumer as we promote to them. It will take testing, it will take a little time, but we're willing to invest the time and energy to do it correctly."

Successful advertising, most analysts agree, will include a location- or time-based component, will have some personalization to it and will allow the user to view it for free.

"There's a subset of wireless users at the low end of the market who today are getting prepaid service," said Walton. "In the future, it's possible that these may be completely advertising-funded. You might have a subsidized or free-of-charge wireless-phone service where what you pay is that commercial messages appear on your screen from time to time."

Form & Function First Determining the form, function and format of wireless advertising is another big challenge, and a few groups are making headway.

The WAA is drafting a variety of voluntary standards and guidelines for preferred ways to deliver wireless ads and guard consumer privacy. The group, whose members include AT&T Wireless, Nokia and Sprint PCS, represents wireless providers, wireless ISPs, content providers, ad-sales firms and developers of wireless ad-serving technologies.

"No one was addressing the creative element or the business issues: Should you advertise, when, where, to whom and in what format, and the issues of privacy and general consumer acceptance," said DePriest.

The WAA hasn't released final standards, but is focusing on these key issues:

- Ad measurement: determining how to track ad delivery in order to accurately measure the effectiveness of wireless advertising

- Creative standards and ad models: specifying ad formats, sizes and display methods for wireless devices

- Ad delivery: outlining the procedures and technologies behind the actual transmission of wireless advertising

- Consumer issues and privacy: setting advertiser-friendly guidelines to maintain consumer privacy.

CTIA, in conjunction with the Wireless Data Forum and Net-Ratings, formed the Wireless Audience Measurement (WAM) Council to develop an advertising framework for the wireless Internet. The WAM Council's first meeting will convene Oct. 18 at CTIA Wireless I.T. 2000. The council will try to define the types of standards that can help improve the user experience. Among its first jobs will be defining a set of metrics to provide advertisers and their agents with a way to quantify the wireless-Internet experience.

Despite the challenges, wireless advertising will be a significant revenue stream, and providers should start planning now.

"There are so many different aspects, from the business models to the technology, that are new," Walton said. "Network operators aren't used to thinking about advertising as a part of their revenue stream."

As with any other new service, keeping the user experience at the forefront is essential.

"Consumers have very low expectations and interest in advertising at this point," Reddick said. "But that's because there's a lot they haven't been exposed to. When you say ads on my personal device, it really sounds ugly, but if they get exposed to a usable ad, they may have a different viewpoint."

Call it sponsored services or dis-counts and promotions - just don't call it advertising! Advertisements must be tailor-made to fit the user perception of value-added services.

- Quality, not quantity. Limit the number of ads per session, update them frequently and ensure that they don't inhibit what the user is doing.

- Make it personal and functional. Ads must be targeted and relevant to users; this creates an exclusive, premium market for advertisers.

- Get users to co-operate. Invasion of privacy and user intolerance are the biggest barriers to wireless advertising. Offer advertising incentives, sponsorship of services consumers value or a trade-off for their call charges. Offer a strong element of control over the type, frequency and timing of ad delivery. Much higher ad rates can be commanded if advertisers know their audience is interested and wants to hear from them.

- Don't just replicate - innovate! Wireless offers location, timeliness of delivery, real-time functionality and a strong "call to action." Users can respond to wireless ads and respond immediately to ads they see and hear elsewhere (radio, television and print), adding a new layer of value to integrated campaigns.

Source: Ovum, Interactive Advertising: New Revenue Streams for Fixed and Mobile Operators