Spotcast Rolls Out Cellular Phone Ads

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Spotcast Communications said this week that it expects to be able to provide highly targeted advertisements to cellular phone users in exchange for free calling time in the United States by the end of the year, and that it also is in negotiations with two large providers of cell phone service in Europe.

The Silver Spring, MD-based company, which has been offering the service in Hong Kong for the past several months, said it expects to announce a partnership with a London-based cellular provider within the next few weeks.

"I don't think there is a more targeted form of advertising out there," said Lauren Wilson, a partner in the firm with her two brothers, Marc and Craig Owensby. "You can target people according to the weather, the time of day, their location. It's like a whisper in the ear."

In Hong Kong, the system works by offering a free minute of calling time to customers who agree to listen to a 10-second advertisement. To get the free calling time, users dial a three-digit code before they dial the number they are trying to reach. The ad then plays before the call is placed.

If customers are interested in learning more about the product advertised, they press the pound key. Then, after they finish their call, they will be called back by the advertiser, which plays a 30-second advertisement.

Spotcast uses proprietary pattern-recognition software developed by programmers who helped develop pattern-recognition technology used for national security purposes, Wilson said.

Cell phone companies can pinpoint callers within 400 feet of their location, and that information can be combined with the time of day, weather conditions and the demographic and consumer preference information that Spotcast has on each of its users. Subscribers give the company 22 points of data - including health concerns, favorite foods and major purchasing plans - that advertisers can select from when targeting their ads. Advertisers are not given any personally identifiable information, however.

About 80,000 people have been using the service in Hong Kong through the Peoples Telephone Co., and another 100,000 subscribers to SmarTone, a rival cellular service, are about to have the service made available to them. Users tend to be in the 16- to 28-year-old age bracket, Wilson said. Their average call length is 1.7 minutes, and their phone bills are declining by an average of 25 percent.

About 60 percent of the subscribers are choosing to listen to the ads, Wilson said. The spots have been getting a 5 percent response rate and have a 58 percent recall rate, she said. The cost of the ads varies depending on the degree of targeting used by advertisers, but a targeted ad generally costs the advertiser 12-14 cents per broadcast, Wilson said.

A little more than half of the 120 advertisers in Hong Kong are global brands, but the high degree of targeting available also makes the ads popular among local businesses. Local banks and shopping malls have been advertising with Spotcast, in addition to multi-national retailers like Pizza Hut, Blockbuster and Ikea, as well as packaged-goods companies.

Several competitors offer variations on the Spotcast system, including some that actually interrupt phone calls with advertisements. British Telecom last summer launched BT Freetime, a similar service that plays ads on a regular basis, in the United Kingdom. Another similar program, called GratisTel, is offered in Sweden.

Adforce, a Cupertino, CA-based company that serves advertisements on the Internet, recently said it was planning to expand its capabilities to include targeting ads on cell phones.

Wilson said Spotcast envisions vast potential for the European market, where cell phones are much more widely used than in Asia or the United States.

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