After Slow Start, Wireless Ad Explosion Looms

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Though the current wireless ad market appears bleak, the promise of future profits is capturing the attention of marketers.

Yankee Group, Boston, predicts a $6 billion wireless ad market in 2005, and London-based Ovum Inc. predicts a whopping $42.5 billion from ads, along with e-commerce and content subscriptions, in 2005.

Despite wireless ads' practically nonexistent market today, which Yankee Group senior analyst Adam Zawel attributed to wireless providers worried about ruining the wireless experience, tests are under way to determine the best ways to market to wireless customers in the future.

Opt-in ad models, including location-based alerts and coupons, still are being worked out by advertisers and wireless providers. They are treading carefully, discovering how to use tools as location alerts, which would notify consumers about promotions - their cell phones would ring-when they walk near participating stores.

Zawel thinks one effective model is a venture between AT&T Wireless and Qpass, Seattle, offering AT&T Wireless customers discounts at the time of purchase. Promotions would take place seamlessly through their credit card companies.

"They would see the reduction come off their credit card bill, if they choose to use it. With that, at least you can see the light at the end of the tunnel," Zawel said.

Early results from ad tests also show promise. Wireless interactive marketer Skygo Inc.'s preliminary results of its 1,000-consumer pilot project show that 60 percent find wireless ads valuable, and 27 percent would switch wireless providers to receive ads in the future. More than 90 percent of participants said it was easy to view and navigate the ads, and 65 percent used the phone to browse the wireless Web.

"These early findings present strong evidence that wireless customers appreciate the value of highly relevant, contextual advertising from both local and national merchants," said Mark Plakias, vice president of voice and wireless at The Kelsey Group, which is organizing the test.

However, the four-month trial in Boulder, CO, in conjunction with Procter & Gamble, Visa, Kinko's, JCPenney, CompUSA, KFC and other major advertisers provided consumers with incentives from the manufacturers as well as Skygo, which entered them in a sweepstakes. It is unclear whether consumers would be willing to view ads without incentives.

Consumes who agreed to take part were given cell phones to use, and were required to receive at least three WAP alerts. But they were not required to view the ads.

A recently completed WindWire study showed that a majority of those in the study responded "favorably" to wireless advertising by indicating their preference for free, ad-sponsored wireless content.

The click-through rate on the ads was 15 percent, while the call-through rate was 12 percent.

"Results from this national trial clearly indicate that mobile consumers are receptive to the benefits of wireless ads while the new medium holds significant near term revenue potential for advertisers, agencies, publishers and carriers," said David Wilson, executive vice president of WindWire, Research Triangle Park, NC.

And test of the advertising viability on six different wireless mediums starts in February. The Wireless Advertising Marketing and Measurement Initiative will measure consumer acceptance of ads on digital phones, Internet-ready phones, personal digital assistants and other devices.

Wireless ad marketers also say that new technology is in place to make wireless ads more functional. For example, ThinkersGroup, Great River, NY, said its ThinkMotion technology translates wired content to any handheld wireless device, regardless of browser, protocol or markup language.

Because wireless advertisers are still building models and testing programs, Zawel predicts they will not see revenues until 2004 or 2005. "It's exciting and promising, but difficult to see where the money is going to come from," he said.

First, cell phone manufacturers and wireless providers must develop better ways of displaying ads.

"The main question in our forecast is when these devices will be ready to support different types of ad models," Zawel said. For example, banner ads could pop up as consumers are waiting for downloads, but service providers are not ready to support that type of service.

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