With more than 200 million U.S. consumers walking around with mobile phones, it's only a matter of time before marketers find a way to fully utilize them as an ad medium.
Last week's news that Verizon Wireless is joining the ranks of carriers that accept ads on its network suggests that the stage is set for big moves this year. But those in the know say 2007 will be marked by further experimentation in the U.S. rather than the explosion of mobile advertising.
Estimates for mobile advertising in the U.S. in recent years vary. Ovum Research said advertisers spent an estimated $150 million on the medium in the U.S. in 2006, up from just $45 million in 2005. But data group eMarketer, which claims a percentage of spending credited to the Web properly belongs under mobile, puts the 2006 number at $420 million, and predicted it would leap to $900 million in 2007.
Still, experts in the field said that while momentum will increase, spending is unlikely to grow at such a rapid pace, at least over the next 12 months. Many believe the cell phone industry itself is the biggest obstacle, largely barring ads from handsets for fear of consumer backlash. Such fears stem from research that shows most phone customers don't want to be exposed to ads, even in exchange for free wireless applications. That in turn has stifled the ad industry's ability to fully test the effectiveness of mobile advertising.
"The carriers need to start working in a more advertiser-friendly form," said Chad Stoller, evp, director of emerging platforms at Omnicom Group's Organic, which has done mobile campaigns for Jeep, Sprint/Food Network and 20th Century Fox. And that goes well beyond the issue of access to steps like "hiring real sales teams and offering up real metrics," said Stoller. "The only measurement you get is messages sent and response. We need to get key information like age, geographic, whether they use specific services, when is the highest time of usage."
That said, the phone industry has taken some key steps that at least enable a more complete testing of its potential as an ad medium. The most recent was last week's announcement from Verizon Wireless, whose network reaches nearly 57 million subscribers.
Verizon was the second major wireless company in three months to confirm it would begin accepting ads. In October, Sprint, with a network of 51 million subscribers, became the first to do so. And last week, Cingular, the largest U.S. wireless phone carrier, with almost 59 million subscribers, confirmed that it was exploring mobile advertising options. Asked to comment on word from sources that the company would unveil its plans in early 2007, a Cingular rep said only, "We don't have anything to announce at this point."
Verizon and Sprint, the second- and third-ranked wireless carriers, respectively, cover about half the U.S. cell phone universe with a combined 108 million customers. And if Cingular follows suit, then the top three carriers would potentially be exposing more than 80 percent of U.S. cell phone customers to ads.
Angela Steele, mobile marketing strategist at Starcom USA, said the carriers' moves would help stimulate activity in 2007. "It is the year we'll start to see a lot of momentum in the mobile space," she said. "Carriers are starting to become much more active, and that's one big barrier that's becoming an opportunity."
Aaron Watkins, vp, business development at Omnicom mobile agency ipsh!, said he is starting to see more "proactive planning" for mobile on the part of some clients, where previously the mentality was, "Oh, let's try mobile" if a few dollars were left over at the end of a budget cycle.
But as the barriers to entry start to come down, the hardest work for marketers really begins now, said Stoller. And simply duplicating applications used for other digital media won't cut it in the mobile space. "I think banners and text that say 'buy Pepsi' are never going to work," he said. "The whole model needs to be rethought."
Properly executed, mobile extensions can enhance broader campaigns, said Steele. She cites a recent campaign the agency did for client Kellogg, with bridal sites like TheWeddingChannel.com. The mobile extension offered a weekly text message with tips on health and style.
And Toyota last week launched a campaign for its youth-targeted Yaris, including a series of short "mobisodes" that play on advanced Sprint phones. The seven 10-second animated episodes, created by London-based Tokyo Plastic, run before clips of Prison Break that users can download from Fox's Web site. Both the network and Toyota began experimenting with mobisodes earlier this year.
Despite such innovations, Stoller said carriers first must find ways to increase subscriber use of wireless data services, which are seen by many customers as too costly. "According to an IDC study, 73 percent of customers don't use mobile data services, so you're looking at low penetration," he said. To increase that penetration, and make ads feasible, "they need to start giving away the razors."
E-marketer analyst John Gauntt agrees. In order for mobile marketing to reach its full potential, he argues that carriers will need to shift "from being an overwhelmingly subscriber and transaction-based business," to one that's a mix of fee and free services. He points to the transition that AOL is making from a subscriber-based to an audience- and ad-based service. "It is naive to think that many [carriers] won't go through a related process," he said.
But a November survey by the American Advertising Federation shows just how far mobile has to go in the U.S. before coming into its own. In the typical ad budget, mobile is allocated about 5 percent of the emerging media spend, which tends to be no more than 10 percent of the total budget.
And carriers are moving at a conservative pace. To start, Verizon said it would not allow mobile video ads, because customers don't want to be exposed to them. As the new e-Marketer report observes, "With no other medium is the consumer in more control than with mobile, meaning it's extremely easy to piss them off."