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HolidayBuyer's Guide
Mobile

A billboard in the palm of your hand

Major companies are starting to add wireless marketing to their advertising budgets, but some analysts believe they may be selling to an empty room.

Technology executive Eric Engstom recently tried to sell a room filled with skeptics on his company GitWit, a maker of cell phones for teenagers.

Maybe, he said, a certain musician could supplement a record release by having her image embossed on the phone itself. That would mean some extra money for everybody involved.

"A guy in the back of the room says, 'Have you spoken with her?'" Engstrom recalled. "It was her agent. I'm thinking that he wants me to pack up and leave. But no, he tells me, 'That's exactly what she wants to do.'"

Although there are many skeptics, wireless advertising is getting the attention of major companies such as Pepsico, Coca-Cola, Nike, Finlandia, Intel and Sun Microsystems, among others. This, in turn, feeds into the desire of wireless network operators to generate as much revenue as possible from their operations to pay for costly equipment upgrades as wireless technology matures.

Wireless marketing is typically done in two ways: delivering ads on cell phones' tiny screens and placing branding on the phone's case.

Some recent examples include the following hopefuls:

• Hop-On Wireless, which makes a disposable cell phone; it hopes to turn its cell phone shell into a billboard by selling the space for advertising.

• Movie studios, which are launching games that can be played on cell phones as a way to advertise feature films.

• AT&T, which combined with cable sports network ESPN in March to let consumers follow the NCAA national college basketball championships using the wireless Web. General Motors was the chief sponsor, its name featured prominently with every e-mail update sent to a wireless device.

• Music labels, which are offering cell phone ring tones as a way to promote new songs from popular artists.

• Candie's, the clothing business aimed at teenagers, which hooked up with Motorola recently to sell a phone that comes with Candie's accessories and that sports the company's logo. Starting in the spring of next year, Candie's hopes the phones will generate traffic to its stores--consisting at the very least of people wanting to buy the latest cell phone holder.

"The phenomenon of extending brand images to electronics has already swept Japan, and this new arrangement will allow Candie's to bring it to young women here in the United States," said the company's chief executive, Neil Cole.

Selling to an empty room?
But although companies are starting to add wireless marketing to their advertising budgets, some analysts believe they may be selling to an empty room. For one, the overall market is still relatively small. There are an estimated 3 million wireless Web users in the United States, compared with the hundreds of millions that routinely surf the Internet.

Most carriers won't divulge how many wireless Web subscribers they have, although AT&T Wireless has said it has about 1.1 million subscribers to data services such as e-mail or wireless Web surfing.

But that won't stop carriers from attempting to wring as many dollars as they can from each cell phone user on their networks. Many wireless companies are digging deep into their wallets, forced to pay for expensive wireless spectrum and new, faster equipment to update their networks to handle bigger loads, such as a possible boom in wireless video.

Some cell phone owners don't see the point to wireless marketing at all.

"I can barely see the screen," Timothy Bryant, a cell phone user from Brisbane, Calif., said on his way home from work in San Francisco recently. "They want me to read ads? I'll go blind."

The scurrying to turn the wireless Web into the next big marketing opportunity has parallels to the Internet, which was supposed to provide an attractive blend of a mass market, the ability to target ads, and tools for tracking response rates.

But for the past year a severe downturn in Net advertising has forced many sites to shut down or seek additional revenue sources such as subscriptions.

"We're in the fetal stages of wireless marketing, but the baby is going to develop, and we have to watch for lots of abnormalities," said Alan Reiter, a wireless analyst with research firm Wireless Internet and Mobile Computing. "The odds are a lot better than any game in Las Vegas that companies are going to screw this up."

One-to-one messages
Nevertheless, some companies have been willing to test the unique opportunities presented by wireless marketing. Cell phones offer the ability to reach one person at a time--a rare feat in advertising.

Companies hoping to sell their products or services don't know for sure whom they are reaching when they advertise on television, where many people can watch at one time, or a personal computer, often shared by a whole family. So the carefully crafted message might never reach its target. By comparison, a cell phone is used almost exclusively by a single person.

Research firm Frost & Sullivan believes that wireless marketing won't take off for another decade. The company said one of the more promising regions, Western Europe--where cell phone penetration is among the highest in the world and where there's a better network in place--would generate about $467 million in wireless marketing revenue by 2006, about a thousand times less than advertising in other venues.

Despite all the efforts and interest, worldwide wireless advertising and promotions revenue will hit just $3.9 billion by 2005, according to industry watcher The Kelsey Group. That pales in comparison to the advertising and marketing expected on the Web, which is in the hundreds of billions of dollars.

But some major companies have decided to conduct wireless advertising campaigns anyway. Soft drink makers Coca-Cola and Pepsico, for example, are sponsoring fantasy football games with their logos prominently displayed. Sporting goods titan Nike and distiller Finlandia sponsor Web sites that are accessible to wireless users.

Similarly, the backers of movies including "Rat Race," "Lord of the Rings" and "The Planet of the Apes" are targeting wireless devices with marketing campaigns. In the case of "Rat Race," cell phone users can actually assume the role of a character in the movie. The game is played using the cell phone's keypad. A turn involves choosing from a number of options--look into a room for items, move to another room, or drive away, for instance.

Beyond the basics
Most wireless marketing efforts are rudimentary and use short text messages. But newer wireless promotional plans are increasingly more sophisticated, providing evidence that corporations are confident about the chances for success.

AT&T is working on a new type of wireless campaign that looks a lot like mobile commerce--that is, using a phone's Internet connection to buy items and services.

Together with fast-food giant McDonald's, AT&T Wireless is testing a system that would allow consumers to order meals on their phones. After choosing from five typical meals, consumers would connect to a wireless Web site using their cell phones and press a few buttons, and the order would be waiting for them at the counter.

From there, AT&T Wireless sees additional marketing efforts, such as starting a loyalty program through which frequent McDonald's eaters could get a free meal after a certain number of purchases.

"It's a pretty big opportunity," said Kris Kone, AT&T Wireless director of business development. "You can't really do this in any other medium."

In London, wireless advertising company ZagMe says it launched another wireless marketing effort, sending advertisements directly to phones. The company says 80,000 people have decided to receive the advertisements on their cell phones from at least two different stores.

In late May, AirMedia debuted an effort with Fox Kids in Europe that paves another direction for wireless marketing. The two companies plan to distribute ring tones and graphics to children who watch TV shows such as "Power Rangers."

AirMedia has also worked to promote the movie "Final Fantasy" and has sent wireless advertisements about a learning-skills council established by the British government.

"Right now, it's an unproven market," said Mark Bregman, Airmedia chief executive. "I think the very front end of it is here now, but still a lot of people are trying things. There will no doubt be some spectacular failures, because this is a new medium and everyone wants to use the new medium."