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Cell phones: The next great ad conduits?

As the world goes wireless, some say advertisers will find that cell phones have become an indispensable link to consumers.

    As the world moves increasingly to wireless Internet access, advertisers will find that cell phones have become an indispensable link to consumers.

    At least that's the vision presented by Catherine McConville, sales director at SkyGo, a wireless advertising company based in Redwood City, Calif. And those same consumers will be happy to receive the ads, viewing them as informative rather than intrusive, McConville added, citing the results of a study released last month by the company.

    McConville talked about the future of cell phone-based advertising at a day-long conference last month titled, "2001: A Tech Odyssey." The event was sponsored by Wharton's Emerging Technologies Management Research Program.

    SkyGo has a direct connection to 1,000 consumers who participated in the company's market study in Boulder, Colo. The trial, to determine whether cell phone advertising can have a measurable effect on consumer behavior, is one of the largest ever conducted using WAP (Wireless Access Protocol) equipped phones. These "smart phones" are proving an attractive Web portal because they are mobile, lifestyle-friendly and more familiar to people than desktop computers.

    In short, said McConville, SkyGo's research shows that cell phones may offer companies their best chance yet for truly individualized advertising. Consider what is happening around the globe:

    "Right now in (the Czech Republic) with your cell phone you can walk up to a Coca-Cola machine, press a button, and your Coke will pop out. And the amount of that Coke will be debited to your cell phone bill," McConville said. "In China, Motorola is selling color Internet-enabled cell phones. This isn't happening in the U.S. yet."

    The trouble, according to McConville, is that the U.S. market has been slow to realize the potential of the cell phone as a marketing tool. Phone commerce is booming overseas, and for once the United States is behind the times. As McConville puts it, "We're in the trough...Much more is happening in Europe and in Asia right now than is happening in the U.S."

    An explosion waiting to happen
    SkyGo hopes to change this perception with its Colorado study even as its helps U.S. companies catch up to a market predicted to reach $6.8 billion by 2005. SkyGo's optimism is based on research by IDC showing that by 2003, "there will be more wireless users of the Internet than wired users, and that there will be more people carrying phones that connect to the Internet than have access to land lines," the sales director said.

    "Everyone, including us, seems to think that wireless advertising will dramatically work when tied to the sale of smart phones."

    While indications are that consumers are interested, the big question mark is whether people will be willing to pay for such interactive services, McConville noted. She said that in Japan, a country where cell phone use is very high, consumers have already demonstrated a willingness to pay for added value. Further marketing studies will be needed to find out whether the same willingness exists among U.S. consumers.

    By Jan. 31, SkyGo had completed its four-month trial of wireless advertising with 1000 members. The study "allowed us to check in real life if this worked, and indeed it did work," she said. The company recruited 50 national advertisers including giants like Procter & Gamble, Visa, NextCard, Digital Impact, Kinkos, HP Online, eCoupons, Avenue A, Modem Media, CompUSA, KFC,, Subway and, as well as a host of local retailers. Participants were recruited mainly through the Web. They were enticed by several incentives, including a free phone (valued around $125) and coverage of the costs of AT&T voice and Internet service (a $45 value).

    SkyGo helped advertisers come up with simple and easy-to-read ads tailored specifically to the format of phone message screens. Since the screens are tiny compared with computer monitors, added creativity was needed to deliver company messages in a catchy way. This was accomplished by an array of offers and promotions including electronic "coupons" good for discounts at local restaurants. The coupons were stored in the phone's memory and redeemed by showing the phone screen to the retailers or restaurant cashier.

    "We had branding ads, sales alert ads, subscription ads, coupon ads and incentive ads," McConville said. One of the most innovative approaches, and one best-suited to the telephone format, consisted of a "call to action" button that allowed the participant to purchase an item instantly or signal a retailer with his or her interest. For example, car ads, which were the least likely to succeed in the wireless format because they require good visuals, were made so that with one click a dealer could send additional information to a potential customer.

    Instant gratification
    McConville envisions a future where the call-to-action button could be used to make instant restaurant reservations or allow one to hear a few moments of new music and then instantly purchase concert tickets or order a group's new CD. Food coupons could be stored on the phone and then swiped at the checkout line for credit. Electronic theater tickets could be purchased ahead of a performance or a movie, allowing a consumer to just show up at the theater with his cell phone.

    Further, consumers walking down the street could be identified by global positioning satellite (GPS). The GPS would know a consumer's location and link the phone to ads from nearby retailers. "Imagine walking into the mall and getting a message from Brookstone that they are having a sale," McConville mused.

    SkyGo developed the test market and research methodology together with The Kelsey Group and market research firm ConStat. According to SkyGo research, about 60 percent of the participants found the ads valuable, and 90 percent found the system easy to use. One secret to making ads palatable was to ensure that consumers had a choice in when they would view them. "Ads don't bombard; they are permission-based," McConville said. "You see only the ones you want to see and the rest are screened out."

    The real-time reporting feature SkyGo built into the study showed that the ads did indeed drive traffic to local retailers, especially when the message was linked to an incentive discount, McConville said. The company was able to build in other features to generate interest and involvement with the brands, including contests.

    For now, McConville said, SkyGo will continue to see itself as a pioneer in the emerging world of phone commerce, developing creative methods to link consumers and companies in new ways. "After all," she asked, "how often can you interact with a brand?"

    To read more articles like this one, visit Knowledge@Wharton.

    All materials copyright © 2001 of the Wharton School of the University of Pennsylvania.