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Calling to a phone near you: Advertising

A handful of service providers and Internet portal companies are toying with the idea of subsidizing portal-like cellphone services with highly targeted advertising.

Imagine a trip through a shopping mall. While passing Macy's department store, your cellphone beeps, and on the screen flashes a message: "10 percent off at Macy's."

For committed coupon clippers, this might be the best invention since the mail-order catalog. For those leery of advertising, it could spell trouble for the last medium still safe from advertisers.

A handful of service providers and Internet portal companies aiming at the wireless phone market are toying with the idea of subsidizing portal-like cell phone services with highly targeted advertising.

In return for having advertisements beamed straight into a standard digital phone--or pager, PalmPilot, or other wireless device--a consumer would get inexpensive or free access to information services like maps, calendars, personal messaging systems, and even entertainment functions like horoscopes or chat lines.

"The idea is to deliver messages--or coupons--that pertain to what you're interested in, at a time when they're most valuable to you," said Dave Weinstein, @Motion's vice president of marketing. @Motion, funded by Intel and Deutsche Telekom, creates the infrastructure and software for these "voice portals," and is in the early stages of testing its service with wireless carriers and Internet content companies.

Several start-up companies, including @Motion, AirFlash, and GeoWorks, as well as larger players like General Magic and Phone.com all are looking at creating this kind of mobile phone portal.

Direct marketing
As on the Internet, the content and advertising would be targeted at a user's demographic group and personal interests. When signing up for a service, Weinstein said, a customer would likely give up enough information to allow customized targeting of advertisements and personalized content.

Since cell phones can be used to pinpoint a user's location, stores will be able to push their advertisement when a customer comes within shopping range. This location targeting facility is currently limited to an average of about a quarter mile, but may shorten as technology improves.

"The problem with the Internet is that typically normal stores can't advertise," said George Sollman, CEO of @Motion. "This allows brick and mortar stores to start leveraging the Internet's advantages of targeting ads."

But the real question is whether people who use these services will accept advertisements over their cell phones, one of the last mediums that has remained largely commercial-free.

"I think for the overall delivery of content to mobile devices, the jury is still out on what the business model is," said Mark Desautels, managing director of the Wireless Data Forum.

Proponents of the ad-based model are quick to point out that the ads aren't unsolicited, and that individual users will be able to choose a pricing plan that best suits their needs. If a user doesn't want to be targeted by ads consistently, they could opt to even pay a small fee with every use, similar to the way dial-up 411 directories work today.

But the industry still risks touching the same raw nerve so often inflamed by unsolicited Internet email, or spam, Desautels said.

"This has such potential as a direct marketing device, that I think it has a lot of people drooling," he said. "But it's tempered by the realization that people have reacted very, very strongly and negatively to the spam they've received on the Internet."

Too early to worry?
Some inside the wireless industry itself say that advertising model is far too premature.

"Getting information on a mobile phone is very different from getting information on the Web," said Rama Aysola, CEO of AirFlash, a mobile information service now in trials with Pacific Bell. "When people want information on a mobile phone, they're not surfing. They want the information now, and they're willing to pay for it."

AirFlash sees the information services supported by a combination of e-commerce-like activities and fees for services like driving directions or traffic updates, Aysola said.

Analysts say the idea has promise, but will have to be tested with consumers before it's rolled out to the mass market.

"I think the concept is wonderful. But its' a matter of the usual statement, the devil is in the details," said Dave Berndt, associate director of the Yankee Group's wireless division. "In 12 months we'll have a better sense of whether this works or not."