April 8th, 2009

Mobile Ads Make Gains, But Pace Slows Sharply

By Roger Cheng
The Wall Street Journal

Mobile advertising’s infant status is helping it to grow, although at a slower-than-expected rate, even as companies slash marketing budgets.

“The mobile percentage of ad budgets is small,” said Jay Emmet, general manager of OpenMarket Inc., an Amdocs Ltd. unit. “When someone reduces their budget by 20%, they go to where the money is. Mobile is not an attractive target for cost savings.”

Mobile-advertising boosters tout several advantages. Carriers have access to demographic information and user tendencies that can be matched with more-accurate targeted commercials. Advertisers can see almost immediately whether the ads are leading to additional business—a promise of the Internet that can be further realized in the mobile world. There is the opportunity to insert ads in places such as text messages, and even phone calls.

“It’s the last screen they look at when they go to bed, and the first one they look at in the morning,” said Eran Hertzmann, head of mobile advertising for Mobixell Networks Inc., a mobile-multimedia and advertising company.

Still, that promise hasn’t been fully realized. Before the economic meltdown, Yankee Group analyst Carl Howe projected global mobile-ad revenue would exceed $1 billion in 2009. His revised estimate calls for revenue of $200 million, which would still show growth. Revenue totaled $120 million in 2008.

While it is likely that the number of mobile ads will rise, it is less clear how much revenue each ad will generate. Mr. Howe’s initial forecast projected that revenue per thousand views would hit $3 by 2012, down from $5 in 2007. Bids for mobile banner ads are now as low as 10 cents, he said.

A majority of ads are served as banners on the mobile Web. But companies are exploring different ways to reach consumers.

Verizon Wireless, for instance, launched its “Daily Scoop” program for its feature phones. The application provides information such as sports scores, weather and trivia on a phone that isn’t in use. Advertisements and coupons are delivered alongside the information.

Verizon Wireless is jointly owned by Verizon Communications Inc. and Vodafone Group PLC.

Mobile-ad company Velti PLC created a coupon-delivery program for pregnant women for Johnson & Johnson. The program was pushed in print ads; interested women would opt in by texting their delivery date to Johnson & Johnson. In return, they would get coupons related to pregnancy products. After the delivery date, Velti would send coupons related to baby products.

Overseas, carriers are trying even more aggressive strategies. One European carrier is experimenting with 15-second ads that would play before a phone call. The ads would result in a less-expensive monthly bill. Asian carriers place ads at the end of text messages.

Companies are hoping text-message ads will take off in the U.S., too. Sybase Inc. is banking on text-message services, such as weather information or news updates, that eventually will include related ads. “You’re looking at a doubling of the number of users who will receive at least one [text] ad a month by the end of next year,” said Marty Beard, head of Sybase’s mobile-messaging division.

Mobile-ad companies say their ability to measure a campaign’s effectiveness provides a strong return on investment.

The personal-computer world can stake the same claim, but few devices are as personal as the mobile phone. In addition, the carriers have a large database of customer information, such as spending habits and where users go and how often they make calls or send messages.

When President Barack Obama was still running for office, his campaign bought mobile-ad inventory from start-up Quattro Wireless, which sent text messages to battleground states to remind people about early voter-registration efforts and helped organize support for the then-candidate.

Despite the excitement expressed by the ad companies, there is an acknowledgement that the market isn’t immune to the macro conditions. “The growth is not as fast as we’d expected,” Mr. Hertzmann said.

Most ad providers say that more education about mobile advertising is needed. During a recession, companies tend to go with what is safe and trusted. Mobile ads don’t fit that mold.

“They are more trackable, but you have to win over the people that are spending the dollars,” Mr. Howe said. “Dollars don’t always follow interest.”

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