Advertisers turn to small screen

LOS ANGELES — For a minute, it appeared as if mobile phones were going to be void of any advertising.

But from the talk at this year's CTIA Wireless IT & Entertainment show in Los Angeles, that minute is long gone. Wireless carriers, application developers and media owners are taking their first steps in a business that some estimate will generate more than $11 billion in revenue in five years.

Examples of what mobile advertising means include: banner ads on mobile browsers, 10-second commercials during TV clips, text-messaging campaigns and priority placement on search results.

The industry has been hesitant to put advertising on a handset or small device because of the small screen and the user pays for air time. But companies developing mobile advertising products are saying is that, if done correctly, consumers will find the ads unobtrusive and even perhaps helpful. Advertising may also be a way to offset the high cost of mobile-applications today.

For instance, Bellevue-based InfoSpace's Find It! application helps users search for restaurants, banks, movies and other listings on the mobile phone. A new version of the application, expected next month, has added advertisements.

Rod Diefendorf, InfoSpace vice president of online and local search, said merchants who pay for priority listings online will also pay when a user clicks on the listing from a phone. However, unlike the Internet, the ads will not get priority over other listings because of the small screen size, but they will be highlighted to make them stand out.

Today, Find It! costs Sprint Nextel users $2.99 a month to use. With advertising, Diefendorf hopes to make it free.

One reason why mobile advertising is so compelling, advocates say, is how people use their phones. If you're locked out of your car and looking for a locksmith, for instance, you'll likely purchase something immediately. That's not necessarily the case when you're sitting at a computer.

Another example is an application Bellevue-based SNAPin has built that presents advertising at appropriate times.

Tom Trinneer, SNAPin vice president of marketing and product management, talked about sending a user a message about a streaming-music service when he or she is downloading a ringtone.

"You are catching them at the perfect time when they are thinking about something like that," said Trinneer, whose company's software helps users learn a phone function without calling customer support.

Level of sophistication

To ensure that the delivery of the message is not annoying, it is sent only if a customer signs up to get it. Trinneer said when you can have that level of sophistication, the results are impressive. In a European trial, 98 percent of the people who received a message agreed to move on to the next step and discover more about the advertised application.

"It's kind of like a friend who would say, 'You might be interested in this, you should check this, out,' " Trinneer said. "The data we are seeing is really neat. The eyes of the marketing people inside the carrier go wide when they think about what they can do."

It is results like this that is leading analysts to think that mobile advertising will experience huge growth in the next few years.

This year, the total mobile advertising market is expected to be $871 million, or 0.2 percent of the overall advertising industry. By 2011, the research firm Informa estimates, it will reach $11.35 billion. That represents 2 percent of the whole industry, with a majority of that being spent on mobile TV ads and text messaging, said Informa analyst Nick Lane.

"The question is what will work," he said. "Right now everyone is throwing everything at everybody. But they've only got one chance with this. The consumer tolerance of spam is low, especially when it's on a very personal device."

Still, the opportunity is spawning all sorts of innovation.

On Wednesday, Bellevue-based Action Engine launched Mobile Advertising Campaign Manager, which will allow media companies and others to quickly insert ads into wireless applications built on Action Engine's mobile software platform.

Earlier this year, Action Engine built an application for MSNBC.com that was free and supported by advertising. Anne Baker, a spokeswoman for Action Engine, said the clicks MSNBC is generating from the application is much higher than what advertisers see on the Internet today.

Note of caution

Will Hodgman, chief executive of Seattle research firm M:Metrics, did caution, however, that it is too early to say whether mobile will find more success in advertising than the Internet.

"If you remember in 1995, click-through rates were close to 7 to 10 percent," he said. "There's a novelty to it. In the history of direct marketing, we have never been able to sustain that level."

Another company, Cambridge, Mass.-based JumpTap, announced Tuesday that it signed a partnership with Alltel, the fifth-largest U.S. carrier, to roll out an ad-based search application that helps users find ringtones, graphics and other content, as well as the location of the nearest restaurant.

The search results are accompanied by sponsored links. And, while a search is conducted, an ad gets displayed.

Jim Straight, vice president of data and multimedia at Verizon Wireless, said the company is conducting advertising trials consisting mostly of Web banners.

"We are taking the conservative approach," he said. So far, he said Verizon Wireless has been happy with customer responses.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com