More and more, advertisers view it as a sell phone

CHICAGO — For many of the 255 million Americans with cellphones, the gadgets are indispensable for everything from tracking appointments to taking photographs to telling time. Now, advertisers want their piece of the mobile phone.

As consumers increasingly use their handsets to browse the Web, it's no wonder that advertisers see mobile screens as valuable turf.

In the U.S., cellphones haven't yet proved to be the same kind of advertising bonanza as the Internet, mostly because of the wireless industry's more controlled nature and the slower adoption of text messaging and mobile Web services.

But momentum is gradually building, especially behind text-based marketing campaigns.

According to research firm eMarketer, worldwide spending on mobile advertising totaled $2.7 billion last year and is expected to hit $4.6 billion in 2008, rising to $19.1 billion by 2012.

In contrast, eMarketer projects that Internet advertising in the U.S. alone will reach $25.9 billion this year.

"Consumers are becoming more receptive to using wireless data on their device," said Laura Marriott, president of the Mobile Marketing Association, which has rebuilt its membership in the last several years after a decline in 2002. "[But] I think there's mixed feelings in regards to receiving advertising-related messages."

Mobile advertising takes many forms. Banner ads run on the Web pages displayed in cellphone browsers, and consumers can either click on those ads or "click to call" a phone number associated with the promotion. Companies can push so-called premium content such as ring tones and wallpapers, often associated with entertainment brands.

Some industry observers credit reality-television hit "American Idol" with introducing mobile interaction to a wide audience when it debuted in 2002, encouraging viewers to cast votes via text message.

There is also message-based marketing, where consumers may be strolling by a billboard or watching a television commercial that encourages them to text a code to a number to receive a coupon or enter a sweepstakes.

According to eMarketer, this ad category is the largest by far for mobile phones and will reach $4.2 billion in 2008.

This month, Chicago-area retailer Sam's Wine and Spirits launched a text-based campaign in which consumers can text a keyword to a number to get a store coupon. The numbers will be listed on traditional print ads as well as on the bottom of receipts and on in-store signs.

The campaign also allows customers to sign up for future communication, such as wine tips, notifications for in-store tastings and more discounts.

Paying for text

In the U.S., wireless customers typically pay for text messages they receive. This model has made text-related promotions slower to catch on. But texting is rapidly becoming a routine part of cellphone communication, especially among younger consumers. CTIA, the wireless-industry trade association, reported an average 1.6 billion messages per day in December, more than double the traffic of a year earlier.

In addition, operators are encouraging their subscribers to sign up for packages that allow a certain number of messages or unlimited texting for a flat monthly rate.

Even with texting costs falling, most advertisers recognize that cellphone users don't want to be bombarded with spam. Industry guidelines call for opt-in procedures, whereby consumers must send in their agreement via text message if they want to receive additional promotions on their phones or enroll in loyalty clubs.

Other recommended practices include easy ways to opt out of promotions via text, and clearly asking for permission to send offers from affiliates.

Testing the concept

Some large corporations are doing early experiments with mobile marketing. McDonald's is conducting a limited promotion in Utah, where through April 27 customers can get a free iced coffee with a cellphone coupon.

San Jose, Calif.-based Cellfire, which specializes in mobile coupons, is making the vouchers available via its Web site and text message.

McDonald's executives said the Utah campaign is a local initiative, and it's too early to see whether such a promotion could be done nationwide.

Cellfire Chief Executive Brent Dusing was more effusive.

"We feel like the market is here," said Dusing, whose firm is doing national campaigns for Sears Portrait Studio and Hollywood Video. Cellfire started in 2005, and "when we started, we were just educating consumers. ... Now that we're here in 2008, we feel pretty good about market adoption."

For mobile advertisers, the experience of the Internet offers both promise and cautionary tales. Although cellphone users in the U.S. are starting to mimic such PC-like activities as Web browsing and media downloads, handsets are a far more sensitive issue than computers.

"It's the most personal thing: How much closer can you get to somebody's space than their phone?" said Eric Lazar, founder of Chicago-based Image Architecture, the firm that created the campaign for Sam's Wine and Spirits.

Carrier influence

Another key difference between the wireless industry and the Internet is the presence of the carriers. Operators are especially careful in letting advertisers on their networks because the service providers would catch much of the backlash if consumers get irritated by too many ads on their mobile browsers or confusing charges on their bills.

For the carriers, the opportunities to draw in greater revenue are promising, but not at the expense of customer defections.

The aim is to maintain an "uncluttered environment," said Richard Williams, executive director of digital-media operations at Verizon Wireless. "From that standpoint, we wanted to make sure we didn't interrupt the customer experience. ... When you look at the mobile Web and our overall lowest churn rate in the industry, we didn't want to jeopardize that."

Thanks to faster networks and download speeds, mobile Web pages can load in a matter of seconds. This ease of use makes for better integration of banner ads, which are tailored for phone browsers.

Not all types of Internet-like advertising work on cellphones. The wireless industry avoids pop-up ads and "interstitial" ads that play before displaying content the consumer has requested. Instead, advertisers prefer to appear on the "deck," or the introductory page that subscribers see when they access their browsers.

AT&T spokesman Mark Siegel said even deck ads appear on "a very limited basis."

Subsidized service

Some industry players have experimented with subsidized service, "where in exchange for a lower rate, consumers would have to wade through some ads before making a call," Siegel said. But he was skeptical about that model gaining widespread acceptance.

Looking ahead, advertisers are eager to seize on the popularity of location-based services that allow phone subscribers to map their whereabouts and get localized content. But industry players say the focus will remain on protecting privacy.

For example, customers can search for local promotions by willingly providing information on their ZIP code, rather than getting an unsolicited message from an advertiser that has managed to track a person's whereabouts via cellphone.

"Mobile marketing was born into a climate of consumer permission and consent," said Mike Baker, vice president of interactive at Finnish handset manufacturer Nokia, which launched a global mobile-advertising network this year with such partners as Sprint and Hearst.

"There are strong existing incentives to police the environment, so we're not all getting mortgage-refinance offers or otherwise feeling taken advantage of, as has happened time to time in the Wild West of the Internet," Baker said.