Verizon Sells Out

Verizon to Allow Ads on Its Mobile Phones

By MATT RICHTEL

VERIZON WIRELESS, among the nation’s most widely advertised brands, is poised to become the advertising medium itself.

Beginning early next year, Verizon Wireless will allow placement of banner advertisements on news, weather, sports and other Internet sites that users visit and display on their mobile phones, company executives said.

The development is a substantive and symbolic advance toward the widespread appearance of marketing messages on the smallest of screens. Advertisers have been increasing the amount they spent on mobile marketing, despite lingering questions about the effectiveness of ads on portable phones.

Verizon officials said their initial foray would be a cautious one — they will limit where ads can appear, and exclude certain kinds of video clips — and thus may invite greater demand to place ads then they can accommodate.

“We know we can make significant dollars in mobile Web advertising in 2007,” said John Harrobin, vice president of marketing and digital media for Verizon Wireless. “That said, we likely will not — we want to take it carefully and methodically, and enable the right experience.” More generally, he added, “Mobile advertising is going to take off in 2007.”

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In absolute terms, the amount of money spent on advertising on mobile phones has been small but it has been growing rapidly. In 2005, advertisers spent $45 million on such messages, and should spend around $150 million this year, according to Ovum Research, which projects that such spending will reach $1.3 billion by 2010.

The interest of advertisers in the medium stems from a theory that ads placed on mobile phones could create a particularly intimate bond with consumers. The gadgets are ubiquitous, personal, and messages could theoretically be tailored to individuals based on demographics like age, gender and location.

Numerous factors have limited the growth of cellphone advertising. Chief among those factors has been the reticence of carriers to allow ads to appear alongside news, sports and other information that is provided by their official content partners. These partners, from ESPN to USA Today and dozens of others, appear on the content menus that subscribers see when they use their phones to search for information over the Internet.

Carriers have also been concerned about annoying cellphone users with obtrusive marketing messages.

In October, Sprint became the first major carrier to allow advertisements to appear with content that is listed on its menus, or as they are known in the industry, their official content “decks.” Cingular, the nation’s largest wireless carrier, declined to comment on whether it would allow advertising on its decks.

The participation of the carriers would greatly broaden the potential audience. Seventy to 80 percent of what people view on their cellphones derives from links on these decks. The rest of the content is viewed “off deck” — on innumerable content sites that wireless consumers are free to access over the Internet.

Lack of access to these cellphone screens “is one of the biggest considerations right now,” and has limited growth, said Angela Steele, a mobile marketing expert at Starcom USA, a media buying and planning firm whose clients include Kellogg, Nintendo, Oracle and Allstate.

Even without cooperation from carriers, advertisers have been able to reach consumers visiting off-deck sites, and such marketing has grown in size and in scope.

The first advertisers drawn to mobile phones tended to be quick-serve restaurants and hotels — businesses that people might want access to on the go. But increasingly, there is traditional brand marketing, said Jeff Janer, chief marketing officer for Third Screen Media, a mobile ad management company that pairs advertisers and agencies with providers of mobile content, like USA Today and the Weather Channel.

Mr. Janer said an example of the evolution took place over the last few months as Unilever ran an I Can’t Believe It’s Not Butter campaign on mobile phones. The campaign, which Mr. Janer said cost $75,000 to $100,000, placed small banner ads on sites like the Weather Channel that urged consumers to click on a link to visit the “Kitchen of Love.” The link took them to a site featuring Fabio, the romance heartthrob, who is spokesman for the ad campaign.

“It’s the first consumer products group we’ve run on mobile,” Mr. Janer said.

Mr. Janer, echoing the sentiment of executives from traditional ad agencies, said that mobile phone ad budgets were growing. He said that a year ago, advertisers typically committed $25,000 for a campaign of four to six weeks. That figure is now $150,000 to $200,000, he said.

The ads have tended to involve simple banners or text messages, like those connected to the “American Idol” show, in which consumers are urged to send in a vote. Or they have offered digital coupons, like those that allow Dunkin’ Donut customers to show a coupon on their phone at the counter to get a 99 cent latte. Or they have involved sweepstakes offers.

Increasingly, driven by the growing capability and speed of wireless networks, they involve more intensive graphics, and, to a much lesser degree, video clips.

Despite these developments, advertisers continue to have serious questions about the effectiveness of mobile ads. While acknowledging there is potential for a particularly intimate relationship with phone users, advertisers say there is a dearth of data about whether the ads are motivating consumer behavior.

“There’s still a question of cost and value,” said David Cohen, executive vice president and United States director of digital communications for Universal McCann, an ad agency, whose clients include Microsoft, Sony, Johnson & Johnson and Wendy’s. The agency last week said it had signed a deal to use ad management software provided by Third Screen Media to deliver mobile ads and try to track their effectiveness.

Mr. Cohen said mobile advertising still appeared to be costly and inefficient. Because of a constrained supply of quality ad space, he said, the cost per thousand impressions is around $40, compared to $10 to $15 on the Internet.

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David Goodrich, director of digital for the West Coast region for OMD, an ad agency, said he did not believe mobile advertising could be particularly effective until marketers could regularly and easily buy space for video clips.

Advertisers “are crazed to get information” onto the phones, Mr. Goodrich said. But the effectiveness “will be really limited until you’ve enabled site, sound and motion.”

That will not be happening anytime soon on Verizon, according to Mr. Harrobin. He said that during extensive tests the company did in determining whether to run ads, and how to run them, it determined that consumers find short, stand-alone video advertisements to be intrusive.

But Mr. Harrobin said that in the tests, consumers did seem to accept a single banner at the top of a page.

“What we don’t want to do is repeat the mistakes of the Internet — spam, interstitials, pop-ups,” Mr. Harrobin said. Bored, offended or inconvenienced consumers could quickly blame Verizon and leave for another service, hurting the wireless carrier’s core business and reducing its monthly subscription fees.

“We offer voice services,” he said of Verizon’s core business. Advertising “is tertiary on top of that.”


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