US Telcos Inch Closer to Ads on the Move

17 August 2006

US telcos' cautious approach to advertising via cellphones could take a bolder direction as the major players become attuned to its revenue potential.

Both Sprint Nextel and Verizon Communications have been trialling banner ads on their wireless information and entertainment services since the start of the year.

Sprint is also testing video ads which appear for around ten seconds before the desired service appears. The company is expected to make an announcement within weeks about its market intentions.

As voice-call costs fall and income from them declines the carriers are becoming converts to the concept of wireless ads, despite caution over customer response to them.

At the same time, they are under increasing pressure from media companies to carry such messages as those businesses invest heavily to bring sports, news, videos and other entertainment to users on the move.

Audiences are reluctant, however, to pay for such content and advertising support offers providers alternative sources of revenue.

Marketers are also keen to exploit the targeting potential of wireless advertising as technology allows tracking of websites browsed by cellphone customers. Targeted ads could be sent while they are using the service.

However, it is still not certain that customers will accept such an invasion of personal space and the telcos are keen not to alienate them, hence the softly, softly strategy.

Sprint's Paul Reddick, vp of business development, stresses: "It's a very measured approach." While a Verizon Wireless spokesman says the company is "very protective" of its relationships with customers.

The phenomenon of wireless ads is more developed elsewhere in the world. Japan's D2 Communications has had banner ads on cellphones since 2000. It says it runs up to 500 million each month, with 3% to 5% of viewers clicking on the ads.

India's biggest cellphone operator Bharti Airtel has had Microsoft, Canon and Ford Motor Company as advertisers since 2005.

In Europe both Orange and 3 UK have started to accept advertising on cellphones in recent months. In addition, the latter has been experimenting with sponsored movie listings, where a phone-directory company pays for an ad that appears on the handset screen before the user can access the movie information.

Data sourced from Wall Street Journal Online; additional content by WARC staff