Business & Technology
An Ad on Every Block?
As you walk down the street — ping — another ad arrives on your phone. But the visionaries promise this won’t drive you mad.
jay.yarow@gmail.com
Bzzt. Bzzt. Bzzt.
I’m walking around lower Manhattan, cell phone stashed in my pocket. Each time I pass a major retail outlet or restaurant, my phone buzzes. I yank it out. First, it’s Starbucks, offering me a special price on a latte. A few feet further, I’m advised that I could get a giant Coke for free—if I’ll just veer into McDonalds and buy a Big Mac. When the Banana Republic tells me to STOP! and take advantage of its great prices on… I slam my cell phone to the pavement.
Its plastic and circuitry scatter, joining the rubble from all the other cell phones whose owners were driven to violence by the endless stream of coupons beamed in.
This nightmare isn’t upon us yet. But it is a real possibility, if the marketers promoting location-based ads as the next big advertising moneymaker have their way.
For most of the past decade, they’ve been touting the appeal of sending hyper-targeted—unsolicited—advertisements through cell phones. These intrusions are, some argue, inevitable, given the captive audience of almost 263 million mobile phone owners.
Yet revenue from location-based advertising hasn’t yet materialized. In September 2000, Ovum, a Boston-based research company, thought the mobile ad market would reach $16 billion by 2005. But research firm eMarketer further lowered its already conservative forecasts, to $3.3 billion (from more than $6 billion) by 2013, after 2008 brought in only $648 million, against eMarketer estimates of $1 billion.
What happened to the grand plans?
First, most people in the industry have a slightly different scenario in mind.
“The example everyone cites, McDonalds or Starbucks sending a coupon and how that would be annoying. It drives me nuts,” wireless consultant Derek Kerton said. “It was never a good idea to do it like that. It’s not how it’ll get done.”
Second, the concept requires that phones be equipped with GPS so advertisers can track consumers’ movements, a technology upgrade that has taken longer than expected. Now that more phones are equipped with GPS — 180 million were shipped in 2007, according to research firm In-Stat — the flame of location-based services and advertisements is once again burning white-hot.
Google CEO Eric Schmidt certainly has high expectations. “We can make more money in mobile than desktop eventually…we can do a very, very targeted ad,” he told host Jim Cramer on CNBC in August 2008. “Over time we will make more money from mobile advertising.”
“The way location-based ads will be offered will be opt-in,” argued Brent Iadarola, Mobile & Wireless practice global program director at the consultancy Frost & Sullivan. The buzzed-alert style of ads will kick in only if you request information by filling out a profile on your phone, he said.
For example, if I’m in the market for a new flat screen television, I can tell my phone exactly what I’m looking for. I want to spend between $800 and $1,200. I want it to be no smaller than 42 inches. I’m not interested in off brands, just Sony, Panasonic, or Sharp, and it damned well better be an LCD screen. Every time I’m near a store that is selling a television that fits my criteria, I get an alert. If I’m lucky, I get a discount too. Iadarola sees this as a value-added feature from a consumer’s point of view, so long as the wireless companies protect users’ privacy and security.
Kerton says he agrees with Iadarola’s model, but that such a level of tracking is years away.
“For now, if you are in New York City and you want pizza, you pull out your phone and you search for pizza. At the top of the first page of results for pizza is an ad for a pizza place or a coupon.”
In this way, companies advertising on mobile phone searches gain a competitive advantage. Sure, there’s a pizza place every half block, but when I ran a search on my phone, Angelo’s Pizzera was at the top of the list, only three blocks away, and offering me two slices and a Pepsi for five bucks. In this economy, that’s enough of a deal to draw me right past 10 other pizzarias.
Schmidt believes the company will earn so much more from mobile advertising because, according to Kerton, “When people browse the web, it is leisurely, not active. When interacting with Google on a mobile phone, however, they are looking for something specific, they are ready to act. They’re not trying to read articles, they need to know where the Kinkos is, what the stock price is. It’s not all commerce, but it’s mostly commerce, so more money will follow a mobile search.”
Landy Ung, founder and CEO of 8coupons.com, agrees, and is designing her business on the concept of search advertising. Her start-up, which offers New York businesses web coupons, just struck a deal with outalot.com, which makes applications for mobile phones. “We are for people that are actively looking for something,” Ung says.
If Schmidt and Ung prevail in the coming struggle over how mobile phones will fit into the vast advertising market, fears that my phone will become a spam box that could drive me to mobile-cide will be unfounded. Instead, my phone might just turn into the most expensive little coupon holder in history.
Not exactly the next slogan for the iPhone, but I’ll take it.
Photo by Ryan Smith