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Ad Trip

Ads that follow your customers wherever they go. No, it's not a hallucination. Wireless advertising is here-but will customers buy it?
Magazine Contributor
8 min read

This story appears in the August 2001 issue of Entrepreneur. Subscribe »

The smells of gumbo, jambalaya and crawfish fill the air of your Cajun restaurant. It's just after noon, and you're working the register while the lunch crowd files in and out. One of your regular customers walks up with her ticket and hands it to you-along with her mobile phone. You check the phone's minibrowser screen and give her 20 percent off on the shrimp etouffee. Your customer just cashed in a coupon. Welcome to wireless advertising.

You can't run down to your local ad agency and start flinging out mobile marketing just yet, but that day is coming. The fledgling industry has big plans for timely, personalized advertising. Some people envision consumers getting daily specials beamed to their phones when they walk past local restaurants, but many entrepreneurs just see it as a big-time opportunity to reach very specific and willing customers. For wireless advertising, the gumbo has just started to stew.

This Ain't the Internet

The last great leap in advertising was supposed to be the Internet. Buzzwords like banner ads, click-throughs, eyeballs and page views abounded. But Internet advertising now has about as much life in it as the hamburger you ate for dinner. That's why Gary Ozanich, senior research analyst with The Kelsey Group in Princeton, New Jersey, wants to get one point across: "Wireless marketing is not the wireline Internet. That's the number-one thing that has to be communicated to potential advertisers as well as users."

predicted revenues from wireless advertising and promotions in the United States in 2005. $1.5 billion of that will be at the local merchant level.
SOURCE: The Kelsey Group

Banish those visions of banner ads for now. "What we're talking about with wireless is really the ability to send people messages in a contextual sense," Ozanich says. Like sending your Cajun restaurant customer a 20-percent-off coupon through her cell phone in the morning good for lunch that afternoon. But there are many forms wireless ads could take-think branding ads for clothing stores or discounts on movie tickets as users surf the wireless Web to get showtimes.

Don Albert, vice president of sales and marketing at FusionOne, an Internet marketing firm in San Jose, California, says marketers are trying to gauge whether direct response and direct sales are the only things wireless advertising is good for. They want to avoid a replay of the Internet advertising debacle. In fact, the rest of 2001 will probably be spent on tests, surveys, data gathering and white papers.

"We have to prove this advertising can be effective," says Albert. "There are skeptics that say there's no way you can do anything on that small screen that's going to be worth anything." But an ad is still valuable if it prompts a consumer to visit a Web site later or remember a brand name. Many current trials focus on measuring those effects beyond consumers' immediate responses to ads. If the industry can prove a range of value for wireless ads, then it will have a solid argument for widespread adoption.

But First, the Barriers

Wireless advertising faces plenty of critics with legitimate concerns. First among those concerns is the spam issue. The fear is that consumer privacy worries and hatred of spam will stop wireless ads dead in their tracks. Knowing there's no love lost between consumers and marketers, the Wireless Advertising Association (WAA) is trying to take the first bite out of mobile spam.

"In a nutshell, we distinguish between push advertising and pull advertising," says Albert, who's also the vice chair of the WAA. Push advertising is akin to unsolicited messages in your e-mail inbox. They're unrequested, unwanted and rub consumers the wrong way. The WAA feels strongly that marketers and publishers shouldn't send e-mail to people without their confirmed opt-in permission. Says Albert, "You have to confirm that the phone is indeed the phone of the person that gave the opt-in permission in the first place."

The WAA's privacy guidelines can be accessed at Still, there's no guarantee against renegade marketers or companies abusing the opportunity, much like the junk fax craze of the late '90s. Some wireless anti-spam bills have already bounced around Congress, though none of them are likely to become law.

WAA members hope their upfront approach will head off both consumer complaints and restrictive legislation. "It does no good to anyone if the users are annoyed by the marketing," Albert says. "Many users will welcome targeted messages that bring some value to them, as long as they can control it."

"Many users will welcome targeted messages that bring some value to them, as long as they can control it."

Wireless advertising enemy number two is a technical problem. Unlike Europe, which has settled on a single wireless standard, the United States is saddled with a bevy of competing technologies. Minibrowsers come in different sizes and types. PDAs are a growing force. Some phones are WAP-enabled; most aren't. It's a telecom Tower of Babel.

"You do have to get over the WAP hurdle," says Ozanich. "And there's certainly the issue of a learning curve for merchants regarding the opportunity." The Kelsey Group expects the WAP problem to ease as consumers upgrade their cell phones over time. Meanwhile, wireless ad agencies are working to make ads accessible over as many standards as possible.

Another issue is the trepidation of most wireless carriers. According to Albert, "The carriers are in positions to serve largely as gatekeepers. They could make wireless advertising take off in a heartbeat if they get behind it." Ozanich predicts increased interest from carriers as they discover advertising's potential for increasing customer loyalty and encouraging usage.

Problems like those are an indication only that wireless advertising is a new medium. Analysts believe wireless's ability to reach consumers is enough to push aside the obstacles.

Looks Good From Here

Location, location, location. That catchy real estate slogan will soon apply to mobile marketing. The FCC is requiring that wireless-enhanced 911 (E911) services be fully implemented by December 2002, which means calls from mobile phones will be traceable to within 50 feet of the caller. The jury's still out on whether independent companies will be able to take advantage of this technology, but the possibilities would be limitless.

"For brick-and-mortar retail establishments, this holds enormous promise as [we'll be able] to target ads geographically," says Albert. Advertising will move from the realm of blanket national and regional campaigns right down to your street corner. Customers could sign up to get a list of your fresh seafood specials whenever they're in the neighborhood of your restaurant.

Case in point: E. Richard Polk, 49, has been running Pedestrian Shopsin Boulder, Colorado, for more than 30 years. For him, comfortable shoes and wireless ads are a good fit with enough room in the toes to grow into. Recently, Pedestrian Shops participated in a four-month Comstat, Kelsey Group and SkyGo study in Boulder that involved 1,000 WAP-phone-equipped users and some national and local businesses.

For $500, SkyGo worked with Polk to tailor and deliver an opt-in wireless campaign. Pedestrian Shops already offered coupons on its Web site, so the move to wireless was a natural one.

"I just thought it was pretty darn exciting," says Polk. "[Customers] would just press a button on their cell phone, and it would be in their e-mail when they got home that night."

Pedestrian Shops got more than 25 coupons back from participants who opted in to receive messages about shoes. Both Polk and Kelsey Group analyst Ozanich were pleasantly surprised by the success, but they insist the Boulder experiment is just the beginning. Says Polk, "We participated in an intriguing test that was successful, but we don't know what the business model is going to be or what it will cost. I think the technology is going to go way beyond selling soup or shoes."

It may be as late as 2005 before your average corner store will be using wireless ads, but you can bet it'll happen. "I don't think this technology will ever put newsprint or any type of advertising out of business, but I'm pretty confident it will be part of the mix," Polk says. Expect it to become more popular as more WAP phones reach the market and ad agencies sort out the privacy and protocol concerns.

In the meantime, entrepreneurs should keep tabs on the technology. Says Albert, "I'd encourage any business to experiment and not wait for all this to get figured out, because anyone that gets early learning is going to have a jump on their competitors."


FusionOne: Creator of an engine that synchs data across many platforms, including cell phones and PDAs
Planethopper: Delivers deals to opt-in wireless and wireline users
Profilium: Provides wireless advertising, promotion and direct-marketing services
Skygo: Provides services, including consulting and wireless advertising
Windwire: Offers wireless advertising and marketing services and is forming an extensive wireless ad network


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