The champagne was on ice, the music by Puddle of Mudd and Metallica thundering loud and hard. This was America's Party, a live show from Las Vegas on Fox (NWS ), and it looked like a standard televised New Year's Eve bash.
However, this show, like so many others this year, included a new wireless component. A stream of text messages flowed across the bottom of the screen. Tens of thousands of viewers across America were sending these messages from AT&T Wireless cell phones, and waiting anxiously for their jokes, put-downs, or love notes to scroll across. "We had 25 marriage proposals that night," says Are Traasdahl, executive vice-president for sales at TeleNor Mobile InterActive, the technology provider for the service.
A Fox New Year's Eve show featuring Puddle of Mudd asked viewers to send in text messages. The resulting onslaught included 25 marriage proposals
Peck out a note or cast a vote on your cell phone. It's a global rage. Text messages are key features on Survivor and American Idol, and they're a growing part of a monster-size business. Callers will send an estimated 548 billion text messages this year, according to industry trade group, GSM Assn. That's about 100 for every man, woman, and child on the planet.
BARELY TAPPED BONANZA.
Each one costs between a penny and a dime to send, adding up to a worldwide revenue stream that's expected to reach $27 billion this year. And as phones over the next two years handle more color pictures, video, and hi-fi sound, a flow of more expensive multimedia messages should drive more growth.
Short messages are a bonanza for wireless carriers, but one that's now reaping only a fraction of its potential. Why? The marketing side of the text-messaging business is just now getting started. The 1.3 billion cell phones in the world give marketers a possible person-to-person link with consumers everywhere.
The potential is there to harness the cell phone to the vast databases of user profiles -- the dossiers that supermarkets, retailers, and mail-order companies have created on their customers. A phone marketer with this data could use short messages to deliver millions of personalized pitches and ads, some of them tailored to the user's whereabouts and the time of day.
A GIVE AND GET.
So far, however technical challenges and privacy concerns have kept many marketers from venturing into customers' pockets and purses. It's a sensitive business. Anything resembling mobile spam could provoke an angry backlash against marketers.
However, marketers do have a way in. It's as simple as knocking and saying "please." Now, throughout the mobile world, that's precisely what marketers are starting to do. They're devising strategies to win customers' permission to receive text ads on the phone. The pitch often involves offering the customer an enticement, from free text messages to weather updates, in exchange for information about the user -- and permission to come calling.
"You give something to get something," says Neville Street, CEO of InphoMatch, a Chantilly (Va.) company that processes message traffic for phone companies. "You give your information, I give you something in return."
Companies that succeed in signing up large numbers of consumers will be able to target them as never before -- giving them a big leg up on their rivals. For now, U.S. marketers are wooing customers with simple text-based offerings, such as daily jokes, diet tips, and astrology readings. But the spread of color screens, stereo speakers, and video applications in phones opens the door to splashier offerings. In more advanced mobile markets, like South Korea's, advertisers win customers by offering video clips, including movie previews or sports highlights.
Surprising numbers of phone users, say marketers, actually welcome ads and sponsored messages on their phones. According to a survey by Enpocket, a London-based mobile-marketing company, customers aged 16 to 25 actually want their phone to beep with a message an average of 6 to 10 times a day. "Our biggest complaint from teens is that they don't get enough messages," says Jonathan Linner, CEO of Enpocket. "Every time your phone beeps, it shows you're popular."
It's not just kids who want more missives on their phones. Consider one Enpocket campaign for a beauty-care company in Britain that Enpocket declined to name. The company sent to an undisclosed number of women a message promising to give them customized hair-care advice if they responded to 10 text messages over the following 10 days.
Each day, a message would arrive with a question. Is your hair dry? Is it fine? Is it thin or full? Fully 90% of the women responded to all 10 questions. In return, they got shampoo advice. And the beauty-care company had valuable data to build personalized profiles for further campaigns.
MENU OF MOVIES.
In another marketing move, Warner Brothers (TWX ) used Enpocket to send messages to a group of women, aged 17 to 35, and offered to give their partners a helpful Valentine's Day nudge. The women had signed up to receive text ads and updates from several women's magazines. The message that arrived on Feb. 1 asked them to send the name and number of their Valentine. In return, the studio would pass along their request to be taken to the Sandra Bullock, Hugh Grant romantic comedy, Two Week's Notice, on Valentine's Day.
So how about the people who might have wanted to send a sponsored Valentine message -- but weren't interested in seeing that movie? They didn't respond. The point with these promotions is to hit a large audience with a specific pitch, something they can respond to with a yes or a no. Conceivably, Warner Bros. could have sent a menu of movies to choose from. But that, say marketers, would likely be too complicated, and discourage customers from responding at all.
In time, with the right demographic information, Warner will refine its targeting so that it can reach the right people with the right movie. Enpocket declines to provide numbers on the messages sent or responses. But according to its follow-up research, 41% of the people who responded were taken to the movie.
Cell-phone companies are figuring out how to use text messages to give young customers a feeling of privilege. Cingular Wireless sends messages inviting fans to exclusive local encounters with stars such as hip-hop performer Ludacris. "If you've got a Cingular phone, you use it as an entry to meet and greet," says David B. Garver, Cingular's director of marketing. He says the prospect of an Atlanta get-together with In Sync's J.C. Chasez had young Cingular subscribers camping out all night.
What does Cingular get out of this? Promotions generate a flurry of text mail, as customers resend the message to their friends. The more phone traffic, the more revenue Cingular can rake in. More important, those messages spread word about the benefits of Cingular membership, and they amount to a viral marketing campaign for the carrier.
Garver says many adults fail to understand the phenomenon text messaging is becoming. Sure, the U.S., which had $1 billion of text traffic last year, is still dwarfed by the $16 billion European market. But led by teens, text messaging in the U.S. is growing fast. Garver estimates that his 16-year-old daughter sends 1,000 messages a month. And that forced him to upgrade the family cell-phone subscription.
HIT OR MISS?
Lots of companies use text messaging to give their customers a voice. Every evening at 9 on WDRQ radio in Detroit, the station plays a new song and asks listeners to weigh in with text messages. H stands for hit, M for miss. Each week, says program director Alex Tear, participation rises. Hits, of course, get increased play time. "It gives listeners a chance to mold their own radio station," he says.
Like many companies venturing into the text market, WDRQ hasn't yet begun sorting their voters into databases for future promotions. This is true of the TV networks as well. "ABC and the others can start to get a much better understanding of their customers," says TeleNor's Traasdahl. "They haven't used it for anything yet but area codes."
That stands to reason. The new forms of digital marketing make it a cinch to send messages by the millions. But as bulk e-mailers have learned, making sense of the return traffic is much trickier, even for companies that have a one-to-one relationship with customers. It requires natural-language software that can process and sort through an avalanche of mail and messages. For now, broadcasters are happy to have a simple feedback from customers -- usually just a thumbs-up, thumbs down -- and to pocket their share of the text-messaging revenue.
MORE CENTS TO SPLIT.
However, the options are near limitless. Just imagine the possibilities from the marriage proposals at Fox's New Year's Eve bash. A savvy wireless marketer could have sent promotions to those phones for long-stem roses, diamond rings, honeymoons in Maui. And they would have reached consumers in a state of ardor -- every marketer's dream. With transaction services available through the phone, already common in much of Europe and Asia, the suitors could even click to buy.
Opportunities for cross-promotions abound but are unlikely to take off on a big scale until more sophisticated multimedia messaging supplants today's simple texts. The reason is economics. Say the Boston Red Sox teams up with Verizon Wireless in a promotion to get fans to vote for their favorite player on an ESPN telecast. Today, those three companies would have to divvy up the text revenues, which average only 3 cents to 10 cents apiece in the U.S. But within two years, say analysts, multimedia messages, complete with color video and music, might fetch 25 cents each, or more.
The key is to have a big enough pie," says InPhomatch's Street. "If there's enough money in it, all sorts of businesses can grow."
A NEW WORLD.
And they will. The winners will be companies that build up piles of cell-phone numbers whose owners opt-in for advertising. But they'll be leaning heavily on software companies to help them digest all the mail and on ad companies equipped with demographers to help them target their pitch.
Spammers? They'll be around, though less free to wreak havoc on mobile networks, which are owned and controlled by phone companies. But that doesn't mean lots of these ads won't feel like spam. An entire new marketing world is opening up. And with each day, look for more of these mobile marketers to be knocking eagerly, asking for access to your cell phone.
By BusinessWeek Senior Writer Stephen Baker in New York