From Cell Phones To Sell Phones

Already controversial, wireless ads are a marketer's dream

It's a sticky August afternoon in Boulder, Colo., and Richard Polk is already daydreaming about the blizzards that will sweep through this mountain town. Snow and slush are good for business, drawing customers into Pedestrian Shops, Polk's two local shoe stores. Come Sept. 29, however, Polk hopes they'll be lured by something else: pithy text ads that he'll zap to people carrying cell phones.

Instead of counting on the weather, Polk will participate in a trial run by SkyGo Inc., a wireless-advertising firm. The company hopes to work with mobile telecom companies to deliver electronic pitches directly into the hands of shoppers. They'll get a free phone in exchange. When a storm arrives, Polk might send a message trumpeting 20% off waterproof boots, good until the storm ends. "You can't plan the weather two weeks out and buy a newspaper ad," says Polk. "We can market directly to the customer relative to the conditions at the moment."

Marketers think they've finally found their Shangri-la: the wireless Web. Here, pitchmen can reach customers whenever they wish--and more directly than ever. Next year, cell phones by law will have to carry location technology for emergencies. Eventually, marketers could use it to track a user's location to within 100 feet and target ads with stunning precision.

The come-ons, heralded with a trill from a cell phone, are hard to ignore. And that's where the business turns tricky. Companies such as SkyGo, based in San Mateo, Calif., could blow their prospects if they're not sensitive to growing privacy concerns. On top of that is the technical challenge of fitting a punchy, 110-character text ad onto a tiny screen and adapting it to some 250 cell-phone models sold in the U.S. Only 1% of America's 101 million cell-phone subscribers use the wireless Web. Just 5% have phones that can show teeny Web pages with graphics such as company logos, according to Strategis Group, a Washington (D.C.) research firm.

Still, with some 46,000 new cell-phone users each day, it's too big an audience to ignore. By 2003, Boston research firm Ovum expects wireless advertising to be a $1.2 billion market, skyrocketing to $16 billion by 2005. What's more, marketers view wireless as the medium that could fulfill the grand promise of the Web: to know their customers' tastes and location so well that customers will buy, literally, on the spot.

SkyGo is one of a half-dozen small companies that already are testing the airwaves in the U.S. Others include, a service of wireless-ad firm in Baltimore. It's paying users 5 cents to 50 cents each time they view ads. So far, the company has signed 15 trial advertisers, including Web site CBS and movie studio Universal Pictures. In Hong Kong, Peoples Telephone Co. is offering 25% off airtime charges to its 90,000 customers if they agree to listen to a 10-second pitch before they dial.

BIG PLANS. But the real clout lies with major mobile operators such as AT&T, which controls the gateway to the eyes and ears of 14 million customers. The company says it plans to start sending targeted ads but won't discuss who will advertise, what advertisers will pay, or how the ads could benefit cell-phone customers. AT&T has allowed SkyGo, however, access to its wireless network for the Boulder trial.

Operators have been mum on their plans because they don't want to spook potential subscribers who are already suffering from ad overload in the wired world. The average American sees, hears, or reads at least 250 ads a day. And Americans, at least, may not be able to stand any more. A March poll taken for BUSINESS WEEK by Harris Interactive found that 78% of Internet users are concerned about companies sending them unwanted e-mail. And 89% say they aren't comfortable with companies that merge their online browsing habits with identifying information, such as name, age, or address. That same month, consumer uproar ended DoubleClick Inc.'s plans to create a database linking online behavior with user demographics.

The pervasive reach of the wireless Web smacks of Big Brother or, at the very least, Big Bother. "Feel free to interrupt me wherever I am, in my dream, in my sleep, in my car, so I can buy something," says Leslie Savan, a longtime ad critic at the Village Voice, a free weekly paper in New York.

Mockery aside, critics have a point. In April, Inc., a fledgling e-tailer of cell-phone accessories, wanted to get its name around. It purchased phone numbers of 10,000 AT&T wireless customers and, without their permission, zapped an ad saying: "Check out and save 50% off cell-phone accessories." One recipient happened to be an aide to Representative Rush Holt (D-N.J.), a supporter of bills outlawing junk faxes, e-mail, and spam. Holt is now adding wireless spam, known as "wam," to his hit list. Next week, he will introduce a bill that would ban sending ads to cell phones without users' permission. "People are outraged to know that this problem is about to arise," says Holt.

To try to keep the peace, most wireless-ad approaches are being built on the concept of "opt-in." That means that consumers choose to receive the ads. "With traditional media, a company tried to establish a silent dialogue with you," says Dee Cravens, executive vice-president of wireless-ad firm AdForce in Cupertino, Calif. "Now, that switches from passive to interactive. You can determine what brands reach you."

Imagine, for instance, a wireless service run by a local major-league baseball team that would alert fans via cell phone if tickets become available at the last minute. If a fan were available only for Tuesday games, that fan could program the phone to accept only Tuesday alerts.

FREE PHONES. The tough part is persuading users to divulge their commercial urges. As incentive, SkyGo will give away $100 Ericsson phones to 1,000 testers in Boulder who reveal their preferences in 12 broad categories, including entertainment and gardening. It also will target ads based on data such as age and address gleaned from the service deals that users must sign with AT&T.

For four months, local Boulder advertisers, such as Pedestrian Shops, and national heavyweights like Kmart and CompUSA, will pitch deals such as two-for-one offers at least three times a day. Pedestrian's Polk says he's paying $500 to participate. "With any viable consumer medium, it's always a matter of when, not if, advertising comes," says SkyGo CEO Daren Tsui.

And with the wireless Web, when they come, ads will always hit their mark, for better or for worse.

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