A Sweet Deal for Virgin Mobile?

SugarMama, a cell-phone service aimed at the youth market, is a bet on the theory that users will watch ads in exchange for free talk time

Virgin Mobile USA has an offer it hopes customers won't refuse: Dote a bit on one of our sponsors, and we'll throw some free minutes your way. It's called SugarMama and it will be announced May 30. Virgin Mobile will partner with Microsoft's (MSFT) Xbox, Pepsico (PEP), and the American Legacy Foundation's anti-smoking "Truth" campaign to show customers ads in exchange for free airtime.

The move is part of an effort to warm customers to the idea of mobile-phone advertising, while providing advertisers a way to engage youth. Teenagers "are a group that's been surrounded by marketing their whole lives, and they can smell something disingenuous a mile away," says Howard Handler, Virgin's chief marketing officer. "SugarMama gives them a way to determine who and what and how they're marketed to," while getting something in return.

Here's how "Mama" doles her "Sugar": Watch a 30-second ad on the Virgin Web site, then answer a few questions to show you were paying attention. Or, if you prefer, answer a few multiple-choice questions through a brief text-message exchange. In return, the "SugarMama" of your choice pays for a minute of talk time.

While some form of advertising over mobile phones has been around almost as long as the text message itself, mobile-phone ads are far from mainstream. According to a May, 2005 survey of 2,200 cell-phone owners conducted by JupiterResearch, just over 2% had ever used text messages to vote in a poll or TV show like American Idol, and just over 1% had ever entered a contest or sweepstakes using a text message -- a common way to opt into a marketing campaign.


  And most U.S. consumers are still turned off by the idea of receiving ads on their phones. The JupiterResearch study found that even in the 18-to-24 age range (the youngest demographic polled), only 9% said they would consider receiving ads if it meant free minutes. In a separate line of questioning, 42% of 18- to 24-year-olds said they would not want to receive advertisements on their phones under any circumstances whatsoever.

But that's not keeping the mobile-ad space from heating up. Last October, advertising giant Omnicom got into the business by acquiring Ipsh, a mobile advertising agency. Recent reports say Microsoft is in talks to buy Third Screen Media, another startup that serves up ads to mobile phones. And many companies, from Pepsi to McDonald's (MCD) to Comedy Central, use mobile phones and text messages for marketing purposes.

Nonetheless, wireless service providers are treading cautiously. The hope is consumers will warm to the idea gradually if they're not overwhelmed with a blitz of ads. "There's just too much intimacy to do the type of marketing you find in print or television," says Handler. "This is a device that you carry around all day and sleep 5 feet from. Advertising must be far more respectful of the one-to-one nature of the product."


  Virgin hopes the choice of the traditional online advertising and the text messages, combined with the incentive to get free minutes, will give users an option they're comfortable with. And while Virgin has said that in its own market research, it found that 60% of the customers it surveyed said they would participate in the program, it is still setting a modest target for itself: The company told advertisers to expect participation of at least 30,000 of its 4 million subscribers in the first three months, according to Joseph Martyak, who handles marketing for the American Legacy Foundation.

Xero Mobile, a startup, is making a big bet that young users will buy into the cell-phone advertising concept (see BW Online, 4/14/06, "Will Xero Mobile's Numbers Add Up?").

Martyak says his group and other advertisers have signed on with Virgin not only because it will let them reach a young audience both online and on their phones, but because of the way they can engage the customer with the back-and-forth text messages, or the interactive quiz on the computer. The fact that the audience is self-selecting (each customer picks his or her own SugarMama) is appealing as well.

"Using a medium that is so common and actively used by teenagers is a huge benefit for us...and getting the message in front of them and having them read and reflect on it is what we're about," he says. "We can also use it as a quick survey of what [teens] understand about smoking, and how they're thinking about it."

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