September 14, 2006 6:28 AM PDT

Advertising seeps into the cell phone

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LOS ANGELES--If you thought your mobile phone was safe from the barrage of marketing messages from big advertisers, think again.

After years of balking at the idea of opening up their networks to advertising, the four biggest mobile operators in the United States are edging closer to incorporating banner ads, text message marketing and short video commercials into their business models in an effort to reduce the cost of offering new multimedia services to subscribers.

Experts at the industry's CTIA Wireless IT & Entertainment 2006 conference here this week said the question is not if and when mobile advertising will happen but rather how it will be implemented.

"Advertising is the only way that carriers can afford to add more content to their services," said Tom Burgess, chief executive of Third Screen Media, a company that manages mobile advertising for content providers and carriers. "They can't grow their content catalogs if they don't support advertising, because they won't be able to keep increasing subscription fees."

Sprint Nextel will be the first of the four major U.S. carriers to move in this direction. Paul Reddick, vice president of business development and product innovation for Sprint Nextel, revealed at a preconference event that Sprint's new ad program will begin this fall.

Several Verizon Wireless executives have acknowledged that the company has been testing a program to open up cell phone services to advertising. Cingular Wireless is also considering inserting advertising into content it offers through its menu of services. But wireless-services executives at CTIA were reluctant to give details.

"We are looking at mobile advertising closely," said Rob Hyatt, executive director for entertainment and premium content at Cingular. "I'm not prepared to say anything publicly here. But if you look at the cable TV market, a subscription and advertising business model worked very well to deliver lots of high-quality content."

Mobile virtual network operators, or MVNOs, are also introducing ad-supported content into their business models. Amp'd Mobile on Wednesday said it has struck a deal with Procter & Gamble to offer targeted ads with its video service.

A cautious approach
Today, most wireless Internet services in the United States don't include advertising. What little mobile advertising there is can be found on content producers' own Web sites, which are accessed through a mobile browser rather than through the carrier's cell phone menu, or deck, that subscribers use to locate service options. Opening the carrier decks to advertising will likely increase the available ad inventory content owners can sell by about 30 percent, Burgess said.

The major carriers have been reluctant to introduce advertising into their networks because they fear a backlash from consumers.

"We are being careful about jumping into advertising," Lowell McAdam, chief operating officer of Verizon Wireless, said during a panel at the CTIA show. "People view their cell phones as their personal space, more so than their PC. If they get an ad they don't want to view, that as a violation."

But as operators look toward offering more data services on their networks, they are quickly realizing that there is a lot of money to be made in advertising--a new revenue stream that could offset the heavy losses they are experiencing in their voice businesses. Operators also see advertising as a way to support new creative content.

According to market researcher Informa Telecoms & Media, advertisers will spend more than $11 billion by 2011 on mobile marketing. Operators could stand to take up to 50 percent of this advertising revenue as they negotiate deals with content owners.

While just about every media service, from newspapers to Web-based services to cable TV, generates a portion of its revenue from advertising, it's unusual for the operators delivering the media to be given a cut of the advertising revenue. But carriers have full control over their networks, picking and choosing which brands and content they carry on their decks.

They've also spent billions of dollars upgrading their networks to get them ready for rich graphic, audio and video content. And they've subsidized the cost of third-generation, or 3G, handsets so that users can get access to the services. So as a result, operators feel entitled to a piece of the action.

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21 comments

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Consumers like advertiser supported content and services.
We were very successful with advertiser supported Dialup Accounts back in the day.

Now we are investigating advertiser supported WI-FI.

Of course there will always be the high-end user that has no problem with our regular $29.95 a month 802.11 service, but the economies of 802.11N will permit make the last mile free, so its easily monetized by ads.
Posted by disco-legend-zeke (448 comments )
Reply Link Flag
Send me an ad, lose my business forever
Any company that sends me an ad loses my business.

If the ads ends up costing us anything they better expect class
action lawsuits.
Posted by rcrusoe (1305 comments )
Reply Link Flag
I agree completely. Send Ad, Lose Business.
Leveraging the one device that travels with me to spam me in any way for any reason, will lose my business. I'd rather stop using cell phones completely than have them be another advert venue invading my life.

We pay cellular companies to use their service, so give us the service we pay you for, not what someone else pays them to give us.
Posted by Dell_Lied (5 comments )
Link Flag
Agreed
I will not tolerate ANY ads on my cell phone.
Posted by nospam! (9 comments )
Link Flag
The Source. CompuServe.
Remember those? All this futzing around with proprietary applications and schemes for making vast amounts of wealth from content will fail for the same reason that The Source and CompuServe failed. The wireless providers need to get a clue and get their crappy technology out of the way and let cell phones do what users know they're capable of.
Posted by converter42 (10 comments )
Reply Link Flag
Cell Phone SPAM & AD'S
This is BS !!! At the prices we pay for wireless, the proividers should be required to pay the users a sur-charge for all the extra band width that is going to be comsummed by this crap!!!
The response for wireless connections is already poor at times!!!

To the providers; work on proividing a QUALITY & RELIABLE CONNECTION SIGNAL FIRST outside the metropolitan areas.

The DO NOT CALL only works on the CONUS area, after a period of time, it does not keep the "here today, gone tomorrow" SPAM market trash that already clog up our e-Mail services!!!

If the companies have money issues, perhapse a reduction in the multi-million dollar salaries & bonuses of the tier 1 & 2 management levels will return the companies back to profitability!!!!
Posted by lmoxon (3 comments )
Reply Link Flag
Cell phones
custumers bought into it, so have fun!
Posted by paulsecic (298 comments )
Link Flag
Got to pay for 3G somehow
After all, 3G is SOOOOO popular that everyone was waiting in line to watch tiny TV, download overpriced ringtones, and browse a small screen internet. Cell phone companies should focus on what we want first, and we don't want 3G. We want coverage anywhere and everywhere, not lies like "America's best network" or "Fewest dropped calls based on anonymous independent study."
Posted by i_am_still_wade (250 comments )
Reply Link Flag
Had better not affect me
All a cell phone has ever been to me is a phone. I rarely even use text messaging, much less even touch any of their content. I would be extremely angry if I were affected by advertisements which support a service I have no interest in using.
Posted by mkhecker (4 comments )
Reply Link Flag
Exactly!
You said it! Amen! Maybe they'd show some profits if the execs didn't need those perks and parachutes!

Alas, some clever user will hack the phone to prevent the advertising anyway. Like an Adblock.

However, I would gladly accept advertising for say, a 50% reduction in monthly "excessive and useless" charges. (Doubtful...but wishful)
Posted by Below Meigh (249 comments )
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Does this say what I read it to say?
From the story: "But as operators look toward offering more data services on their networks, they are quickly realizing that there is a lot of money to be made in advertising--a new revenue stream that could offset the heavy losses they are experiencing in their voice businesses."

This simply cannot be true, if they are exepriencing heavy losses in their voice business then they wouldn't be promoting people to buy more phones. Most of what they sell right now is useless fluff (ring-tones) that cost them next to nothing but they charge a lot for but if their business model says they loose money for voice access (the primary reason for a phone) then they'd go out of business in a hurry.

That simply cannot be true, it they're advertising it as a truth then they must be lying.
Posted by aabcdefghij987654321 (1721 comments )
Reply Link Flag
I wonder where the "Do Not Call" legislation fits into this.
I have all my phones (terrestrial and wireless) on a statewide and national "Do Not Call List". If I am being solicited either by pop up ads or someone on the other side of the phone, the net effect is the same.

Cell phone companies beware. You could be getting yourselves into some very hot water that could potentially cost you plenty.

Also, if you receive an unsolicited text message that is advertising, why should the subsriber have to pay for it.

This is nothing more than greediness on the part of the wireless carriers.

It will become what magazines have become: you pay for the subscription and then half of the publication is advertising.
Posted by Big Tsunami (29 comments )
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Maybe Verizon will lower their price
If advertising comes to the mobile web then maybe Verizon will lower their data prices. I'm sure the answer to that is NO, but it would be nice.
Posted by Joey301 (46 comments )
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Good - Break the addiction
Dave lets loose.

<Rant>
Excellent news! Hopefully, this will **** off cell-phone users the point that their usage decreases. Talk about an addiction! Cell phones are a world-wide addiction that makes American's oil consumption look like a pathetic thumb-sucking bad habit in comparison. I see people who can't afford to EAT walking around with cell phones! Unbelievable! Kids in school talking on cell phones! Take them away! Driving like maniacs all over the road with their mind glued to a cell phone conversation. And this is a world-wide trend we are talking about. People are SO INSECURE, they get paranoid when they accidentally leave their cell phone at home, and will actually leave work to go get it! Heaven forbid your machine has to take a message!

*talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk* *talk*
Nobody thinks any more... its all gabbing and socializing.

I have 2 phone lines at home and 1 at work. I have a satellite phone in the car that is for emergencies and has been used less than 10 times. That is MORE THAN ENOUGH.

I HATE cell phones, and their crappy quality, and high prices, along with their tendency to bring out the worst insecurities in humans. I do NOT own one, and god willing, will never have to.

"I forgot my phone! What am I going to do? What if somebody tries to call me!" Suck it up and get an answering machine. Better yet, tell your friends to **** off and stop calling you when they know you are working.

*I* decide how to use my time - not some insecure button-pusher who can't stop calling me throughout the day. I will talk to people when I want, and ignore them when I want. And contrary to the suggestion that I could simply turn my phone off, nobody ever does. Not even at the movies.

Start a worthwhile movement - smash your cell phone.

/End Rant
/Off Soapbox
Posted by David Arbogast (1709 comments )
Reply Link Flag
What They Are Really Saying
What the cell carriers are really saying with all this ad garbage talk is:

1) We made a decision to spend billions of dollars on high speed networks just because Europe did. Everyone knows Europe is so cool, and so far ahead of us. It was too boring spending the money to improve the voice quality of the network, and Wall Street would not have been interested.

2) We hired a bunch of 22 year olds to tell us what the 18-34 demographic wanted in the way of content for our new network.

3) We gave the 18-34 demographic what we thought they wanted, and priced it accordingly. We ignored the 35-99 demographic because all they buy is Polident anyway.

4) We realized that the only content we could provide at the decided price point was re-packaged garbage that people see at train stations and on airplanes. Shows like Comrade Katie and the Evening News and The Best Of Everybody Loves Raymond.

5) We couldn't get decent content at the decided price point and the 18-34 demographic won't pay to watch Raymond anymore. So we have no choice but to prostitute our cellular network to the advertisers, take the money and run. Wall Street will be really excited about our new strategic direction and our stock price will go up. The compensation committee will vote to give us a boatload of low-priced, back-dated options so we can upgrade the Holmby Hills mansion with a brand new multimedia theatre system that filters out cruddy commercials. Raymond will look great on that new 60 foot screen.
Posted by maxwis (141 comments )
Reply Link Flag
forget it!
Don't know about you guys in the US but in Europe this would be suicide. No way no way NO WAY would I allow ads on my phone. The first ad I get, I'm gone. Finished. Vodafone I hope you're reading these comments. I don't want "more content" or any of that 3G crap. I just use my phone for phone calls and text messages - that's it!
Posted by halfbaket (1 comment )
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Posted by lucifinil (22 comments )
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No, no no no cell phone ads.
Posted by mk_rock (1 comment )
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i am sure each company will offer an opt-out option...........................................for a fee!
Posted by pvollmer (1 comment )
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I have friend who owns the patent to ads to cell phones
Posted by cento573 (1 comment )
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Does any one else go to their albums in their phone to realize there are albums that have been created, labeled things like ''c28045'' which contain one image of an advertisement, such as Geico or Visa ??? I am an HTC Sprint user, and this is really beginning to frustrate me because I don't like the invasion of my personal privacy AND though I delete them, the next week even more have been created.... ?!?!?!!
Posted by indigobird (1 comment )
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