Ads heading toward your cell phone

Rutanen's online brokerage firm in Finland, eQ Online, recently became the first advertiser to run a campaign on a new generation of mobile phones that offer Internet access. When users of the new phones clicked on the Web address for Kauppalehti Online, a popular Finnish business-news site, up popped an ad for eQ. Users could either click on the ad, which gave them real-time stock quotes, or continue to the news site -- but they couldn't avoid seeing the ad.

"People who are trading stocks over the Internet will be using mobile phones to make trades in the very near future," said Rutanen, who is managing director at eQ Online. "As far as I'm concerned, we can put 100 percent of our advertising on mobile phones if that's what they're using."

Rutanen conceded that's an exaggeration. But he and other advertisers, ad agencies and content providers agree that the next wave of digital advertising will hit in 2000, in the United States as well as Europe, and it will be on handheld wireless devices, the most popular of which is expected to be the mobile phone.

Chan Suh, CEO of interactive ad agency Agency.com, based in New York, said several clients are asking about advertising on interactive mobile phones. Mobile-phone messaging "is going to have to be part of an overall interactive marketing scenario," Suh said.

WAP the standard by 2003
Motorola (NYSE: MOT) and Finland's Nokia (NYSE: NOK) and other phone manufacturers late last year began rolling out phones that can access the Internet. Sales of these devices, which use "Wireless Application Protocol" technology and are known as WAP phones, are expected to take off in Europe during the first half of 2000 and catch on in the United States by the third quarter. Analysts estimate WAP phones will be the standard mobile phone by 2003 with 80 million users in the United States, even though they currently cost between US$500 and US$1,000.

But mobile advertising is still embryonic, and there are a lot of questions about what the ads will look like on the tiny screens, which dotcoms might find them beneficial and how anyone will make money.

Initially, such ads will afford very limited branding opportunities. The screen on a WAP phone is about the size of a business card, so it's too small for more than a few lines of text. The ads will either take the form of a sponsorship or resemble the eQ ad, which carried the name of the company, its slogan and its Web address in a short text message. Over the next one to five years -- estimates vary widely -- ads may feature color graphics, audio and video, offer coupons, and even pop up when users flip on their phones.

Some industry watchers predict that because of slow Internet connections and the inconvenience of telephone keypads, the advertising groundbreakers will link to sites that offer information and services, such as news headlines, weather and flight schedules -- as opposed to e-commerce sites.

Information as focus
"Users may want to make a stock purchase or check the status of their bid on eBay," the online auction site, said Lucas Graves, an analyst with Internet market research firm Jupiter Communications in New York. "But for the most part they're not going to go shopping for books on Amazon," he added, referring to online retailer Amazon.com.

Local advertisers may have the most to gain. Since carriers will be able to monitor a user's general location, there are good possibilities for target marketing -- say by offering a coupon to a restaurant that is near the telephone user.

But advertisers also risk consumer backlash. "Phones are incredibly personal devices, and in order not to upset users we have to make sure that any type of ad they receive is relevant to them," says Jamie Byrne, director of emerging platforms at New York-based DoubleClick (Nasdaq: DCLK), which could begin managing ads on mobile phones later this year.

So who pays?
Content providers are figuring out how best to charge for these ads -- whether it should be a cost per impression or click-through or by collecting a percentage of sales. Initially the price is expected to run between US$30 and US$100 per 1,000 impressions, compared with the US$10-to-$50 rate charged for banner ads. The higher cost reflects the technology involved, but also the target marketing.

The eQ ad received 59,000 responses, said Gordon Simpson, CEO of 24/7 Europe, a division of 24/7 Media, New York, which managed the Finnish company's ads on both short-message services and WAP phones. "If we had 3,000 to 5,000 responses we would have been very pleased."

The first hurdle will be getting users to buy the high-priced phones. The next may be consumer acceptance of the ads. At least one direct marketer, Advertising.com in Baltimore, plans to pay users for accepting targeted pitches -- offering between 1 cent and 50 cents an ad, which can be applied to air-time charges.

"Users will be willing to put up with [the ads] if advertisers make it free for them to do what they want to do on the phones," said Agency.com's Suh.