Study: Wireless Ad Sector to Boom in 2006

Wireless marketing is poised to become “the next big thing” — but only if the industry can surmount several pressing hurdles, according to a new study by marketing consultancy Frost & Sullivan.

Despite the industry’s current experimentation mode, expectations run high for mobile advertising’s potential. According to Frost analyst Allison Webb, advances in the area can eventually allow real-time monitoring, data exchange and targeting — creating a seamless, melding of mobile marketing, advertising, CRM and e-commerce.

“However, before wireless will be used as a mainstream marketing channel, a number of issues must be resolved,” said research analyst Allison Webb. “These include complementary technologies, next generation mobile networks, new wireless devices, privacy and data protection legislation, consumer acceptance, forms of wireless ads and pricing structures.”

The main issue hampering the industry is that wireless networks lack the technology that will afford high-bandwidth transactions and ad delivery, according to the study. The problematic rollout of third-generation (or 3G) networks is currently mobile marketing’s largest barrier to expansion — limiting the amount and quality of ads, content and transactions that can be performed with mobile devices.

Additionally, Frost & Sullivan says carriers, marketers and consumer advocates are leery of how privacy controls will function in wireless advertising.

Clearly, overcoming these problems is no mean feat. The expansion of 3G in the U.S. and elsewhere is contingent on cooperation between industry players and governments’ spectrum and telecom regulators. Meanwhile, legislators, marketing industry critics and Web ad players have yet to come to any hard-and-fast consensus on Internet marketing, let alone standards for emerging media like wireless.

But according to the report, once those obstacles are surmounted, 3G’s higher bandwidth potential will let advertisers distribute rich media campaigns that can boost branding efforts, as well as track and target users in real-time.

Moreover, Frost analysts say the new medium stands to become a sustainable revenue generator, with network operators, advertisers, technology providers, service providers and consumers standing to cash in and/or recoup costs from 3G once it takes off.

“3G network technology and devices will have to be reliable, with a critical mass of subscribers for advertisers and big brands to devote a significant amount of their budgets to the wireless channel,” Webb said.

According to Frost & Sullivan, that’s going to start happening in four to five years. By what it said are conservative estimates, the firm said it sees the potential for 37 billion wireless advertisements and alerts to be sent in Western Europe in 2006 — amounting to about $12 billion in ad spending.

The new technology “will help enable network operators and advertisers to deliver more interactive, compelling and emotionalizing campaigns and alerts to subscribers when, where and how is most convenient,” Webb said.

Specifically, Frost & Sullivan says revenues from wireless banner ads in Western European will rise from $51.48 million in 2001 to $464.7 million in 2006. During the same time frame, wireless interactive alerts will see a huge growth spurt, leaping from $102.9 million to $7.43 billion.

Frost analysts also said that that 65 percent of wireless subscribers would be willing to accept these sorts of marketing messages by 2006. The reason? Once 3G networks are in place, targeting and rich media will make marketing both extremely relevant and valuable for the average consumer.

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