Mobile Ads Many Years Away?

PARIS — Advertising on mobile phones has enormous potential to become a significant platform for marketers, but any breakthrough is years away and major operators must work together to succeed, executives said.

Mobile operators increasingly see advertising as a powerful offering, given falling traditional voice revenue, as it allows brands to target consumers based on their location and at times of the day when they are otherwise hard to reach.

Executives from advertising and telecoms groups told the Reuters Technology, Media and Telecoms summit that mobile advertising was inevitable and would become hard to resist.

But it was still at the experimental stage, and many brands and mobile operators were wary of alienating customers.

“It will be slow, it will take time but it will be there,” Maurice Levy, chairman and chief executive of advertising group Publicis, told the summit in Paris.

“Why? Because it will be in the interest of the phone companies, consumers and advertisers. So it will be very difficult to resist.”

Forecasts suggest the mobile ad market will generate revenue of $1 billion to $24 billion within the next four years. Many operators are experimenting with plans and one service, Blyk, has signed 100,000 clients in the United Kingdom with its offer of some free calls and text messages in return for accepting ads.

“If you look at the long horizon, I think that advertising on mobile phones is going to be very, very significant, simply because there are going to be 5 billion mobile phones and they are always with you,” Hamid Akhavan, the head of Germany’s T-Mobile, said.

Stumbling blocks

“There are people on this earth who in their life will never have a television or a laptop, but they will have a mobile phone. [So] thinking logically, there is no reason why mobile phones should not be the most powerful tool for advertisers.”

All participants agreed that many stumbling blocks existed.

Virgin Mobile U.S.A. (NYSE: VM) told the Reuters summit in New York that it would use AOL’s mobile advertising system exclusively to deliver banner ads to its customers who surf the Web on their phones. But they intended to approach the offering carefully.

“A cell phone is an intimate device,” Virgin Mobile U.S.A. CEO Dan Schulman said. “We pay a service provider to have that service, and we don’t want to be spammed, quite frankly.”

French mobile operator SFR said a market for mobile advertising would develop, and it had established a team to work on a business model but said its customers would have to opt in.

“People will have to agree to take this service,” SFR CEO Frank Esser said.

T-Mobile’s Akhavan saw mobile advertising being held back by the large number of different phones and their capabilities, meaning the inventory space for advertising was very fragmented.

“By the time you say how many countries you cover and what your share of the market is, how many people have that kind of phone and how many of them are interested in Nike, you end up with an inventory of 6,000,” he said.

“And are you going to go to Nike and waste their time over 6,000 potential customers?” Esser asked.

A cooperative model was likely the only way to succeed.

“So in Europe for instance all the big names have to work together, look at the inventory and try and figure out a way for us to share it in a very cooperative way and together go and pitch. That’s the only way it is going to work,” he said.

Akhavan said operators were starting to discuss this, but that it was not a top priority.

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