October 2007 - Mobile Marketing, Here & Now

Good news: Bigger things than you think are happening today in the United States. Bad news: The full-scale mobile revolution still has a wheel in the sand.

By Jack Gordon

A skeptic might be forgiven for seeing mobile marketing in the United States as the greatest new thing that is always just about to reveal its true potential-but never quite does.

From all sides come assurances that the entire e-commerce revolution is poised to leap from desktops and laptops to the mobile phone in the consumer’s pocket. Observe that this phone often is Internet- and camera-enabled. Then look at Japan. Right now, commuters in Tokyo can touch a few buttons on their mobile phones to pay automatically for train tickets and to buy sodas from vending machines. Using the phone’s camera, they point and click at quick response (QR) codes on billboards for instant access to mobile websites offering product information and digital discount coupons. If they want to go ahead and buy the product with the phone, they can do that, too (see “A Mobile Society” in Electronic Retailer’s April issue).

Well, hooray for Japan, the skeptic might say, but a casual look at mobile marketing in the U.S. might suggest that the only products being bought with cell phones are ring tones, wallpaper and games for the phones themselves. The same cursory look might lead one to conclude that the only people making money from text messaging are the phone carriers and maybe the producers of text-in television shows like “American Idol” and “Deal or No Deal.”

Then again, there was a time, not so long ago, when skeptics suspicious of dot.com hype pointed out that the only people who actually appeared to be making money on the Internet were pornographers.

Take a closer look at the mobile scene, suggests Laura Marriott, president of the Mobile Marketing Association (MMA), an industry trade group. It is true that the cell phone’s evolution into an e-commerce device is happening more slowly here than in Japan, South Korea or parts of Europe, she says. But while the dam hasn’t broken, some sizeable cracks suddenly are appearing. In just about any facet of mobile marketing that you care to examine-text messaging, the mobile web, video, live chat-”significant developments” are now underway, she says.

For instance, she points out, huge advertisers such as Proctor & Gamble and Coca-Cola, that only stuck their toes into the waters a few years ago, are spending millions of dollars in 2007 on mobile campaigns. Coke’s “Sprite Yard” initiative, launched in June, invites youthful cell users to join an “on-the-go community,” featuring text messaging, photo sharing, live chat and downloadable “mobisodes”-short animated videos.

The mobile web? Brian Stoller is vice president of marketing and strategic development for Third Screen Media, a Boston-based company that inserts banner ads (for the likes of IBM, American Express and Kraft Foods) into mobile web content from providers including USA Today and ESPN. “Two years ago,” Stoller says, “the average ad campaign for us was $10,000 to $20,000. Now our average is into six digits, and we have a few million-dollar-plus campaigns.”

The cell phone as an instant-purchasing device? ShopText Inc., a year-old New York company, now enables buying by text message. The ShopText logo, with a short code and keyword, can be placed into advertisements in magazines, newspapers, concert-hall posters, television programs, billboards-wherever.
According to ShopText CEO Steve Roberts, August campaigns in CosmoGirl, Lucky and Stuff magazines enabled a reader on a city bus, say, to buy a wide range of advertised products simply by texting the keyword in an ad to the short code and confirming the sale with a personal identification number. Billing arrangements, usually to a credit card, must be made with ShopText only once, by phone or web. Products sold in this manner to date have included the new Harry Potter novel released in July, a CD by singer Tim McGraw and tickets to music concerts at The Knitting Factory in New York and Los Angeles.

What about loyalty clubs, special product offers and such? SmartReply Inc. of Irvine, Calif., historically made its living by selling 35-second automated voice messages for advertisers to leave on consumers’ home (landline) answering machines. That still represents half of SmartReply’s business, says sales director Jonathan Starets, but the other half now comes from text-messaging services.

These opt-in campaigns are aimed at consumers who agree to receive text messages from specific retailers on their cell phones, just as they would ask to get e-mail notices or newsletters. Of SmartReply’s approximately 28 clients for the three-year-old text service, 20 have signed on within the past 18 months, Starets says. Longer-term clients include La Redoute, a French catalog retailer of women’s fashions and accessories.

Once or twice a month, opt-in customers get a text message that might alert them to a special bargain or invite them to enter a product giveaway contest. Partly because some cell phone plans charge up to about 15 cents apiece for text messages, “people are more selective about opting in with a phone than with e-mail,” Stoller says. That translates into a smaller list, but a more loyal and engaged one. “One or two text messages a month often get the same response as eight e-mails,” he claims. “And opt-out rates are a fraction of whatwe see with e-mail.”

On a more futuristic level, Starets says that SmartReply and at least one major retailer are now testing a product-locator service that lets store customers check inventory levels at all of the retailer’s outlets. Suppose that the store is out of something you want, or you’re at an outlet in Chicago but you’d rather buy the item at home in San Diego. With this new system, Starets says, you pull out your cell phone, call an 800 number, and enter the product’s SKU number and your zip code. “Our system calls the retailer’s inventory database, pulls up the five locations closest to your zip code, and tells you how many units are for sale in each store.”

All of those developments, from Proctor & Gamble’s ballooning mobile advertising budget to text-message sales of Harry Potter books, are new and “significant,” to use Marriott’s term. But why is it that here in America, this is avant-garde stuff? In Japan and South Korea, according to all reports, the mobile phone is a full-fledged Internet and e-commerce appliance; the Japanese use their phones to operate vending machines and to check the evening’s TV listings. In India and Romania-Romania!-cell users are downloading Disney-sponsored mobisodes starring Donald Duck.

For all of the progress made and the promising initiatives underway, Stoller admits, “For most people here in the U.S., the cell phone is still a phone.”

That isn’t to say that text messaging hasn’t caught on, especially with younger phone users. More than 90 percent of U.S. mobile phones are text enabled, and about 35 percent of mobile phone users actually employ the text function, according to Forrester Research.

It is really the mobile web that lags behind. eMarketer reports that 76 percent of Japanese mobile customers use their phones to browse the Internet. Here, the figure is only 12 percent.

Certainly the promise is there: According to ABI Research, mobile marketing will be responsible for $3 billion in spending this year and will grow to $19 billion by 2011. ABI also predicts that by 2011, advertisers will spend $9 billion on mobile video alone. But that’s still a promise.

The reason the mobile web is less advanced in the United States than elsewhere, sources agree, is, in a word, integration. If Japan leads the world in this area, it is not because the Japanese are more gadget-obsessed than Americans but mainly because the mobile web works better there. Consistent technology platforms, consistent high-speed Internet connections and standardized handset designs make for a situation in which marketers and application designers can create content to the same technical standards and-no small matter-consumers know how to operate the various functions on their phones.

Effective New Media Platforms Used by Marketers at U.S. B2B and B2C Companies, June 2007
(% of respondents in each group)
  B2B B2C
Own website 59% 51%
Webinars 54% 27%
E-mail marketing 44% 45%
SEO - organic 41% 50%
SEM - paid 41% 55%
Video-on-demand 26% 20%
Viral video 23% 32%
Podcasts 21% 13%
Blogs 17% 6%
Online ads 17% 33%
Mobile 15% 13%
Wiki 14% 27%
RSS feeds 14% 11%
Social networks 10% 36%
Second life 8% -

Note: includes responses of 8, 9 and 10 on a 10-point scale
Source: BtoB Magazine and Association of National Advertisers (ANA), “Harnessing the Power of New Media Platforms” conducted by Guideline, August 13, 2007

In the U.S., consumers can barely keep track of which payment plan they selected or when the additional charges start to kick in for using various features, never mind re-learning how to use each new handset. Slow connection speeds render the mobile web sluggish for most users, and multiple technology platforms make it difficult to design websites or applications that work properly regardless of a user’s handset or carrier.

Advertisers who want to go the mobile-web route in the U.S. thus are forced into workarounds. For instance, Toyota earlier this year launched a major mobile campaign for its FJ Cruiser vehicle. Phone users were invited to download video snippets, up to two minutes long, of a documentary featuring two racing teams that drove FJ Cruisers in an off-road endurance race last November on Mexico’s Baja Peninsula.
A spokesperson for the campaign told Adweek that Toyota was eyeing a potential audience of 40 million U.S. cell phone users with mobile Internet access. However, the spokesperson acknowledged, only 6 million of those users have phones capable of receiving the high-speed video portions. The rest could access still photos, banners, wallpaper and ring tones.

Sources all expect that Apple’s new iPhone will prove a major impetus in the development of the mobile web, simply because it is easy to use as an Internet device. “People in our industry say it has changed the way they interact with their phones,” says MMA’s Marriott. “I have a colleague who no longer takes his laptop home. He uses his iPhone to access e-mail and the Internet.”

However, even the iPhone underscores the fragmentation in the U.S. mobile-web market, since AT&T is its exclusive carrier. Single-carrier programs are “nice,” Marriott says, but the mobile web’s marketing potential depends ultimately on “carriers and brands adopting consistent standards across entire markets…so that one set of creative works across the whole industry.”

What applies to the mobile web as a whole pertains even more to the spread of technology such as quick response codes. Until industry standards are better established, don’t expect to see a lot of vending machines that respond to your camera phone. As Stoller puts it, what beverage maker wants to offend consumers who say, “Hey, I can’t buy your soda because I have Verizon, not Sprint?”

Jack Gordon is editor at large for Electronic Retailer magazine.


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