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Source: Business 2.0

Posted on June 4, 2001

      There is tremendous buzz in the marketing industry regarding the burgeoning wireless medium and its promise as a new marketing channel. Forrester predicts that consumer spending via mobile devices will reach $3.8 billion by 2003; and this, coupled with an estimated U.S. audience of more than 128 million mobile consumers by the end of this year, has advertisers migrating toward the space.

      Since wireless advertising is still a nascent industry, there are widely divergent estimates of the spending advertisers will dedicate to the space. The Strategis Group forecasts $3.9 billion in revenue for location-based wireless advertising alone in North America by 2004, and the Yankee Group predicts a hefty $6 billion wireless ad market in 2005. Both figures are considerably higher than Forrester's wireless-ad-spending projection of $891 million, and Jupiter's forecast of $700 million, for the same period.

      Unlike on the Internet today, where banner advertising commands the lion's share of marketers' energy and budgets, advertising on wireless platforms will need to focus more on direct wireless marketing--the email marketing equivalent of the wireless environment.

      Direct wireless marketing involves the delivery of permission-based marketing offers and content, in various formats, directly to wireless devices, such as cell phones, personal digital assistants (PDAs), wireless Internet-enabled phones, and two-way pagers. These messages, as in house-list email marketing, are "pushed" to individual customers by request rather than being set up as "pull" advertising, in which a message is displayed to a broad, passive audience in an attempt to elicit a response.

      Studies conducted by a Jupiter, Ericsson, Accenture, SkyGo, and others have shown that the majority of wireless subscribers are willing to receive such offers and messages on their devices if the content is permission-based and contextually relevant to the mobile environment. For example, a study by Jupiter Media Metrix showed that 54 percent of consumers with wireless phones and PDAs were willing to accept advertising of some sort on their device. However, the study further noted that consumers are likely to ignore and perhaps resent marketing messages that do not provide time- or location-sensitive relevance.

      Marketers must be aware of the unique needs of the mobile consumer, understanding that the nature of the mobile environment means that the consumer is likely in transit and focused on something other than taking in advertisements or making purchases.

      Most studies on the medium seem to indicate that the demand from wireless consumers for contextually relevant marketing messages, delivered on a foundation of permission, will result in a higher percentage of the overall wireless marketing budget being spent on permission-based "push" marketing than the Internet advertising market is currently achieving.

      The key to wireless marketing will be for the advertiser to gain permission from the consumer. Because of the personal nature of a wireless device, and the often busy environment in which the device is used, consumers may not be as receptive to the idea of responding to banner-like advertising or to giving out their contact information to third parties. Also, list brokers may find the mobile audience reluctant to share contact information for future solicitation.

      In the absence of direct data, one could estimate spending on direct wireless marketing by using Forrester's conservative yearly projections for overall wireless advertising and current push versus pull advertising spending ratios. Assuming that marketers allocate 50 percent more of their overall wireless marketing budgets to push messaging--or direct wireless marketing--than is currently done on the Internet, it would indicate that marketers will spend $115.7 million in 2003, $317.3 million in 2004, and $651.6 million of their overall wireless advertising budgets on push by 2005.

      The market will likely spend the majority of this sum on two types of direct wireless messaging--batch messaging and ongoing message tracks. With batch messaging, the marketer delivers a single, specific message to an audience, while ongoing message tracks serve as perpetual, rules-based, event-driven systems to deliver a message to an individual based on established criteria. For example, an ongoing message track set up by an online auction could automatically send wireless alerts to any customers who had bid on an item and the bid was later outdone by another auction customer, allowing the user to go back and rebid. This would serve the customer by providing crucial, time-sensitive information, and it would serve the marketer by generating more frequent bids and higher bid prices.

      Ultimately, marketers will need to use the wireless medium as a permission-based channel to deliver relevant, time-sensitive, and location-based information or offers to their mobile customers. This approach will result in a valuable offering for consumers and the greatest return on investment for the marketer.

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