Handheld Devices Are Viewed As Home of Next Online Ad Wave

By Jennifer Rewick for the Wall Street Journal Interactive Division
February 4, 2000

Petri Rutanen has experienced the future of online advertising, and it isn't banner ads on a computer. Mr. Rutanen's online brokerage firm, eQ Online, of Finland, 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," says Mr. Rutanen, who is managing director at eQ Online. "As far as I'm concerned, we can put 100% of our advertising on mobile phones if that's what they're using."

Mr. Rutanen concedes 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 U.S. 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, chief executive of interactive ad agency Agency.com, based in New York, says 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," Mr. Suh says.

Motorola and Finland's Nokia 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 U.S. by the third quarter. Analysts estimate WAP phones will be the standard mobile phone by 2003 with 80 million users in the U.S., even though they currently cost between $500 and $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 "dot-coms" 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 electronic -- commerce sites.

"Users may want to make a stock purchase or check the status of their bid on eBay," the online auctioneer, says 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, which could begin managing ads on mobile phones later this year.

Content providers are figuring out how best to charge for these ads, that is, whether it should be a cost per impression or click-through, or collecting a percentage of sales. Initially, the price is expected to run between $30 and $100 per 1,000 impressions, compared with the $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," says Gordon Simpson, CEO of 24/7 Europe, a division of 24/7 Media, New York, that managed the Finnish company's ads on both short-message service 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. Many venture that advertisers will be willing to pick up the cost. 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 one cent and 50 cents an ad, which can be applied to airtime 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," suggests Mr. Suh of Agency.com.