Technology helps reinvent cell phone ads

SINGAPORE - Mobile phones are a potential gold mine for advertisers, the most
personal and intimate way to communicate and engage with subscribers — more than 2 billion of them and counting worldwide. Yet the advertisers' two-liner text pitches have largely fueled a growing hate club, with recipients quickly equating the messages with spam they abhor on desktops.
Now, thanks to improved technologies, advertisers believe they have struck upon the formula for getting their messages across without irking consumers. The development is important given the mobile handset's promise to be a "third screen" — after the television and the desktop computer.

Several blue-chip brands like Nokia Corp. and McDonald's Corp. have been experimenting with interactive ads on cell phones, taking advantage of the device's ability to know where you are. Customers have the option of finding the nearest retail or restaurant outlet with the press of a key.

Others partner with search engines and e-mail services to slip in an ad or two, similar to how Google has mastered the use of e-mail and search keywords on the desktop to help determine which topics users find interesting and, in turn, what ads appear.

Better handsets and faster networks mean "more brands utilizing mobile devices for more advanced marketing and advertising initiatives," said Laura Marriott, executive director of the Denver-based industry trade group Mobile Marketing Association.

The search-based advertising model seems to be working in Japan — a mature mobile phone market where the bulk of the 98 million mobile phone users have phones with Internet capabilities.

Japan's mobile advertising expenditures is expected to reach $1 billion by 2011 — more than three times the $328 million last year, according to an April report from media and communication think tank Dentsu Communication Institute Inc.

Although subscribers had felt they were wasting their time and money going through ads while conducting searches on their phones, those concerns have diminished with faster speeds and flat-rate pricing for Web access, said Akira Miwa, the report's author.

Yahoo Inc. took the plunge in June with a mapping service that combines search and location-based mobile technology. All one has to do is to enter a keyword to search, and advertisers registered on Yahoo's database pop up on a digital map.

The advertising industry is mindful of earlier mistakes, including inundating consumers with pop-up ads on the desktop and text messages on the phone.

Many agree that preserving a good customer experience is critical.

"Push marketing and spam have a very short shelf life," said Frank Brown, director of the mobile marketing and technology firm Sydus.

People need to feel, Brown said, that they had specifically invited the pitch or are engaging with the brand in a relevant and entertaining way.

Rebecca Ye, a 22-year-old Singaporean, said she wouldn't mind having ads sent to her phone as long as she had subscribed for them, like "a notification on upcoming sales."

"Let's say you're on the train and you get a message telling you something's going on somewhere you can just drop by," she said. "So it's very targeted and purposeful."

MobileOne, Singapore's second largest mobile communications provider, promises to cater only to the "willing customer."

Subscribers can choose to receive offers, free news headlines and advanced functions with an interactive ad-based text messaging service, but if a customer declines, "he continues to send and receive (text messages) the way he does today," Chief Executive Neil Montefiore said. "It is completely under the control of the customer."

Wireless carriers, meanwhile, are starting to loosen restrictions on third-party ads, which they had resisted for fear annoyed customers might defect to competitors. Until now, most mobile ads are found on content producers' own Web sites, which are accessed through a mobile browser rather than through the carrier's cell phone menu.

Yum Brands Inc.'s Pizza Hut and KFC are among the first to advertise through a free, ad-based e-mail service from Southeast Asia's largest operator, SingTel.

"Our customers are fully aware that they will be receiving the ads, and from our initial findings, they aren't disturbed by them at all," SingTel spokeswoman Tricia Lee said. "We also found that a relatively large segment of customers are willing to try mobile advertising provided they receive something in return."

Analysts say slowing revenue growth and saturation in developed markets have forced wireless carriers to reconsider — good news for advertisers that want to target specific groups. After all, the carriers have the key to a treasure cove of customer demographics — where they live, their age and what games they play on their phone.

"Carriers today are now focusing on targeted advertising and personalization capabilities," said King Yew Foong, research director of Gartner Singapore. "The crucial point is whether carriers understand their customers well enough to execute this flawlessly. They will have to develop better customer intimacy."

The risks are high if they don't do it right.

"Consumer aversion to such advertisements in the past is due to the fact that they were irrelevant to the recipients," King said.

To mitigate the risks, Korean and Japanese companies that have allowed advertising have also put in place spam filters.

The Mobile Marketing Association has set up guidelines that include letting consumers decline to receive ads and ensuring that information advertisers obtain from customers be kept confidential.

"So because of that, spam will be less of an issue," MMA's Marriott said.

Brands themselves are also learning to be more subtle with its mobile campaigns, tapping on to a trend where youths in Asia are increasingly turning to their phones rather than an iPod for on-the-go entertainment.

Bacardi Ltd., the company best known for its top-selling rum, recently extended its yearlong partnership with Sydus to stream music to cell phones through a virtual radio "brand-channel." The company hopes to connect with a younger audience that way — without overt advertising.

It may take time, though, for mobile ads to gain better esteem among consumers. Some parts of Asia have yet to embrace the third-generation, or 3G, phones that can carry multimedia ads. Handset technology and network signals differ among mobile carriers and countries, forcing advertisers to cater only to the tech-savvy group.

But it's only a matter of time before mobile networks improve — and the mobile ads follow. The key is to avoid simply importing techniques from television and the desktop.

"We should all by now (know) that doing boring TV ads aren't much appreciated," Craig Davis, worldwide chief creative officer of New York-based advertising agency JWT, said during a recent visit to Singapore. "Doing annoying things is no way to seduce people that your brand is for them."

Consumers urged to pick new DVD format

LOS ANGELES - People who own an HD DVD player can forget about watching "Spider-Man 3" in high definition when it goes on sale during the holiday season. The movie from Sony Pictures will only be available in the Blu-ray DVD format. Likewise, people with Blu-ray players won't be able to enjoy the action-thriller "The Bourne Ultimatum," which Universal Pictures will release only in HD DVD.

These exclusive arrangements, plus aggressive price cuts for high-def DVD players, are designed to persuade consumers to finally embrace one format or the other.

But analysts wonder if the moves will anger consumers, just as the studios and consumer-electronics companies are hoping to boost high-def DVD sales as growth in standard DVDs stalls.

"The frustration for consumers is not knowing what format is going to win," said Chris Roden, an analyst at Parks Associates.

Consumers, many of whom are still smarting from the VCR format battle between VHS and Betamax, need to know their expensive equipment won't become obsolete if the competing format wins, said Steven J. Caldero, chief operating officer of Ken Crane's, specialty electronics chain in Southern California.

"People are still frustrated there is a format war to begin with," he said. "The studios are making people choose. What consumers want is something that will play everything so they don't have to choose."

Until recently, many consumers were able to defer the choice because players have been so expensive. But prices have been slashed by about half — Sony Corp.'s Blu-ray player now sells for $499 and Toshiba Corp.'s cheapest HD DVD player sells for $299, with both likely to include as many as five free movies as an incentive. (Players that read both formats remain expensive.)

Both sides are also releasing blockbuster titles such as the new "Pirates of the Caribbean" movie aimed squarely at the demographic most likely to upgrade to high-def.

The stakes couldn't be higher for Hollywood, which has seen sales of traditional DVDs, once a reliable profit engine, slow to a trickle. Direct digital delivery online, while promising, is still years away from profitability because current Internet capacity simply can't handle the enormous high-definition files.

Yet consumers remain profoundly confused by the two formats, both of which deliver crisp, clear pictures and sound but are completely incompatible with each other and do not play on older DVD players. Many haven't even heard of either format.

HD DVD, developed by Toshiba and backed by powerful companies like Microsoft, has the lead in standalone players sold because they are cheaper and hit the market first.

In the United States, standalone HD DVD players have 61 percent market share, while Blu-ray players have 36 percent share and the few dual-format players have a 3 percent share, according to market research company The NPD Group Inc.

But Blu-ray, backed by Sony and a majority of Hollywood studios, got a big boost when Sony introduced its PlayStation 3 game console, which comes standard with a Blu-ray drive. Counting those machines, there are more Blu-ray players out there.

Although Microsoft's Xbox 360 can play HD DVD movies, the drive has to be bought separately. Only 160,000 drives have been sold so far, compared with 1.5 million PS3 consoles, according to NPD.

In terms of discs sold, Blu-ray has always had the lead. Time Warner Inc.'s Warner Bros. and Viacom Inc.'s Paramount Pictures release movies in both formats, and in such cases Blu-ray has outsold HD DVD by nearly 2-to-1.

Blu-Ray is getting an even bigger boost as Blockbuster Inc. announced it would stock only Blu-ray titles when it expands its high-def DVD offerings this year. Target Inc., the nation's second-largest retailer, said it will only sell Blu-ray DVD players in its stores in the fourth quarter.

Sony Pictures, News Corp.'s Twentieth Century Fox, The Walt Disney Co., and Metro-Goldwyn-Mayer are releasing only in Blu-ray. Universal, owned by General Electric Co., is the only major studio to back HD DVD exclusively.

Nonetheless, Warner Bros. believes both formats can coexist and has been urging Blu-ray backers to begin supporting HD DVD as well. The studio has developed a dual-format disc and has said it would license the technology to other studios willing to back both.

"The fourth quarter is critical for the formats to show growth and momentum," said Steve Nickerson, Warner Home Video's senior vice president of marketing. "It's more than about winning or losing. If you can continue to show growth (in both formats), that's a positive in a situation where standard DVD sales aren't growing."

To counter Blu-ray's recent gains, the HD DVD camp is planning an advertising campaign touting the interactive elements of the format, which allow users to connect to the Internet to download special features.

"This is not about a high-def movie on a disc," said Craig Kornblau, president of Universal Studios Home Entertainment. "It's about a fully immersive experience, connected interactivity. That's what is going to separate these high-def formats."

Kornblau said he isn't worried about Blu-ray's momentum and doesn't believe there's a need for one to knockout the other.

"To call this market nascent is to a degree to pay it a complement," he said. "The people who have bought so far aren't early adopters, they are early, early adopters."

Analysts said even lower prices for players could be the key to determining a format winner. Some believe that until prices hit the $200 range, consumers simply won't upgrade from their current machines, many of which cost less than $100.

Chinese-made HD DVD players selling for $199 are expected to hit store shelves by December, while Sony is widely expected to cut the cost of its Blu-ray machine to as low as $299 by year's end.

"When that occurs, the studios and Sony are going to pull out the big guns," said Phillip Swann, president of the technology-oriented Web site TVpredictions.com. "They are going to release more titles, big titles, and really go for the kill this holiday season."