Marketers Gearing Up For Mobile Spam

Because they fit easily inside purses and pockets – and people carry them wherever they go – cell phones are every marketer's dream: closer than email, more personal than TV commercials.

So it's only natural, then, that pitchmen are dreaming up ways to hawk their wares – everything from music to Big Macs to contact lenses – over the tiny screens of mobile phones. Add a dash of the global positioning system, which soon will reach every phone, and companies have the power to target individuals at specific times and locations, say, right when they pass a certain restaurant at lunchtime.

But it's probably nine months to a year before ads start popping up on cell phones. Nihal Mehta, founder and chief executive of Ipsh, a San Francisco mobile marketing company, thinks it will take that long for such brands as McDonalds and Procter & Gamble to build databases of a half-million or a million mobile phone numbers. They acquire them from willing consumers, who type in a five-digit word or number known as a "short code" that acts like a URL on the Internet, and send it as an SMS message to the advertiser, who responds with a sweepstakes offer, free ring tone or coupon.

Ipsh has run 400 ad campaigns like these since 2001 for British Airways, Budweiser, Dunkin' Donuts, Kellogg's, HBO, Reebok, Universal Pictures and others, who spent $5,000 or less four years ago but now as much as $150,000 for a single campaign. One of the company's largest deals was for Starburst, which put the short code "juicy" on millions of packs and is giving away a wide-screen TV. The contest, launched April 1, lasts till the end of the year, three times longer than the typical campaign. Both McDonalds and Johnson & Johnson have campaigns planned for this summer that will include TV commercials to promote a short code.

"We're finally seeing a significant tipping point," Mehta says. "People aren't just testing it anymore, they're starting to see return on investment."His biggest piece of advice for advertisers: Don't send a message more than once a week. "We've advised [our customers] not to send stupid messages to consumers like ‘Ronald McDonald says hi.' If it's not really compelling or not giving the customer something interesting (like a sweepstakes offer or a free ring tone or wallpaper) then a text message is useless."

For proof that consumers are happy, he points to the fact that across all Ipsh campaigns, only 1 percent of subscribers removed their names. The percentage of text message pitches that are read, and lead to sales, far surpass email pitches. Nearly one-fourth of the SMS alerts about movie premieres that link to Fandango.com lead to ticket sales, Mehta says.

But Mehta acknowledges that some carriers are spamming their customers, and that's provoking discontent. For the shape of things to come, look to Europe, where more people use cell phones and send text messages than in the United States – and the results have not been pleasant. In a study by a Swiss university and the International Telecommunication Union released last February, more than 80 percent of mobile phone users polled said they had received text-message spam and blamed operators; an equal number of industry representatives believed the issue would be critical within two years.

Here at home, JupiterResearch surveyed U.S. online consumers and found that already, 10 percent have been annoyed by text-message spam. Nearly the same number said they had received SMS pitches that they wanted. Jupiter estimates total U.S. wireless subscribers will grow from 184 million today to 212 million by 2009; SMS users will jump from 60 million to 93 million in the same period.

"SMS is the most broadly available and used wireless data technology today, but adoption overall has been low," Julie Ask, the JupiterResearch analyst wrote in the mobile marketing report published July 14. She does not believe that will change in the next five years, regardless of the multimedia features on phones. "The majority of online adults is not interested in receiving promotions via SMS, even if they receive free or discounted goods and services, are assured that their privacy will be protected and don't have to pay for the messages," she wrote.Jim Manis, the global chairman of the Mobile Marketing Association, an industry trade group, insists the fear of mobile spam is unfounded because access to U.S. carrier networks is much more restricted than in Europe, which has hundreds of access points, making it harder to thwart spammers. There are only 10 such points in the United States, and aggregators – companies like MBlox and M-Qube, where Manis is a senior vice president – have greater control over the content that moves across the network.

Manis and Mehta both vow that U.S. carriers are serious about filtering spam and the strict regulatory process they've put in place will prevent results like in Europe. To launch a mobile marketing campaign, Manis explains, a company must file a brief with an aggregator explaining the message, short code, how it will be promoted and expected volume of response. The aggregator and the carrier, after a review, must approve it before a short code is authorized and made live.

Manis believes that ads on phones, when they do appear, will not be via SMS but WAP. "Advertisers will want a richer format," he says about an issue the industry still needs to settle. But that doesn't bode well for the industry, since even fewer people today use WAP than text messages.

Ask, the Jupiter analyst, estimates that about 18 million wireless subscribers use the WAP browser, with one-half of them accessing the technology once a week or less. "The opportunity is not large today, but it is one that is growing and effective for targeted campaigns" toward 18-24 year olds, three-quarters of whom have used SMS and one-third of whom have paid for a ring tone, she wrote in her report.