Cellphone ads bring wariness all around
By Peter J. Howe, Globe Staff  |  October 20, 2004

Greater Boston wireless subscribers who use their cellphones to look up weather reports or entertainment sites may see something unusual this week: an ad offering a 99-cent latte at Dunkin' Donuts.

The promotion, similar to a standard Web page banner ad reformatted for a tiny cellphone screen, represents one of the latest forays into what marketing specialists think -- but privacy advocates fear -- could be an enormous new advertising market.

To marketers, 160 million Americans carrying cellphones means 160 million people they can reach with personalized, interactive advertisements whose effectiveness they can instantly measure by checking how many people click on them. An important bonus for advertisers is they literally have a consumer's number for future text messages, even though federal law bans wireless telemarketing calls and wireless spam.

Cellphone owners are less enthusiastic. "It just seems like a really stupid idea and a total invasion of privacy," said Cindy Gallagher, 41, an Arlington mother of three. "My cellphone is for people I want to be able to contact and to contact me. The purpose is not to get a free doughnut."

Erik M. Klaver, 37, of Somerset, a graphic designer, said as someone who helps develop advertising materials: "I understand why marketers want to do this. But as a consumer, I would run away from it as fast as I could." Klaver said he fears inviting massive spam on his cellphone, and "I already delete enough e-mail to fill my basement."

The campaign being run by Dunkin' Donuts, which is owned by Allied Dome PLC, is not spam. It offers a one-line promotion on the screen when people use their phones to visit any one of about 10 special wireless websites that give weather forecasts or quick entertainment headlines and services. Because only people who opt in by clicking on the ad get the offer, it is not unsolicited e-mail, or spam.

Dunkin' is following Sony Entertainment, which promoted "Spider-Man 2" heavily on Sprint PCS, and Procter & Gamble Co., which is offering a package of ring tones, pictures, and entertainment to promote Herbal Essence shampoo.

"You have a lot of people dipping their toe in the water, but you don't see a lot of brands spending a lot of money yet," said Mark Lowenstein, managing director of Mobile Ecosystem, a Wellesley wireless market analysis firm. "We're still feeling our way through issues like people's level of tolerance for screen clutter. Advertisers, though, are salivating at the sheer potential because of the numbers."

Many businesses that launched splashy wireless advertising campaigns over the past two years have quietly shut them down or have been slow to pursue second or third rounds of wireless promotions. The Cambridgeside Galleria, for example, in 2002 began offering a service letting shoppers with cellphones sign up to get coupons -- sent as text messages to the handset -- for mall stores. But it pulled the plug within a year after interest dwindled.

One possible reason for the slow start is that advertisers are proceeding cautiously. Because cellphones are still spam free, marketers are worried that aggressive cellphone advertising campaigns could cause a consumer revolt, possibly leading to legislative action that would preemptively shut down the industry.

Still, many industry leaders are convinced wireless marketing has major potential. Lawrence Weber, a longtime Boston marketing and public relations guru who served as chairman of the advanced marketing services unit at advertising giant Interpublic, now heads a Waltham start-up called ThirdScreen Media, which is running the Dunkin' Donuts latte campaign.

The company's name reflects the vision of Weber and chief executive Tom Burgess that cellphones are poised to become the "third screen" for advertising alongside television and personal computers. "There's a generation coming of age that will never have known a landline telephone," Weber said. "Marketers are going to have to go there."

Ruth Swanson, Dunkin's marketing manager for sales promotions, said the chain decided to test wireless marketing as a key way to reach young adults. "We don't want to be in their face. Those that choose not to respond, we're not bothering them," Swanson said.

Swanson added that the doughnut-shop chain was impressed that 3 percent or more of the 25,000 people who saw the ads during a trial this month responded to the offer. By showing a person at a Dunkin' Donuts counter the text message on the phone, with its unique numeric code, the customer could get 80 cents off a latte.

The cost of producing these cellphone ads is minimal; the major challenge and expense comes in working with the new wireless websites and the complicated carrier networks. But, Swanson said, "we still have to evaluate the results" to decide whether to continue and expand mobile marketing.

Eric Kristoff, a 32-year-old website developer from Leominster, said his willingness to see ads on his phone would depend heavily on how good a deal he stood to get. "If it was just a simple link on the bottom of the screen, not something that would block me from getting to where I was going, maybe it would be OK," Kristoff said. "But it would have to be at least half off the price of a latte."

Industry analysts estimate nearly 80 percent of American cellphone owners carry models that can receive text messages of up to 160 characters in length. About one-quarter of all US cellphones in service can also receive multimedia messages with images and sound.

With nearly 10 million units in service nationally, camera cellphones also open up new advertising possibilities. Mobot, a Waltham start-up, has begun offering a promotion to readers of Jane magazine letting them take pictures of ads in the magazine, including the upcoming December issue, and e-mail them to enter sweepstakes and get free product samples and other goodies.

Industry leaders attending a recent "Mobile Marketing Roadshow" in Boston uniformly insisted they will refuse to get involved in wireless spam, which they consider economically suicidal for the fledgling market. "Network operators are very concerned about the lessons they've learned from e-mail," said Jay Emmet, president of US operations for mBlox, a European company with offices in Sunnyvale, Calif., that handles back-office processing of text messages. "What we don't want is to turn short messaging into one more thing that people turn off because they can't stand it."

Lowenstein agreed marketers are wise to proceed very slowly and carefully. "Any minor screw-up at this point will be magnified, because a mobile device is a very personal device," Lowenstein said.

"Any serious misstep by the industry would usher in a wave of rules that they don't want."

Peter J. Howe can be reached at [email protected].