The Mobile Marketing Revolution

| FROM THE PRINT EDITION |
 
 

Recent passengers on Alaska Airlines flights may have noticed, as they picked up their drink from their tray table, the in-flight napkin inviting them to send a text message to a certain number in order to receive flash alerts about airfare discounts.

This program has proved to be an effective tool for the airline. Each time a competitor offers deeply discounted fares on one of Alaska’s routes, Alaska can now quickly respond by sending a text message offering an even better discount.

If Alaska Airlines sent out an e-mail with the same discount offer, it might be trapped in a spam filter or ignored for days, says Ivan Braiker, CEO of Kirkland-based mobile marketing firm HipCricket, which orchestrated the Alaska Airlines campaign. But Braiker says customers react differently when messages are routed to cell phones, opening 97 percent of them within four minutes.

Alaska’s marketing effort, which combines old-world napkin advertising with the power and immediacy of mobile marketing, is just one example of the extent to which the mobile phone has emerged as a potent sales weapon.

Indeed, it may well be the most powerful marketing device ever invented. The smartphone is always at hand, contains a camera that can double as a scanner, can pinpoint the user’s exact location and can double as an electronic wallet.

The power of the device is already transforming the advertising and marketing landscape. And while virtually every advertising and marketing firm boasts of its ability to add mobile elements to any advertising campaign, firms that have special expertise in the mobile arena may have the edge.

“When we talk to national companies like MillerCoors they say they want one company at the table representing mobile,” says Jeff Hasen, HipCricket’s chief marketing officer. “We intend to be that company.”

Ubiquity Plus Intimacy

Illustration by Mark Brewer

The power of the mobile phone begins with its ubiquity. Today, there are already many more mobile phones in the world than computers. And the number of mobile devices worldwide capable of accessing the internet is expected to more than double to over 1 billion by 2013.

But what really makes the device so powerful is its massive computing and communications capability, combined with its ease of use, its indispensability and its intimate connection to its user.

“Next to my wife, my most intimate relationship is with my [mobile] phone,” says Nic Wildeman, founder of Bellevue-based Lionfish Creative, a strategic marketing company. “It charges next to my bed and it’s the first thing I reach for in the morning. It’s my tether to the office and my kids. If we are going to reach people where they have the fewest barriers, it will happen through this product in our pockets.” The mobile phone, he says, should have a significant place in any marketing or advertising campaign.

It’s not surprising, then, that analysts project rocketing growth for mobile marketing. Market researcher BIA/Kelsey says the market, which includes mobile search ads, display ads inside running apps and commercial text messaging, was worth $491 million in 2009, and will grow 43 percent a year to reach $2.9 billion in 2014. When purchases over mobile are included, other estimates suggest revenues totaled $2.5 billion in 2010.

Those forecasts may underestimate the scale of the changes in store. Since online advertising first took off, the field has undergone dramatic shifts. In the era of the online portal, Yahoo dominated with its many websites popular for display ads. When search trumped as an advertising vehicle, Google rose to prominence. Now, in the mobile age, every major player is battling for dominance, including Facebook, Google, Microsoft, Amazon.com and Twitter. But there is also an army of innovators, entrepreneurs, venture capitalists, business strategists and developers betting on the space.

“People don’t understand how big the mobile audience is and how much time consumers spend on their phones,” says Thomas Huseby, managing partner of SeaPoint Ventures, a Seattle-based venture capital company that focuses on the mobile market. He’s so optimistic about the growth potential for mobile marketing that he’s invested in three local businesses focused on the sector: Ground Truth, which is emerging as one of the dominant suppliers of market data about mobile phone use; Zumobi, which develops free applications for large content providers (such as MSNBC) that use the company’s own proprietary system for placing advertising in the content; and SinglePoint, which pairs advertisements with appropriate text messages. “You have to know how to develop apps that make content sing on a phone,” Huseby says. But equally important, he adds, “You have to invent new ways to get ads into apps.”

As with past tectonic shifts, it’s far from clear who will remain standing. What is clear is that the companies that gain the upper hand in this battle will also have the best shot at the marketing dollars sure to follow. For businesses across the spectrum, the wireless web is a must-win game changer and the game is on.

Putting it in Text

One of the most significant features of the cell phone today is its simplest feature—texting, the preferred method of communication for tens of millions of young people. The use of texting as a form of mass marketing probably started in 2003 when AT&T sponsored American Idol. Millions of viewers tuned in to the talent show and voted for contestants by texting designated numbers. In those days, mostly teens texted. But a funny thing happened: Adults embraced and extended the trend. The average age of texters is now approaching 40.

Marketers noticed. All those people staring into their hand-held screens as they walk, drive or pedal down the sidewalk, street or trail are potential customers. More and more companies have sought to exploit the opportunity: pro sports franchises, political campaigns, radio stations and even local restaurants.

Thanks to the presence of companies like McCaw Cellular, AT&T Wireless and T-Mobile, the Seattle area has a strong wireless technology base, with an impressive concentration of software developers familiar with the wireless world and a large population of tech-savvy consumers near at hand. So it was natural that dynamic mobile marketing companies would develop here as well.

“This really is the hub of the mobile world. Thank you, Craig McCaw,” says HipCricket’s Braiker. “The McCaw DNA is pervasive here.”

Elegantly named after a British slang term for hip-hugging, chirping cell phones, HipCricket offers a platform that allows customers to set up advertising campaigns and monitor them in real time.

“We think mobile is all about one underlying goal that any client should have; it’s all about engagement,” Braiker says. “There’s no better way to build tribes than around mobile. What device is it that you have with you, no farther than three feet away, 24 hours a day?”

Braiker owned and operated radio stations for many years, and that’s how he got his foot in the door. HipCricket’s first client, Seattle’s KUBE 93, a Clear Channel Communications station, helped propel the startup.

KUBE exploits the HipCricket platform to interact with its audience in a variety of ways. A top five songs at 5 p.m. promotion allows listeners to vote via text. Listeners can communicate with disc jockeys live on the air by texting them. KUBE sends loyal members special event notices—lineups for concerts—before they are announced over the air. Text “now playing” to 97373 and KUBE will respond by sending back the last three songs the station played.

Texting neatly dovetails with the radio station’s social media promotions, says Gus Swanson, director of interactive marketing for Clear Channel’s Seattle radio stations. Three stations in the region deploy HipCricket, and about 75,000 people have opted in to each of their texting programs.

“It’s nice to have the revenue stream with our [advertising] clients, but more importantly, we want more engagement with more listeners more frequently,” Swanson says. “We are pushing this technology to encourage listening to the radio station more frequently.”

When former Seahawks head coach Mike Holmgren calls a sports talk show, KJR alerts fans to tune in. “We can get that message out in a couple of minutes,” Swanson says. Another campaign informed listeners they could get a text-based coupon for a free quarter pounder with cheese at any McDonald’s in six western Washington counties if they texted QPC during a 15-minute window. Thousands responded.

A Different User Experience

Doesn’t all this texting annoy customers? Aren’t most people busy with more important matters? While mobile represents a huge opportunity, mobile advertising will have to strike the right chord with users, says Monica Harrington, chief marketing officer at Intersect, a new Seattle-based social networking company that asks customers to share stories, often by mobile phone, that are then linked based on time and place.

“If people aren’t thoughtful about it, the whole experience of trying to push advertising out to mobile has the potential to be no more welcome than a telemarketing call,” Harrington says. “We tolerated telemarketing calls for a long time. But now we don’t have to tolerate things that we don’t like. There are too many choices.”

Backers of mobile marketing agree that text messages sent to random recipients are likely to alienate customers even more than spam or telemarketing. Since smartphones have become such an extension of the individual, such mindless marketing would feel even more like an invasion of privacy.

But the most effective campaigns only pursue customers who have expressed an interest in the product being offered.

“The great thing is [that customers who receive the texts] have opted in,” says Clear Channel’s Swanson. “They have asked for the information. A small number of individuals unsubscribe, but only a handful.”

If reaching customers who have opted in is one way to make sure the message is targeted at the right individual, another way to cut through the clutter is to develop applications that take advantage of the phone’s geo-locating capabilities. Once activated, that application can inform users when they’re near a retailer, which may recognize them and send a discount, special or freebie. These can be used for apps that include maps, search, social networking or geographically targeted advertising.

“Some people are willing to give up their location for an offer,” says HipCricket’s Hasen. One beneficiary of this feature is the burgeoning business of providing online discount coupons. The potential power of the sector became apparent in December when Google reportedly offered $6 billion to acquire Groupon, the largest company in the sector, but was turned away. Just days later, Amazon.com, which bought Carrollton, Texas-based deal-of-the-day site Woot last summer, announced that it would invest $175 million for a share of LivingSocial, the second largest group buying company.

Seattle’s Tippr, which is the third largest group buying company, is a rapidly growing player in that market with 50 employees in December and plans to hire another 30. The company offers its customers discount coupons—which can be displayed on a smartphone screen—for popular restaurants, bars, salons, retail, fitness centers and entertainment venues.

“Today, people spend maybe $1,000 a year on online commerce,” says Martin Tobias, Tippr’s CEO. “The rest of their spending is in the local, brick-and-mortar economy. The opportunity to help customers with all of those purchases is the trillion dollar market enabled by mobile.”

Tippr recently signed a partnership agreement with Yahoo, and Tobias says that soon customers using Yahoo maps as they walk down the street will likely see deals popping up from stores around them based on their physical location. Eventually, merchants may be able to offer discounts in real time based on how many seats they have available in their restaurant at any given time or how much inventory they have in the store.

But before that happens, Tobias says, large companies like Google and Microsoft will have to create a massive infrastructure that signs up most merchants and allows them to offer such deals instantly. The huge mobile potential for the services may be one reason Google and Amazon.com want to invest in the market.

What’s still unclear is how important a role Microsoft will play in mobile marketing. With the introduction of the new Windows Phone 7 operating system, the company is finally offering a product that can compete for market share with iPhones and Androids. And Microsoft argues it has a powerful marketing platform when it combines the new phone platform with such mobile properties as Bing, MSN Mobile, Windows Live Messenger and Microsoft adCenter.

Microsoft’s advertising offerings include many mobile solutions including mobile display for banners, text, rich media and video. The software giant has forged mobile advertising partner deals with Verizon and Fox Sports. Microsoft touts its ability to pull together integrated multiscreen campaigns for mobile, PC, TV and gaming.

“We’ve seen this convergence coming for years and years now,” says Jeff Plaisted, national sales manager for Microsoft Mobile Advertising. “It’s been a passion here. We’re positioned well.” Plaisted has built mobile advertising programs for clients including Progressive Insurance, Ford Motor Co., Samsung and HP.

“In the last couple of years, we’ve increasingly moved from a lot of talk to more action,” he says. Mobile ad programs “have proven effective” and “we’re seeing results for advertisers.” National and regional accounts are “getting better at tying in multiple screens.”

One feature that has been a relative success, however, is a major mobile ad technology called Microsoft Tag. It is similar to the square, two-dimensional bar code known as the QR or Quick Response code. Both can point to web pages or trigger a phone call or SMS on mobile devices or display contact information. Microsoft Tag allows a mobile device to snap a picture of the square code to access more information, and each tag encodes much more information than QR codes.

Two billion Tags have been printed since the beginning of 2009, and 1 billion of those were made between May and October last year, the company says. Allure magazine used Tags to generate 450,000 scans for its annual “Free Stuff Giveaway” issue.

“The rise of [the] internet-connected smartphone is what is making this possible,” says Aaron Getz, general manager of Microsoft Tag. “Now, everyone has the kiosk in their pocket.”

Getz says Microsoft turned the corner and will be an important force in mobile advertising. “Mobile is an increasingly more important part of everything the company does,” he says. “No question there has been a sea change.”

Microsoft has a mixed record in the marketing space. In a wave of ad network consolidation in 2007, Microsoft acquired Seattle-based advertising network aQuantive, the parent company to Avenue A/Razorfish, for roughly $6 billion, but critics say it did not effectively exploit the company’s capabilities. Its Bing search engine, while vastly improved, remains a distant second place to Google. In 2007, Microsoft bought Screen Tonic, a mobile phone advertising company.

Although Microsoft has yet to build a strong presence in the mobile advertising arena, Wildeman of Lionfish, at least, is a believer. “Microsoft is making a game-changing commitment. They have the money and the R&D. It’s just the beginning.”

New Sectors Go Mobile

The smartphone will become an even more important device as another new feature gains currency: mobile payment systems. Starbucks, which has been a pioneer in the use of mobile marketing—travelers starved for good coffee have long been able to use their navigators to steer themselves to the closest Starbucks—recently added mobile payment capability to the Starbucks Card Mobile and my-Starbucks Apps. The company hopes mobile payments will help speed service at its stores.

Mobile marketing could prove a natural in many fields. Take real estate. Smartphones with web access and GPS allow shoppers to browse listings as they pass. One real estate search firm says close to half of its online users in Seattle are mobile visitors. In the game world, Seattle startup Z2 Live is experimenting with a model for mobile gaming that is completely advertising supported.

As the smartphone emerges as the all-purpose device for every individual, however, it will be the user’s sense of connection with the device that will make it so important as the ultimate carrier of a marketing message.

“If you and I are talking and I get a text, I will stop and look at it,” says HipCricket’s Braiker. So if Alaska Airlines sends a text offering a good deal to counter a competitor’s discount, chances are good that its customers will see it right away, he says. Services like that make mobile marketing a powerful weapon that any company should have in its arsenal.

Leslie D. Helm contributed reporting to this story.