Vodafone Mobile Ads - WSJ

Technology Journal: Vodafone Gives Mobile Advertising a Push
By Cassell Bryan-Low The Wall Street JournalNovember 30, 2006
VODAFONE GROUP PLC is ramping up its efforts to push ads to its cellphone- service customers in a move that -- if successful -- could help shape the nascent mobile-advertising industry. Vodafone, the world's largest cellphone-service provider by revenue, recently laid out plans to launch a mobile-advertising service in conjunction with Internet giant Yahoo Inc., starting in the United Kingdom in the spring. The two companies will jointly develop the look and feel of the advertisements that will likely include a variety of formats from banner ads to short video clips. Vodafone also will use Yahoo's sizable sales force to sell to advertisers, rather than spend the resources on building its own. The past year has seen a rash of alliances between cellphone-service providers and Internet companies. Joint efforts have included enabling Internet searches via mobile phones, where carriers are hoping advertisers will pay to place small text ads that appear when users search for certain keyword phrases -- such as " London hotel." Vodafone, based in Newbury, England, recently said it is working with Google Inc. to launch such a service for its customers, due early next year. Vodafone's partnership with Yahoo, however, goes a step beyond many mobile- advertising initiatives because Vodafone and Yahoo plan to use customer information to target their efforts. Yahoo's technology, which Vodafone will use as part of the arrangement, enables advertisers to direct their message at people depending on gender, demographic group, location and user behavior. Yahoo, meanwhile, will be able to harness Vodafone's knowledge about its customers that also includes knowing where its customers are when they use the phone. "We can build up a social-interest profile over time," says Vodafone's head of strategy, Alan Harper. Vodafone will deliver ads only to customers who opt in to the service, Mr. Harper says. For those who do, Vodafone will collect details such as the mobile user's age and gender at sign-up. Then, over time, it will build a profile of customers' interests based on their activities over their phone. For instance, Vodafone could track their favorite types of music or which sports they like to watch. "The whole benefit and potential of advertising on the mobile is targeted ads, " says Nicola Walton, a London-based analyst at research company Informa Telecoms & Media. One key hurdle, she says, is that many carriers don't manage the information about their customers in an efficient way. "They might have that information but it's stored in about 20 different places." To help make ads interesting to customers, Vodafone says it will offer discounts on services such as mobile television, games and sending pictures via text messages. Vodafone's Mr. Harper says details of discounts and what services they will be available for remain to be worked out. But he says they could include offering certain mobile television channels free or giving a discount on the price of games. Executives from Vodafone and Yahoo declined to spell out how much revenue they hoped to generate from their mobile-advertising efforts. "We are early in the game," says Marco Boerries, a senior vice president at Yahoo. "But the initial test results look very promising." Just 0.5% of global advertising spending currently goes toward ads on cellphones, and advertisers and phone companies are still figuring out formulas for setting ad rates, according to Ms. Walton, the analyst. It is also still unclear to what extent consumers will tolerate ads. But many marketers are keen to explore ways to target customers more precisely than ads on television, online or print. As stiff competition and price declines eat into revenues, Vodafone and many of its telecom-industry peers are being forced to reassess their business models. Vodafone's sales across its core market of Europe slumped 1% to GBP 11.8 billion, or about $23 billion, for the six-month period ended Sept. 30. Growth at Vodafone's operations in emerging markets helped boost the company's total revenue, which was up 7.2% to GBP 15.6 billion. Advertising is just one type of new revenue stream Vodafone is trying to tap into. It also is in the process of rolling out fixed-line broadband offers as well as introducing new services that customers can access over both their mobile phones and via their computers. Vodafone hopes that together these three new areas for the company will account for some 10% of its revenue in about three or four years, or roughly GBP 3 billion based on the latest fiscal year ended in March. For now, the Vodafone partnership with Yahoo covers just the U.K., Europe's largest online-advertising market. Mr. Harper says Vodafone is looking to introduce advertising in other countries, but won't necessarily partner with Yahoo in each case. And, as Vodafone expands into broadband Internet access for the home, it also hopes to deliver ads to its customers via the personal computer.