Ads to cellphone screens set for rapid growth

PARIS Fri May 18, 2007 2:58pm EDT

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PARIS (Reuters) - The more than $500 million mobile advertising market looks set to multiply in just a few years, helped by new technologies and the spread of more advanced phones.

Executives attending Reuters Global Technology, Media and Telecoms Summit in Paris, New York and Seoul said the demand for mobile advertising was finally rising after years of high hopes in the industry.

"I think mobile is one of the great growth opportunities," said Randy Falco, head of AOL, the Internet division of Time Warner Inc. (TWX.N), which this week purchased mobile advertising company Third Screen Media.

"It will certainly be in the $4.5 to $5 billion range in terms of the marketplace (in five years)," he said, adding that estimates for the annual market now range from $500 million to $900 million.

"I think you need to be there. That's money that's coming from some place. It's coming from other media," Falco said.

Martin Sorrell, Chief Executive of WPP Group Plc (WPP.L), said he sees mobile advertising as an interesting area, which has much growth ahead.

"My sense is that that is an area that is small but growing fairly rapidly," he said.

Strategy Analytics, one of the most cautious forecasters on mobile advertising market growth, has forecast global mobile advertising market will reach $574 million this year and grow almost three-fold by 2010.

In addition to media firms and telecom operators, Internet players Google Inc. (GOOG.O) and Yahoo Inc. (YHOO.O) and the world's top cellphone maker Nokia Oyj (NOK1V.HE) are also keen to have a piece of the growing pie.

WHERE'S THE PHONE

Text message advertisements have made headlines in the United States, where Hillary Clinton and John Edwards use them in presidential campaigns, but lack of advanced cellphones -- which enable viewing of Internet pages or positioning services -- has held back wider uptake.

For the next year the industry expects to sell 250 million so-called smartphones and handset makers including Nokia have started to ship their first models with GPS chips in them.

Such positioning chips enable shopkeepers to send advertisements to potential buyers nearby, or pubs to alert people walking by that happy hour is set to end.

"We know where the phone is -- it's much, much, much more targeted," said David Erskine, head of Telefonica's (TEF.MC) European mobile operations outside Spain.

Erskine said the business case for mobile advertising has not fully proven, but a test the company was running looked promising.

"The number of hits is really, really powerful," he said.

No. 3 U.S. wireless carrier Sprint Nextel Corp. (S.N) earlier this week launched InterActiveCorp.'s (IACI.O) mobile Web search service "Ask Mobile GPS" to help consumers find friends, shops and services based on their location.

The company does not yet use the service as a platform to sell ads, but it would enable advertisers to know not only who called their business having used Ask Mobile's service, but also to know who walked into their store due to the ad.

Even as bigger rival AT&T Inc. (T.N) forecast lucrative growth from placing ads on handsets, Verizon Communications (VZ.N) said it was taking a cautious approach to creating an advertising business via its Verizon Wireless joint venture with Vodafone.

"I am reluctant to say that delivering ads is what our customers want. At the same time our customers have come to expect advertising as they look at the Internet," said Verizon Communications Chief Operating Officer Denny Strigl.

But Tom Henriksson, head of Nokia's advertising network for mobile publishers, said the personal nature of handsets was set to boost mobile in its battle against PCs for the increasing amount of digital ad dollars.

"We have good reason to believe mobile advertising will be a significant market," he told Reuters. "In mobile we see much higher click-through rates."

(Additional reporting by Sinead Carew, Michele Gershberg and Gina Keating in New York)

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