Cellcom offers free mobile air time for watching ads

TEL AVIV (Reuters) - Mobile phone operator Cellcom (CEL.TA) (CEL.N) on Sunday launched a new advertising model in Israel enabling subscribers to accumulate free air time in exchange for watching commercials.

"Cellular phone advertising will happen in the end and it will be big," Cellcom Chief Executive Officer Amos Shapira told a news conference.

Cellcom, Israel's largest mobile phone operator with 3.1 million subscribers at the end of June, will award customers up to 45 minutes per month of free air time for watching the commercials. At the end, viewers will have to answer one or two advertiser questions to prove they paid attention.

Adi Cohen, Cellcom's vice president of marketing, said the initiative entitled "Time is Money" was targeted mainly at teenagers, students and others up to age 30.

"It is a way for us to attract young new subscribers," he said, noting it will allow Cellcom to make its service cheaper to customers without the company having to finance it.

Major advertisers such as Coca-Cola, Nokia and Sony have already signed contracts to advertise on Cellcom, he said.

Advertisers will pay 1.7 shekels per proven view of an ad. Cellcom expects advertising turnover to reach 15 million shekels ($4.2 million) in the first year, with about half of that being passed on to subscribers in free air time.

Cohen said the model was similar to one implemented by Virgin Mobile in 2006 in the United States called Sugar Mama.

The advertising market in Israel reached $900 million in 2007, with Internet advertising accounting for $90 million of that, up from $69 million in 2006.

The advantage of advertising on cell phones is that handsets are always with subscribers and it is more personal.

"We can know exactly what clients want and can do more targeting," Cohen said.

($1 = 3.59 shekels)

(Reporting by Tova Cohen; Editing by Richard Hubbard)