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Sat, Nov 17, 2007 - Page 10 News List

Advertising cash needed to propel smartphones' rise

FINANCING Experts said operators will have to rely on advertising to provide the fund to offer better mobile services and attract smartphone users


The emergence of smartphones has put the Internet, music and videos in the palm of the consumer's hand, but the technology will need a flow of advertising cash to reach its full potential.

Cellphone makers and service providers meeting at the Mobile Internet World conference in Boston picture a world five years from now where the consumers will be able to pay bills, read the news and communicate with their mobile devices.

Few cellphone owners now use their devices to access the Internet, with Yankee Group, a technology consulting firm, placing the figure at 9 percent.

But International Data Corp estimates more than one in five cellphones sold in 2011 would be smartphones.

Three billion cellphones circulate in the world, three times more than computers. While Internet connections over the cellphone is often slow, it is improving.

Kiyo Oishi, chief of the Japanese company Access, estimates 1 billion consumers will have access to high-speed Internet in 2013.

Consumers will need better services, including simpler Web sites and systems that are not limited to one operator or device. But the market will need revenue.

"Advertising, commerce will be the economic engine that will drive everything," Andrew Belt of the Monitor Group said.

Operators currently make money through subscriptions to their services. For instance, some companies charge for e-mail service, ringtone downloads or voting on television game shows.

But to get a slice of the mobile Internet age, companies will have to rely on advertising to get their products to consumers, analysts say.

"You have US$110 billion spent on TV [advertising]. By 2008 you'll see big shifts, to mobile and social networks," W2 Group chief executive Larry Weber said.

Estimates by eMarketer show that US$16 billion would be spent on advertising on cellphones in 2011, 10 times more than today.

"Most people would rather have free services with ads than paying subscriptions," said Andy Jedynak, co-chairman of the Interactive Advertising Bureau's (IAB) mobile committee.

Advertising will become the main source of revenue for mobile devices, but not before three to five years, he said.

IAB, which represents companies that sell interactive advertising, already wants to set standards for cellphone ads, including to limit their size to no more than a quarter the screen.

"All mass media are financed by advertising," said Douglas Edwards, founder of Handmark. "Advertising will inevitably" become the main source of revenue.

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