Free data plan?

It has long been standard practice in telecommunications to handle customer contact via toll-free numbers when specific orders or requests are involved. Is it also an advantage for data traffic on smartphones and tablets if the sender of advertising messages covers the transmission costs? The American telecommunications company AT&T sees a market need here, and at the Mobile World Congress in Barcelona at the end of February, the head of the relevant division announced plans to introduce a counterpart to 0800 numbers for data traffic by next year. App operators will be able to advertise that users of their mobile apps will be spared these costs. But it’s not just about apps: The latest cell phones with sufficiently large screens invite advertisers to showcase their products to customers on the go via high-resolution videos. When video ads are streamed in high quality to mobile devices (made possible by fast and powerful data networks), large amounts of data can be used up quickly. In this context, it might become standard practice here as well for the sender to cover the data costs—a move that would certainly be well-received by the public and, at best, rewarded with strong demand.

For both Swisscom and Orange, the American telecom giant’s plans are nothing new: «We already explored ideas like this a few years ago, for example regarding SMS costs,» says Swisscom spokesperson Olaf Schulze, adding, «So far, however, we haven’t seen any demand from advertisers.» « And Therese Wenger, Director of Media, PR & Political Affairs at Orange Communications SA, points to tests conducted in 2008 for a mobile advertising concept in which Orange customers received credit when they accepted ads. She, too, notes: »We have refrained from introducing such an offering so far.« Tobias Kistner, corporate spokesperson for Sunrise Communications AG, reports that there have been repeated attempts in this area with third-party providers, »but such models have not really caught on yet.”.

Switzerland is a country with flat-rate pricing

In other markets, such credit models have long been in place and are successfully used in advertising campaigns. As a result, advertising on mobile devices is not only better accepted, but—more importantly—it allows for the incorporation of a reward element into a campaign as an additional incentive. This is because mobile devices are considered very personal items, and advertising messages that appear on them are correspondingly unpopular. «The acceptance threshold for advertising on mobile devices is quite low,» says Tobias Kistner. However, in Switzerland, advertisers have so far faced little risk of provoking public resentment when they burden smartphone and tablet users with the data traffic required to download their messages. Unlike in other countries, flat-rate plans for mobile browsing are widespread here, and even prepaid customers are increasingly using data packages, so the data consumed by advertising messages is hardly significant. «Flat-rate plans are certainly the future,« Kistner is certain, explaining: «Our experience shows that customers don’t use data services in the first place because a price per MB is completely unpredictable. With voice calls, per-minute billing is predictable, and the customer knows what a 30-minute call will cost. With mobile devices, some processes even run in the background that are completely opaque to the customer and can lead to significant uncertainty if billing isn’t on a flat-rate basis.» Swisscom takes a different view: «We expect that our customers» needs regarding mobile internet usage will continue to vary widely in the future. Customers want to be able to choose how they use their cell phones. While we do see a trend toward higher data volumes, we do not expect unlimited flat-rate data plans to become available anytime soon,« explains Olaf Schulze. Meanwhile, Therese Wenger concludes that the 1 GB of data offered by Orange at a flat rate is »a de facto flat rate for the vast majority of customers.”.

Key Growth Driver

In the mobile advertising market, network operators are of particular interest because their networks are what make this business possible in the first place. As customers use the mobile Internet more and more intensively, it has long since become a major source of revenue. As Therese Wenger of Orange puts it: «Mobile data traffic is of central importance to us and a key growth driver.» Last year, the company—which was recently acquired by the British private equity firm Apax Partners—generated about one-third of its network revenue from mobile data services. The volume of data transmitted over the mobile network has increased thirtyfold over the past two to three years. At Swisscom, according to company spokesperson Olaf Schulze, data volume has doubled within a year. While this generates additional revenue for providers, it also requires very high investments in the network to handle the volume of data. Nevertheless, the prices customers pay per MB have fallen by 96 percent over the past four years. Swisscom plans to invest 1.7 billion Swiss francs in network expansion this year, and Orange has launched an investment program totaling over 700 million Swiss francs for the next five years, with the vast majority of the investments going toward the expansion and modernization of the mobile network. The increase in data traffic is attributable to the boom in smartphones (iPhone, etc.). At Orange, about eight out of ten mobile phones sold today are so-called smartphones. And at Swisscom, two out of three newly sold cell phones are smartphones. The number of active smartphones on the Swisscom network has also risen sharply by 63 percent in one year, reaching 2 million. Both network providers (no data was available from Sunrise on this topic) expect this trend to continue.

Swisscom Sells Its Own Ad Slots

When it comes to supporting the advertising industry in implementing mobile advertising, network operators are taking a low-key approach. «Orange does not offer any mobile advertising services,» says Therese Wenger, while Sunrise and Swisscom primarily point to tools for sending SMS/MMS messages, mobile display banners, and advertising in mobile apps. They are even more reluctant to address questions about sharing user-specific data, even though this could be lucrative for network providers. For example, when it comes to information about a cell phone user’s location—which can be derived from the cellular network—location-based advertising could be implemented far more easily and effectively than with GPS data. Instead, Swisscom is in the process of launching its own offerings in the mobile advertising market: In the free version of Swisscom TV air—the TV service that can be received via cell phone or tablet—special ads will be displayed when users switch channels. (Similar offerings are available on online video services such as Zattoo or Wilma.) Olaf Schulze reveals that a pilot program is currently underway. Demand is already so high that a corresponding commercial offering for advertisers is expected to be available soon. In Switzerland, traditional TV commercials have been used for this purpose so far, but in other countries such as the UK or the U.S., there are already commercials specifically tailored to mobile devices that also allow for interaction. «We expect this trend to take hold in Switzerland as well in the long run,» Schulze predicts.

Christoph J. Walther

TAKING IT A STEP FURTHER: THE ADVERTISING CELL PHONE
Smartphones are all the rage, but they’re relatively expensive. Market saturation is on the horizon, and in the long term, growth will only be possible with new pricing models—such as the ad-supported cell phone. Instead of money, the ad-supported phone is «paid for» with attention and data on consumer behavior. In the U.S., for example, the online retailer Amazon.com offers a discounted version of its Kindle e-reader that displays subtle ads for its own products. This principle also applies to the ad-supported cell phone: Before it can be used, an ad must be clicked away. These ads constantly reappear when the phone is not in use and prompt an immediate response. This could be an online order, or a coupon that can be redeemed in-store. In return, the user receives a credit to their cell phone account each time. Surveys are particularly lucrative—and, in fact, the highlight of the ad-supported cell phone. Answer three questions about your own purchasing preferences regarding orange juice, and in return, you get five minutes of talk time or internet access. This is how the advertising cell phone learns its user’s preferences and can optimize future ads accordingly. For marketers, the advertising phone provides a unique platform for market research. Surveys can be conducted in the blink of an eye, and the data on the panel offers unparalleled depth. When it comes to the data collected this way, the advertising phone is ruthlessly transparent. Not only is the basic concept—paying with information instead of money—clearly communicated, but the insights are also shared back with the user: «People who prefer the same brand of orange juice tend to prefer So-and-So coffee.» The advertising phone will be especially popular among bargain hunters because it offers the coolest deals and promotions. And the advertising phone is integrated into the world of social media, which helps it go viral: “Just bought 3-for-2 orange juice at the # Super Store, thanks to my # promotional phone,” the device tweets from the user’s account after redeeming a mobile coupon that arrived upon completion of the orange juice survey. cjw