The mobile ad market has been on the verge of a major break out for the better part of a decade, yet it still only captures a tiny percentage of the online ad market each year. But that should change as large brands and carriers start entering the space. 

And today, Alcatel-Lucent is dipping its toe in the mobile advertising market. The French telecom-equipment maker is teaming up with San Francisco's 1020 Placecast to target customers with ads specific to their location.

According to The Wall Street Journal:

"Alcatel's service differs from most mobile-ad set-ups because its ads will be beamed only to cellular customers who sign up for them. They can specify when and how frequently they want to receive ads, and from which vendors. A customer could elect to get retail announcements at lunchtime and movie promotions on evenings and weekends."

Making mobile advertising relevant is the key to its success. For the most part, cell phones have been protected from the majority of telemarketing that goes to landlines. And while customers are likely to respond negatively to marketers spamming their phones, mobile marketing done well has incredible potential.

The article continues: "If such advertising is targeted to a specific location, rather than citywide, consumers there are three to 10 times as likely to click through the ads, according to Michael Boland, program director of research firm Kelsey Group."

And the mobile technology is in place, though demand has been slow. U.S. mobile spending is expected to grow 17% this year according to eMarketer, but that $760 million will still be a small fraction of the projected $24.5 billion U.S. online-ad market. However, done right, mobile advertising has incredible potential.

Cell phone users are increasingly dependent on their phones for information on the go. Combine the increasingly popularity of smart phones with ads that offer goods and discounts at nearby locations, and you have a pretty formidable business model. What stranded consumer in a new city wouldn't be glad to receive an coupon ad from a local pizzeria when they type "pizza" into Google?

Getting usability right is the key. As Alistair Goodman, 1020 Placecast's CEO, says in the article: "I call it marketing as a service, not marketing as an intrusion."

Meghan Keane

Published 21 May, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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