Web Phones May Revive Online Ads

Baldwin Louie — Mon, 25 Sep 2000 15:00:00 -0700

TOKYO - The raging popularity of NTT DoCoMo's blockbuster i-mode service means that Web phones could help revive the online advertising business model. Many Japanese businesses are beginning to see the potential of ad space on those sleek, lightweight and reliable phones.

Japanese ad agency Dentsu (dossier) says the market for ads distributed via i-mode and other Net-enabled phones will soar to $92.6 million in fiscal year 2001, which starts next April.

In the past few months, some online advertising firms in Tokyo have been testing the way Japan's sophisticated Web phone customers, most of them using DoCoMo's i-mode, react to text-based ads.

ValueClick (VCLK) Japan, which started running mobile ads in early February, says more customers are clicking onto those text ads with their Web phones than do customers with PCs. The company says the average click-through rate on those ads has stabilized at around 1.5 percent, three times higher than the average click rates on the ads that ValueClick Japan sells on PCs. D2Communications, a subsidiary of DoCoMo, has found a similar correlation.

Critics might argue that the ringing success of i-mode comes from culturally specific factors - the Japanese affinity for small gadgets, the need to kill time during long commutes in crowded trains or a relatively low rate of PC penetration. But industry experts say those factors are not enough to account for i-mode's success.

"In Europe and in the U.S., they have a lot of misconceptions," says Giles Richter, president of WestCyber, a wireless-device consulting company in Tokyo. "The best and the most useful thing for them is to know technically what's working, not to focus on cultural aspects."

Unlike the wireless Internet services in Europe that are based on wireless application protocol, or WAP, which requires customers to dial up in order to get a connection, DoCoMo's i-mode technology allows customers to remain connected whenever their phones are on. When customers go to Web pages, they can see the content on their small screens within seconds. The rates customers pay are not based on the time they are connected but on the amount of data that is transmitted.

NTT DoCoMo has registered more than 1,000 "official" content sites, run by corporations that have met DoCoMo's requirements. But an increasing number of people are using i-mode to access content on "katte sites" - sites whose content is written in i-mode-compatible compact-HTML, a variant of the language that is used to write Web sites for PCs. Independent content developers have been adding everything from mini search engines and games to image messaging services, restaurant guides and train schedules - tools needed for people on the go. Current estimates put the number of such sites at 20,000.

This might be welcome news for U.S. Internet ad companies, which have suffered from a slowdown in Internet ad spending. ValueClick said last week that it would not meet analysts' third-quarter revenue estimates. DoubleClick (DCLK) was downgraded last week by H. Perry Boyle of Thomas Weisel Partners.

And brick-and-mortar companies aren't coming onto the Net quickly enough to offset the pure-play dot-com pullback. But if they are able to focus on niche spaces such as individual i-mode sites, they might be able to improve their outlook.

ValueClick Japan says more than 700 companies have asked to be part of its distribution network. Today, 28 companies, including a leading instant-noodle maker, Honda Motors and one of Japan's major banks, send ads to i-mode's 11 millions subscribers every day.

"In the morning when you see ads for some restaurant near your office telling you about the special lunch menu of the day, you would probably think, 'Oh, yeah, I would try that,' " says Hiroyoshi Shimano, Webmaster of I-Card, an i-mode-enabled online greeting-card site in Tokyo. "Or if you see an ad with a discount coupon to rent a video on your way home, you might want to drop by and check the latest movie. Unlike coupons on your PCs, you don't have to print them out and bring them in your wallet. Everything's in your phone."

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Web Phones May Revive Online Ads