A story on the Japan Nikkei wire this morning trumpeted what appears at first blush to be a foreboding prediction: "Japan’s Cell Phone Ad Market To Triple To 128B Yen by 2011". That’s over $1B in ad revenue from Japanese cell phone advertising in just four years and according to Dentsu Communications a 3.3X increase over the expected 2006 figure.

Steve Sechrist
Senior Analyst and Editor
Projection Monthly

I may be taking a leap here, but in cell phone technology and adoption, where Japan leads, others follow (especially the US). If this is the case, then we can expect a similar growth in ads to our cell phone services in North America and other geographies.

But cell phone advertising may not be so bad as you might think. According to the report, Japan ads are split into two types: what Dentsu calls "pure ads" in the form of banner ads originating from cell phone Web sites (browsed to via a handheld over the wireless network), and "search-link ads", or ads more closely related to content downloaded from a cell phone search. By nature, these content-linked ads are more likely to be targeted, and focused on what users are interested in (or at least somehow related to what the user is searching for).

Take the example of a coupon (ad) being sent to a search request for local restaurants in a particular area. This might actually be useful. Dentsu says these types of ads are expected to account for some 40% of all mobile ads by 2011 as major sponsors and others are seeing the results of increased search services by cell phone providers.

There’s no doubt to the effectiveness of this type of advertising as it leverages the power of a smart network moving beyond the shot-gun broadcast method to a more targeted approach. In fact, in Japan, content-linked ads on the Internet are also growing, up 24% from 2005 numbers. They now account for almost 30% of all Internet ads-according to Tokyo-based Aun Consulting Inc. The group said in a Nikkei article in January, "…search- and content-linked advertising appears set to become a driving force in the market." (NikkeiNet Interactive, 1-10-07).

At present, ad growth is being fueled by search-based services but what of other cell services like mobile video? In the mid-term, (by 2011-the scope of the Dentsu study) can we expect to see mobile video delivered to our cell phones via some ubiquitous network funded totally by ad revenue?

My crystal ball says yes, at least here in the US. I think most consumers want and will pay for relevant data, particularly real-time traffic and other proximity-based information that can help make life a little easier, like avoiding traffic delays or finding a close eatery, etc. And, most do not want to pay high premiums for mobile video services-nor should they. It was ad revenue-not pay-TV that built our existing TV infrastructure.

Perhaps the solution will come from local TV broadcasters desperate to find relevance in the digital, cable, and satellite delivery age. After all, they are best positioned to provide mobile proximity content (as their ad dollars come from local merchants)-and they can offer much more (sports, weather local news plus national programming). In addition to being local, they already have a successful ad-based business model in place.

Some may see the growth of cell phones ads as yet another intrusion into our daily lives (glass half empty), while others watch with great anticipation as the next level of mobile services unfolds-powered by consumer advertising. It worked in building-out the broadcast TV infrastructure in the 40’s and 50’s in a process that occurred in classic market driven style with consumers and society as a whole benefiting from individuals acting in their own self-interest. The invisible hand is still working today.