Privacy Advisor

The Chapell View - The 411 on Targeting Ads to Cell Phone Users

December 1, 2006

Alan Chapell

One of the most cited features of mobile phones is just how personal they are. Mobile devices are frequently used, rarely shared and often carried with consumers wherever they go - a recipe unmatched by most other forms of media. But just how adept are mobile marketers at using personalization? As much as customer privacy gets talked about these days, what do marketers think about privacy concepts? There's probably not one concise answer to this question. But a couple of recently released studies help to shed light on how some companies are approaching customer privacy.

Marketers are interested in leveraging the personal attachment consumers have to their phones in order to serve more relevant and personalized messaging. And mobile users in turn seem open to personalization - whether it's personalizing ring tones, wallpaper or other features. Mobile marketers are betting that given enough targeting this desire can be extended to marketing campaigns as well.

For this to work, though, mobile marketers will have to know something about mobile users. And collecting user data - as we all well know - can carry with it important logistical, legal and privacy challenges. I recently spoke to a number of mobile marketers about these issues, in order to obtain perspective on where mobile marketing is today - and where it's headed in the not-too-distant future.

Collecting Mobile Data

Most experts envision three different categories of mobile data. The operative word here is envision - it doesn't appear that anyone in the space is currently leveraging all three forms of mobile data.

First there is demographic data - the same information that fuels most traditional direct marketing programs. For example, Mike Baker, CEO of Enpocket, described how his company has developed an ad server whereby Enpocket's clients can "take any info" they may have already collected about their customers - demographic or otherwise - and "use it for targeting."

Secondly, there is transactional data - information about the products customers have bought from a particular retailer. Mobile technology provider MobileLime has partnered recently with retailers, including an upscale grocer, to provide their customers with targeted discounts and special offers via Short Message Service or SMS, a service for sending short text messages to mobile phones. This loyalty program was based on transactional data already collected by the grocer, with MobileLime simply providing the technology to reach consumers on their mobile devices. And the program has enjoyed some success: 64 percent of opted-in customers have used the program in the past year. This doesn't surprise Baker, who says Enpocket has found that "transactional data is much better for targeting than behavioral or demographic data."

But What About Behavioral?

Online media types have been actively using behavioral targeting for several years now - but in the mobile world it remains somewhat theoretical. Even so, mobile marketers have interesting ideas about how behavioral data could be used in mobile marketing.

For example, explained Andrew Stollman, president of mxFocus, behavioral data collected on (non-mobile) Internet sites can be used to target those same consumers on their mobile devices. For example, he says, mxFocus runs on an online portal where the company collects the online activity of opted-in Internet users. When these same users are on their mobile devices, the information collected on the portal can be used to "determine which ads to show and when to show them."

Other mobile marketers agreed that using data from multiple marketing channels is an effective way to target mobile advertising. Alfredo Narez, VP of marketing for Air2Web, described a similar program his company designed for American Express. But collecting data on one channel and using it in another can present some additional challenges, including some issues around consumer acceptance. Although optimistic about mxFocus' portal, Stollman noted that only 10 to 12 percent of the portal's users have opted into receiving mobile advertising.

Tom Burgess, CEO of Third Screen Media, thinks that the issues related to using data from multiple channels are going to become increasingly pertinent. Part of the reason, he says, is that mobile marketing actually encompasses four different channels - messaging, mobile browsing, mobile applications and mobile video. This makes data collection all the more complex. And effectively collecting behavioral data, Burgess argues, would mean that "you'd probably need to be working in all four channels."

Can't Forget About the Carriers

No discussion of mobile data would be complete without a word about the mobile carriers, such as T-mobile, Verizon and Cingular. There's something of a consensus that the mobile carriers are the ones that will be able to drive the market. First, they hold what amounts to a mountain of subscriber data. Second, the carriers currently have enough influence over the mobile space that pretty much any new mobile marketing technique or technology will have to meet with their approval to succeed.

Mobile carriers, however, have often been reluctant to use the data they have - even for their customers' benefit. The carriers know all too well that customers tend to blame them for - well - just about anything that negatively impacts their mobile experience. Ruby Pan, VP of business development for adhoc mobile, a CPC- based ad solution for mobile applications, notes that mobile carriers are "very concerned about doing the wrong thing and alienating their customers."

And don't forget there are limitations placed upon how carriers can use customer data. The section of the Federal Communications Commission's (FCC) rules related to Customer Proprietary Network Information (CPNI) governs how carriers can use customer information for marketing purposes. In general, the CPNI rules don't allow data collected for non-marketing purposes to be used for marketing - unless the carriers obtain consent. Since much of the data held by the mobile carriers wasn't originally collected for marketing purposes, the carriers would have to proactively opt-in each of their subscribers prior to such use. Not doing so would put a carrier at risk of significant fines from the FCC.

Lastly, the carriers are still trying to decide what their role should be in all of this. Are they going to remain service providers, or will they ultimately take a more active role in content and advertising? If the carriers do choose to move away from the service provider role, the amount of control they will ultimately be able to maintain is just about anyone's guess at this point.

The Bottom Line

Part of the reason that mobile marketing was able to take off in Europe was ease of integration with the carriers. Things have been a little more complicated in the U.S., and significant logistical challenges remain - but the mobile industry is well on its way to addressing these issues. As mobile marketers continue to do so, they may begin to make good on the promise of personalized marketing.

Of course, many different marketing techniques - from email to behavioral targeting to Customer Relationship Management - have promised advertisers that elusive one-to-one relationship with their customers. Why should mobile fare any better? First, mobile marketers are showing a real willingness to focus on "doing the right thing." By emphasizing user opt-in, being aware of legal requirements (such as CPNI) and learning from past examples of where things went wrong, mobile may have a better shot at success. And second, armed with the right data, mobile marketers seem ready to make ads relevant to individual consumers. If you're not already working in the mobile space, this may be as good a time as any to take a look.

Alan Chapell, CIPP, is president of Chapell & Associates, a consulting firm that helps direct marketers navigate the waters of consumer privacy and develop responsible and effective marketing programs. Chapell has been instrumental in the development of emerging best practice standards for privacy and interactive marketing. He may be reached at +212.675.1270, or by email.