• by Lydia Loizides , Op-Ed Contributor, April 24, 2007

Time was, we didn't ask much of our cell phones. As long as they held a battery charge for a few hours and worked more-or-less well enough to let us get a line, they met our expectations. No more. Today, they swivel, they flip, they ring, they play music, take pictures, play games, capture video and, oh, yeah, you can still talk on them. They come in all different shapes and sizes and one thing is for sure, the cell phone isn't just about communication - it is about self-expression.

Consider, 28 percent of U.S. mobile phone users own video-capable mobile phones, according to a study last year by the NPD Group and the Mobile Marketing Association.

That figure might not be earth-shattering, but it shows that mobile video is on its way to achieving critical mass.

In general, a vertical market becomes economically viable once 15 to 20 percent of the target market has the requisite technology to sustain it. For example, when VCR penetration hit about 18 percent, three things occurred: Economies of scale for production and distribution of the technology resulted in price drops; the price cuts helped spur faster consumer adoption; and this, in turn, prompted content owners to make more content available more quickly for rental and eventually for sale. Quite simply, there was a viable market to sustain the costs and generate profits.

Applying these principles to the wireless market, the three main constituencies needed for the growth of mobile video are the handset manufacturers, the wireless carriers and the content owners. Other pivotal players are advertisers and marketers, media brokers (buyers and planners) and, of course, the consumer.

Consider also, the landscape is likely to change significantly after Apple introduces its iPhone this summer. The new Wi-Fi-enabled device lets users make phone calls via Cingular, and also download and play music and videos. Apple also has partnered with Yahoo and Google to incorporate their search engines and e-mail. In addition, with a wide 3.5-inch screen, the phone offers new promise for wireless video ads.

As with online video generally, there's a push toward making mobile video content ad-supported. At the same time, mobile video content providers are feeling pressure to improve adoption results; churn is high among video subscribers and content offerings are generally of the repurposed variety.

There are some bright spots on the horizon, though, with companies like Mediaflo getting ready to offer its multicast network nationally in the coming year. Another shift is occurring in the consumer market, where we are seeing more people using their cell phones as a way to interact with social networks and blogs.

An estimated 46 million mobile phone users worldwide submitted video clips to user-generated services such as SeeMetv or YouTube last year, according to Informa Telecoms & Media and the Mobile Entertainment Forum. That number is expected to grow to 198 million by 2011. On a regional basis, in 2011, 19 percent of ad revenues for mobile video will come from North America, 32 percent from Europe, 37 percent from the Asia-Pacific region, 5 percent from South America and 7 percent from the rest of the world. In the United States, spending on mobile entertainment is expected to reach $15 billion by 2010, up from $1.1 billion, according to eMarketer estimates.

Both buy-side and sell-side economics will be what drives the growth of this market. If we look at the overall growth of the various types of entertainment revenues, the games and music categories top the list.

But will advertisers play in this market? Yes, according to eMarketer, which predicts that U.S. mobile ad spending overall will grow from an estimated $421 in 2006 to $4.8 billion in 2011. Mobile marketing and content tied to broadcast TV also will soar to nearly $1 billion within three years, estimates eMarketer.

Consumers have shown preferences regarding mobile ads. Of those who are interested in getting ads via mobile phones, the most palatable formats are text messages (56 percent), picture messages (40 percent), videos (24 percent), transferred to e-mail (23 percent), and voice messages (22 percent), according to Harris Interactive.

From the agency side, Brand Republic targeted Blackberry users during its "Business Colour" branding campaign for Xerox. Created in partnership with the Financial Times, the campaign delivered special ads to users visiting the ft Web site for BlackBerries.

Also notable were campaigns for Nike ID, Pontiac G6 and Snakes on a Plane. For the customized sneakers, creative agency R/GA made the Reuters sign in Times Square interactive. Mobile users had 60 seconds to design a custom pair, and then got a text message offering them free wallpaper of their creation and info on where to go to purchase the sneakers.

Pontiac leveraged the deep penetration of camera phones in the U.S. with a promotion for the G6 that asked consumers to look for the vehicles, snap photos and e-mail them in. Consumers who did so were entered into a drawing to win $1 million.

For the film Snakes on a Plane, users could generate a customized voice call from Samuel L. Jackson. People went online to provide the recipient's personal attributes and submit numbers. From the recipients' end of the line, it looked like the call was coming from a friend - until they heard Jackson's voice. More than 4 million phone calls were made during the promotion of the movie.

As with all emerging technology markets, there are bound to be bumps along the way. Will we be able to predict the roadblocks ahead? If not, how hard will we fall if we hit one? One source of guidance comes from consumers. They are already telling us they're willing to watch ads in exchange for free minutes and free entertainment. But, as always, call-to-action campaigns will still drive the best usage in the near term.