Ads on cellphones, privacy concerns grow

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: Your cell phone is a potential gold mine for marketers: It can reveal where you are, whom you call and even what music you like. Considering the phone is usually no more than a few feet away, these are powerful clues for figuring out just the right moment to deliver the right coupon for the store just around the corner.

But first marketers will have to wrest the personal profiles from mobile carriers worried that annoyed subscribers might defect to rivals.

“It’s proceed with caution,” said Jarvis Coffin, CEO of advertising distributor Burst Media Corp. “Are consumers going to be spooked by the idea that suddenly their phone goes beep and it’s a Starbucks offer, and they are standing next to a Starbucks?”

Carriers are now guarding the data zealously, but many people believe it’s only a matter of time—over the next year or two—before marketers can routinely target ads to a potential customer’s location and actions.

Imagine getting pitches for rental cars and hotels the moment you land in San Francisco because an analysis of past calls suggests you tend to take weeklong trips there. Or if day trips to Boston are your thing, you might get an offer for cab service instead.

“My phone has a lot of very specific and detailed information about myself ... information that isn’t always going to be resident when I’m at a number of PC browsers,” said Rob Adler, CEO for mobile web company go2 Media.

The research firm eMarketer estimates that US spending in mobile ads, at about $900 million (euro611 million) in 2007, will grow more than fivefold to nearly $4.8 billion (euro3.26 billion) in 2011. By contrast, paid search and other online spending will only double, to about $42 billion (euro28.5 billion) in 2011.

Mobile ads today are mostly blasted at the mass audiences, with a few carriers offering limited targeting based on users’ age, gender, and other characteristics.

That should change. Ever since the Federal Communications Commission (FCC) ruled in 1996 that wireless carriers must help emergency 911 dispatchers identify a caller’s location, technology companies and privacy advocates alike have been speculating about making phones’ location information available to commercial services and advertisers. “It’s always been the next big thing around the corner the last 10 years, and now we really feel that it is,” said Brian Levin, CEO for Liberty Media Corp’s Useful Networks, a company that helps outside developers tap location information from cell carriers.

Americans are finally using cellphones for more than calling, joining European and Asian counterparts in embracing data services like text messaging and ring tones.

Devices also are improving, and last summer’s release of Apple’s iPhone unleashed an era of bigger screens and friendlier interfaces for mobile web browsing. Advertisers, meanwhile, are starting to experiment with mobile ads. With a boom in GPS devices and location services like maps and child tracking, it’s only natural that advertisers, too, will want to take advantage of location information.

The phone’s highly personal nature will mean more privacy red flags compared with what’s collected when someone surfs the Internet from a regular computer.

Two industry trade groups—CTIA and the Mobile Marketing Association—have committees developing guidelines, including how to properly get a customer’s permission and periodically remind them of any tracking.

Companies are also developing ways to share profiles with marketers while stripping out sensitive information like names. On Sprint phones, all targeting to such attributes as age and postal code is done on Sprint Nextel’s end; advertisers give Sprint the ads for the company to place without having to share any data with anyone, spokeswoman Emmy Anderson said.

Meanwhile, an ad-delivery system from Ad Infuse can be installed entirely on a carrier’s own premises so that data remain under the carrier’s control. The wireless industry deserves credit for its caution, said Ari Schwartz, a privacy advocate with the Center for Democracy and Technology. He said advertising and technology companies are the ones having to first prove to wireless carriers “that they have put in a lot of thought about how to do it in a way that won’t raise the creepiness factor.”

Telecom firms face unique federal privacy regulations, requiring notice and permission to use and share calling records for marketing, but carriers believe competition is as important. “We have great expenses with customers leaving one company and going to another,” Verizon Wireless spokesman Jeffrey Nelson said. “One thing I can guarantee Verizon Wireless will not do is get a bump of short-term advertising dollars while scaring and losing our customers in the process.”

The challenge will be getting consumers at the right state of mind. You might appreciate that restaurant discount when you’re hungry but not if you’ve just finished lunch. The mantra, for now, is to avoid the type of backlash that online hangout Facebook recently faced when it enlisted users as endorsers of movies and other products, initially without them necessarily realising it.

“We know this is a great opportunity for targeting, but we don’t want to blow it by overdoing it,” said Eswar Priyadarshan, CTO for Quattro Wireless, a mobile ad distributor. Initial ads tied to location tend to revolve around search terms and other user input rather than GPS detection. If you search for movie theatres in Chicago followed by a search simply for “pizza,” Google will assume you are looking for a pizzeria in Chicago. Go2 Media lets users enter cities, postal codes or specific addresses, but users can activate an “auto locate” feature on some phones. But current location isn’t always as useful as where you’re going or what you’re doing. Figuring that out means pairing location information with other behavioral data.

For instance, advertisers might also target to the beginning of a billing cycle, when a customer might be more willing to spend, said Dan Olschwang, CEO of JumpTap, which is offering targeting technologies to mobile carriers and web sites. Working with Britain’s Vodafone Group, Yahoo has been able to target to basic demographics like gender. Possibilities down the road include targeting by calling patterns, such as whether you make calls to a certain region on weekends—all without the carrier having to reveal anything about the customer’s identity.