SUPERVISING INSTRUCTOR: RICHARD LUTZ

Thesis
Mobile Marketing
Ksenia Mitselmakher
4/21/2010

The Implications of the Development in Information Technology on Marketing

Communication Channels

Thesis Outline
Topic: The Implications of the Development in Information Technology on Marketing
Communication Channels
Subtopic: Mobile Marketing
I.

Introduction

II.

Body
A. Digital Industry Overview: Mobile marketing

1. Sneak peak into the future of Mobile Marketing

2.

Brief History Overview

B.

Mobile Technology

1. Smartphones Capabilities : pros and cons

C.

Mobile Marketing Strategies

- Brief overview
1. Text-message Marketing
2. In-game Mobile Marketing
3. Mobile Applications as a Marketing tool
a. Overview
b. Cost of Development
c. Major Players in the industry

D. Location-Based Advertising Offerings (Emergence of Hyperlocal Marketing)

1.

Overview

2.

LBA Platforms

E.

Future of Location-Based Advertising

I. Introduction

In the modern world, more and more companies are turning to new digital media technologies in
order to enhance their marketing communication channels, improve efficiency, and appeal to
more technologically-savvy younger audiences. In order to stay ahead of the competition, some
of the largest corporations are investing heavily in the development of e-commerce, social media
marketing, and mobile advertising. What once seemed like an unachievable dream of any
marketing professional becomes a reality in a modern world. The technology is developing
rapidly every day, opening new unimaginable opportunities. It allows a company to place their
marketing communication messages more effectively to reach desirable audiences, eliminate all
unwanted noise in the communication process, cut costs, and more importantly, engage its
audience in a mutually-beneficial dialog.

In order to understand the roots of modern digital marketing technology, I will trace the
development of marketing channels throughout history. Current digital marketing technology as
we know it today did not emerge overnight. The ground-breaking revolution started when the
internet (http protocol) was created, and rapidly evolved first into information-based Web.1
development and later interactive Web 2.0 as we know it today. Mobile technology was
developing alongside until the early 2000s, when the technologies merged. They created one of
the most powerful marketing tools in the human history Mobile Marketing.

Mobile Marketing, as we know it today, is in an early stage of development. We are at a point in

our history where we can only get a slight glimpse of what our future is going to look like.
Despite groundbreaking developments in mobile technology over the past few years, the mobile
device is still in the introduction phase of the product lifecycle in most of the countries around
the world. If it takes a few years for the general population to adopt the mobile phone as a major
communication device, it can be expected to take even longer for an average person to start
perceiving it as an advertising channel. It is important to point out how the age differences
influence the acceptance and adoption of mobile advertising messages. Finally, the mobile device
as we know it today has a major impact on the quality and quantity of messages that can be
communicated and accepted in return.

Nevertheless, it does not matter how quickly the general population adopts the mobile marketing
or how quickly the technology will become everyday reality. What matters is that in order to stay
ahead of the competition, companies have to pay close attention to the new developments in this
emerging marketing channel. For companies that target younger audience, mobile marketing has
already become a norm. No major marketing or advertising strategy is planned without the
integration of digital marketing. Whereas companies like Dunkin Donuts, McDonalds, Adidas,
Apple, Pepsi, and Burger King were among the early adopters of this digital philosophy, more
and more companies are beginning to catch up.

The reason companies like Adidas are utilizing these technologies is not just because they allow
them to appeal to a younger audience. Mobile Technology is a tool that allows them to better

identify trends; understand and segment their consumers; target specifically based on consumer
needs; and personalize their messages in a way that communicates what the consumer actually
wants. Mobile Marketing is changing the advertising industry at its core. Ten years ago
advertising was perceived as an intrusion into personal privacy and an unnecessary distraction.
Nowadays, on the contrary, the latest developments, like Open Wave Analytics and LocationBased Advertising, allow marketers to provide the consumer with a tool to find what they want
when they want it. They are no longer captive customers, but empowered users.

Finally, in addition to all of the benefits that both the consumers and companies experience as a
result of digital technologies, advertising agencies are able to track the progress and evaluate the
results of specific advertising initiatives better, and therefore, adjust their messages accordingly.
Now more than ever, the CMOs (Chief Marketing Offices) can be held accountable for their
initiatives that have not generated positive results. There is more room for trial and error because
different strategies can be tested almost instantaneously at minimum costs.

A. Digital Marketing Overview

1. Sneak peak into the future of Mobile Marketing

As you wake up in the morning, your mobile device is already delivering good news for you. A
digitally enabled voice tells you everything you need to know about this day: weather forecast,
traffic updates, suggestions as to what to wear, where to find the cheapest cup of coffee, and
more. If you are hungry, it gives you an update on all of the promotions and specials that nearby
restaurants are running. On your way to work, you decide to drop off your clothes at the dry

cleaners. Your phone tells you the optimal location to choose with the cheapest price and/or the
highest rating. As you go by Starbucks, your phone beeps. You just got a promotion for half price
latte.

As you walk into the grocery store, you pick up two boxes of cereal and scan both of them with
you RFID-reading mobile phone. There you have it: side-by-side nutrition comparison, health
facts about both products, instantaneous evaluation of prices, and your personalized mobile
recommendation based on your previously recorded medical history. No need to carry tangible
coupons with you anywhere. Your phone has already collected and sorted all special deals you
can potentially get in this store. As you are navigating through the wine aisle, your phone shows
you the best deal on the aisle, as well as all the complementary food suggestions with
whichever wine you decide to purchase.

While you are waiting for your dentist appointment, you decide to watch the latest episode of
Desperate Housewives online. With one click of a button, you have it. As you watch your
favorite show, a commercial streams in for a pair of Levis jeans. You decide to learn more about
the brand, and click on your favorite item. In a matter of seconds, your GPS-enabled phone tells
you the brands nearest locations and prices.

The possibilities of modern mobile technology are endless. Some people find it scary, some
people find it thrilling. However, the reality is that this future is inevitable whether we want it or
not. One way or another, the mobile technology is going to hit all of us, and resistance is futile.

In order to understand what is going to happen next, we will look at the roots of mobile
marketing in the past.

2. Brief history of Mobile Marketing

Mobile Advertising and Marketing is one of the most interesting developments today. The
turning point in history for Mobile Marketing occurred in 2004, when the adoption rate of mobile
devices surpassed that of laptops (According to Enpockets quarterly). In 2004 more companies
have launched mobile campaigns than ever before. The total wireless subscription rate reached
180 million subscribers. Brands started engaging their consumers in dynamic mobile experience
by launching various text-to-win contests and campaigns. Whereas previously the mobile
communication channel was primarily utilized as an information source, in 2004 it began to
transform into interactive engagement.

One of the pioneers of mobile marketing was Dunkin Donuts with its successful SMS campaign
carried out in Italy in 2002. The promotion enabled Dunkin Donut customers to enter a 5-digit
code into their mobile devices in order to receive a coupon for the purchase of a donut. What
attracted consumers, though, was that every participant was automatically entered into a
drawing to win a free Piaggio scooter (fortumoblog.com, History of Mobile Marketing: Dunkin
Donuts). The campaign turned out to be rather successful. Dunkin Donuts Italy increased its
sales 9% in a matter of days while the campaign was running.

Other successful marketing campaigns followed. For example, History Channel with its
promotion of the Barbarian show. In 2005, McDonalds launched its extremely successful
SoCal (South Californian) McFlurry campaign which not only increased its sales but also
helped to create a compelling way to connect with the younger demographic and make
McDonalds a relevant brand in [consumers] lives (fortumoblog, History of Mobile Marketing:
McDonalds Case, 2008). In the meanwhile, Mobile Marketing has been shaking up the
Eurasian continent as well. One of the largest phone operators in Russia, MTS, has launched an
interactive Short Text Messaging (SMS) quiz game with a grand prize of $1 million. As a result,
more than 24,000,000 SMSs were sent in the short period, leading to increase in the interest in
MTS and average number of consumer interactions sky-rocketing at 16.2 (fortumoblog, History
of Mobile Marketing4: MTS Russia SMS Game for Millions).

In 2005, other companies started to realize the growing importance of mobile marketing
strategies especially in integration with other media (TV, print, radio). Some critics were
forecasting that they would take away attention from print, web or other media elements
(iMedia Connection, March 25th, 2005). On the contrary, as a result of the integration of mobile
promotions into the marketing mix, brands have enhanced their value and connected to their
customers better.

3. Mobile Technologies

A. Smartphones: Advantages and Disadvantages to Marketing Industry

Whereas just a few years ago smartphones were out of reach for the majority of US and
worldwide consumers, nowadays they have become an everyday necessity. With the latest
introductions of Apples i-Phone, RIMs Blackberry, and Googles Android technological
platforms, the penetration of smartphones is skyrocketing. The variety of choices makes these
devices more attractive to consumers because of the decreasing cost of access. As a result,
mobile web usage is increasing significantly every day. According to Advertising Age, The
iPhone alone has now reached 57 million units worldwide, the fastest uptake in the history of
technology.

One of the major advantages of the increasing number of smartphones for marketers is an
opportunity to utilize more targeted marketing based on collected psychographic and
demographic information, location, lifestyle preferences, and others. One of the largest
drawbacks to smartphone technologies, on the other hand, relates to the privacy issues that are
now becoming a big concern for the users. More and more regulations are being passed
restricting advertising agencies from collecting personal data and other private information.
Nowadays we see the consumer put in charge of what marketing messages he/she decides to
receive and which to ignore. Only a few years ago companies were deliberately bombarding their
consumers with advertising messages; today consumers control the flow of information.
However, despite these steps forward towards the liberation of consumers from marketing
attacks, the issues relates to the intrusion in personal privacy are yet to be eliminated.

B. Mobile Marketing Strategies

According to the definition given by the Mobile Marketing Association, Mobile Marketing is a
set of practices that enables organizations to communicate and engage with their audience in an
interactive and relevant manner through any mobile device or network. Mobile Marketing can
generally utilize two types of strategies: push and pull.

Push strategy refers to companies pushing their advertising messages to consumers by

sending Short Text Messages (SMS) or Multimedia Messages (MMS) with the information they
would like to communicate. Pull strategy, on the other hand, entails consumers themselves
reaching out to companies (texting special codes or messages) as a result of broadcasted promo
campaigns, participating in mobile games created by certain brands (In-game mobile Marketing),
or downloading applications or other resources from companies websites.

Even though both of these strategies are relevant to the discussion of Mobile Marketing, the
push strategy is becoming less and less effective because of new regulations and the MMA
Consumer Best Practices Guidelines regarding privacy of the consumers. Therefore, we will
focus our attention mostly on pull strategies, such as text-messaging campaigns, in-game
mobile marketing, application marketing, as well as an emerging category of geo-marketing.

1. Text-messaging Marketing

One of the first companies to launch an extensive text-messaging campaign was Labatt Brewing
Company Ltd. with its cross-carrier short-code campaign in 2002. Ever since then short-code
campaigns have become one of the most popular marketing tools for various large events, where

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consumers could text a keyword to a short 5-digit code in order to vote or receive valuable
prizes.

The short codes that a company purchases can be divided into three main types: Random Short
Codes, Selected Short Codes, and Shared Short Codes. These three types of short codes
mainly differ on whether or not a company gets to choose their own personalized code or not.
Whereas Random Short Codes can be bought for about $500, Selected Short Codes are
priced at $1000 per month and above.

In her article Lessons in SMS marketing from the Obama campaign Amy Syracuse points out
that nowadays text message marketing can be one of the most powerful resources to promote any
brand. The main focus should be on delivering something useful to customers in return, whether
it is coupons, stickers, ringtones, or anything else that they will appreciate. Once customers start
signing up, companies can leverage this database for future promotions. The major advantage of
this technology is that it allows marketers to segment their target database based on
demographics, location, and other characteristics, which can help tailor their messages better in
the future. The Obama campaign was one of the most prominent examples of how textmessaging marketing can help a brand increase its customer base.
One of the most successful text-messaging campaigns has been rolled out by Nike ID.
The company rented a large billboard on Times Square. Fans could send a text-message with
their custom design of Nikes to the code displayed on a billboard. As a result, they could win a
free pair of Nike shoes. This promotion created excitement among passers-by, and more than

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3000 shoes were given out. Similar campaigns were carried out by Adidas, Pontiac G6, Dove,
and others.

2. In-Game Mobile Marketing

According to M: Metrics report, mobile games are downloaded at a rate of five million per
month and, of the 16 million unique players, 35 percent are in the 18-34 male demographic.
These numbers definitely demonstrate the significance of mobile gaming as an emerging
advertising tool. One of the major benefits of in-game marketing is in the fact that brands are
better able to emotionally connect with their consumers because gaming involves complete
psychological engagement. Gaming is also attractive since it is a leisure time activity when users
are more receptive to marketing messages (Intl journal of Marketing).

There are two main ways of delivering promotional messages through mobile games. The first
one is a direct advertisement placement within the games; another is sponsorship of the entire
game development. Whereas the former is the more cost-efficient method of in-game marketing,
the latter is definitely the more effective. Nevertheless, it is important to note that the success of
an advertisement placed in a game is highly correlated with the quality of the game offered. If a
game generates a lot of positive feedback from its users, so does the brand associated with it.

Therefore, it is important to understand different categories of games, and how they appeal to
different target segments. Despite the fact that common perception is that the majority of gamers
are males under 30 years old, nowadays females are becoming frequent gamers as well.

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According to Intl Journal of Mobile Marketing, women in their 30s and 40s account for a
significant segment of game aficionados on the web, playing everything from solitaire and
puzzles to casino and retro shoot-em-up classics (Intl Journal of Mobile Marketing, Jim
Durrel). Therefore, in order to get the most out of a mobile gaming campaign, companies have to
study which games would be the most appealing to their target customer.

Advergaming has already proved successful for a number of companies throughout the world.
Coca-Cola India has launched an extremely successful game called Thumbs Up Everest. As a
result, in one week they received more than 350,000 downloads (Intl Mobile Marketing). This
example shows that even though in-game marketing has not been proven to be an effective
primary advertising tool by itself, it is an excellent complement to a well-rounded marketing
campaign.

4. Mobile Applications
a. Overview:
Applications have become one of the most ubiquitous tools accepted by consumers
looking to enhance the utility of their mobile devices. Marketing Applications designed
specifically to enhance the brand are meant to create a long-standing relationship with the
customers, as opposed to a short-lived relationship created by a text-message. Applications are
programs that are downloaded by their potential users to their mobile devices. They may range
from streaming video and music with image galleries, life-style information, news, blogging,
offers, and interactive features that survey consumers and help sell products-- such as coupons
for merchandise (Imedia Connection, Understanding mobile Marketing). Apple has

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developed more than 150,000 applications available for purchase on its website in order to help a
consumer to enhance his/her mobile experience.

For that reason, numerous companies are actively trying to take advantage of this
emerging trend. For example, Whole Foods Market, a chain of grocery stores selling organic
products, has successfully developed an on-line application. It allows users to browse through
thousands of recipes containing only healthy ingredients. Not only does the application increase
the awareness of the brand, but also serves thousands of its users as a helpful tool. Via Direct TV
application subscribers can set their home DVR to record their favorite shows from their
smartphone. Whether one wants to discover new ideas or learn more about the world, TED,
ESPN, CNN, and the rest of the networks have developed phone applications to download free
of charge.
Phone applications have become a utilitarian tool that is used for various purposes by an
increasing number of users. It is no longer an option for companies to avoid the use of apps in
their marketing campaign. Should the company be able to develop a successful application, the
return on investment can be significant. However, the development of a successful application
requires a lot of resources.
For that reason, an internet marketing and technology firm has developed a simple and
innovative tool to help brands plot the future of their mobile apps. By comparing an apps brand
value against its usefulness, the tool predicts whether
the app is doomed for failure or future success
(Mobile Marketing Watch, 02.26.2010). With the
help of external resources like that one, companies

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increase their chances of developing an application that will increase their brand awareness and
profits.
b. Cost of Developing Mobile Applications
Whereas large corporations, such as Direct TV or Whole Foods, utilize their own IT departments
in order to build a comprehensive applications, smaller businesses can create less complex
applications by means of a number of platforms available on-line. Such companies as
SwebApps, AppIncubator, Kanchoo, AppBreeder, My AppBuilder, Buildan
App,eBookApp, and others have created simple to use interfaces that are easy to
comprehend for non-technicians. Even though the prices may vary, a typical applicationcreating program charges a fee of $50 per button with up to 8 available buttons, plus a $25
monthly hosting fee. Other companies charge 25% of the overall profits.
c. Major Players in the Mobile Application Industry
The market for mobile applications is expanding tremendously. One of the major players
in the industry stimulating its growth is Apple, Inc. with its latest introductions of the I-Phone, IPad, and I-Touch. Recent development of i-Ads has transformed the mobile application industry
by allowing advertisers to buy spots in almost any Apple application. As a result, both the
application developers and Apple are able to make more money from advertising and allow
companies like Whole Foods to incorporate ads into their cookbooks. On the other hand, the
implications of this development for end consumers can be harmful. Having access to mobile
applications, there is a high probability that the advertisers will flood them with advertising
messages that consumers do not need. Balance can be achieved by utilizing targeted advertising

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which current technology permits. Consumers will be exposed only to relevant advertisements
that relate to topics of their interest.
According to the article Apple Edges Into Selling of App Ads, the next step in the
mobile advertising industry is to add a location component to its mobile ads so, for example,
coupons from local stores could show up on a persons phone (The New York Times,
04/08/2010). That opens up endless possibilities for the emerging movement of location-based
advertising, which is the next revolutionary step in the advertising industry.
D.

Location-Based Advertising Offerings (Hyperlocal Marketing)

a. Overview

It is no coincidence that one of the largest advertising publications Advertising Age lists
Mobile Marketing in three of the top five digital marketing trends in its article Where Digital
Marketing is Heading in 2010. According to the Mobile Marketing Association, total U.S.
spend on mobile marketing will grow from $1.7 billion this year to $2.16 billion in 2010.
Among the five top trends, geo-targeted marketing is listed as one of the emerging
developments.
According to Digital Beat Magazine, location-based advertising (LBA) is the
emerging business model for most consumer-facing location startups today. Similar to any other
mobile marketing technique, LBA can be of two main categories: push and pull. One of the main
distinctions between the two depends on who initiates the initial interaction the consumer or
the advertiser. If a customer passing by a restaurant receives a coupon for a free appetizer
without prior subscription or inquiry, the advertiser is engaging in a push process. On the other
hand, if a consumer initiates the interaction by subscribing or specifying which types of
promotions or ads he/she would like to receive, the process is called pull.

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LBA is currently in its inception and for that reason not a lot of research has been
conducted on the topic so far. However, as the proliferation of GPS-enabled devices increases,
LBA is starting to be perceived as a key part of the future of marketing. One of the main
advantages of LBA is the degree of customization that companies can utilize in the process.
Customers can subscribe through a number of different sources: mobile networks, Map-service
companies, or through mobile applications. In either case, the users are mandated to enter their
personal information in order to opt-into the service. As a result of that, the consumers
information as well as preferences, eating habits, etc. can be used in order to tailor the message
accordingly. One of the main implications for the consumer is the ability to obtain relevant
information at the time when it is needed, as opposed to spam messages that are no more than a
distraction.
b. LBA Platforms
While Apple is the first company to create such innovative technologies as i-Phone, iPad, and i-Ad, Google is its primary rival from the LBA technology standpoint. After winning
the patent for one of the major location-based advertising technologies, Google has gained the
power to utilize the technology that is determining and/or using location information in an ad
system (Ben Parr, 2010). The patent deals mainly with user interface with the technology, as
well as defining geographic areas of the system.
One of the first companies to develop a Location-Based Advertising platform was
Placecast, which was founded in 2005 with start-up funding of $8 million. The main purpose
of the platform was to drive customers to specific physical spaces. Users input lists of their
interests (bars, restaurants, types of shops) and receive direct-mail-type text messages from

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places of interest around them. (CrunchBase.com, 2010). It is going to take a matter of months
before the system can be mass-commercialized and used as a tool by thousands of consumers.
The Future of LBA
The implications of LBA are endless. Not only does it have the possibility to become one
of the major promotional tools for small businesses such as bars and restaurants, but also may be
helpful navigation device for larger retailers such as Barnes and Noble, Macys, or IKEA. For
these types of retailers, the platform can be configured to a network of cells that provide
location-based information such as new items, coupons, discounts or rollovers (Ad2Hand, 2007).
With the further expansion of RFID technology, wireless and infrared advertising, as well as
LBA, shopping will soon become a completely different endeavor than it is today. Cell phones
equipped with GPS and plain digital picture/video technology will be able to receive a
comprehensive MMS listing the names along with the barcodes of the items that are on sale in
the store near where one is located.
Companies will utilize all the latest resources in order to increase their profits. However,
with the increasing marketing power of advertisers, privacy issues are becoming of greater
importance to the public. Many critics say that the FTC will try to regulate this eye in the sky
that has the power to track ones location (CNN, 2010). The solution to this issue, however, can
be achieved by allowing consumers to control the flow of information by means of opt-in/optout options and to request only information that is personally relevant. The latter development
will allow consumers to customize their opt-in options in regards to what brands, items, or
stores they would like to include/exclude out of their message flow.

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There are a number of communication channels that marketers, brand managers, or store
managers can use in order to notify potential subscribers about an opportunity to opt-in one of
the similar services. For example, during the World Cup, Adidas communicated through
billboards, flyers, and other announcements special codes that fans could enter into their phones.
Store managers can let customers entering the store know about the chance to opt in through instore displays; hotels can use stretch banners over the entrance, and movie theaters can post their
special codes on the ad screens. The main goal of these companies is to attract as many
subscribers as possible in order to create a solid base of loyal followers.
Another trend that is emerging and will grow in the future is location-based networking.
Companies like Twitter and Foursquare are testing this new concept that allows its users to track
the location of their friends. The implications of this technology for marketers are endless.
Should they be given the permission to access these networks, companies can engage larger
audiences in their promotions. For example, restaurants can send out a package deal to a group
of six on a social network as opposed to a single text-message to an individual. Utilizing Google
technology, the content of the twitter posts can trigger relevant ads to show up on a mobile
screen.
While companies are increasing traffic, consumers are becoming more price-conscious
because of the increased number of lucrative offers that are being rolled out by the businesses.
Consequently, the mobile competition for consumers will become even fiercer and will force the
rest of the businesses to enter. This will create an accelerating wave engulfing more and more
businesses in this digital transformation.

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