Would you watch ads just to talk for free?
Wireless carriers are betting that customers will endure commercials in exchange for free airtime or downloads.
By Michal Lev-Ram, Business 2.0 Magazine writer-reporter

SAN FRANCISCO (Business 2.0 Magazine) - Don't put down your phone - your caller will be right back after this commercial break.

Starting Wednesday, June 14, Virgin Mobile USA's customers will be able to earn up to 75 minutes of airtime a month by watching ads on Virgin's website or reading text-message ads on their phones.

Most analysts agree ads are coming to a mobile screen near you. By some estimates, the mobile advertising market could reach $1.3 billion a year by 2009.

Indeed, the notion of ad-supported airtime is a new twist on an old business model. According to Lewis Ward, a research manager with IDC, it's only a matter of time before mobile phones go the way television and the Internet have gone - seeking advertising revenues to subsidize cell-phone calling or wireless content.

"This is very likely to happen if you look at the history of other media," says Ward, a specialist in wireless communications.

Sweet deal for marketers

Unlike television commercials, though, Virgin's ads may seem outrageously demanding. While television gives viewers 22 minutes worth of a sitcom in exchange for seven or eight minutes of ad time, Virgin's customers will have to spend 75 minutes viewing advertisements - and correctly answer follow-up questions to prove they were paying attention - to get 75 minutes of airtime.

It's a proposition that seems like a stretch for most consumers with jobs, but Virgin is betting that this new plan, dubbed "SugarMama," will be a hit with its 14-to-25-year-old demographic, which tends to have plenty of time on its hands. Teens may well be glad to have a way to earn airtime without asking parents to top off their minutes. Virgin is also confident advertisers will welcome a new way to woo the company's 4 million customers.

Microsoft's (Research) Xbox, Pepsi-Cola (Research) and Truth, an anti-smoking campaign targeted at youth, have already signed on for SugarMama's launch. And, according to Virgin chief marketing officer Howard Handler, more deals with advertisers are in the works.

"We have the highest concentration of teens in the wireless world and a lot of advertisers want to engage with our customers," says Handler. "Plus, the mobile phone is the device that people have the most intimate relationship with. It's a direct marketing vehicle."

Initially, participants of Virgin's SugarMama program will have to choose between reading text messages or watching ads online. But, says, Handler, as soon as video-enabled phones become more mainstream with their customer base, it's likely SugarMama users will be able to accrue minutes by viewing video ads on their mobile phones as well.

Video ads coming

Other companies aren't waiting that long. U.K.-based startup Amobee is pitching wireless carriers on a service which gives users the option of "paying" for downloaded content such as games, music and video by watching commercials on their phone. Backed by Sequoia Capital and Accel, the company's already testing its technology with wireless provider Orange Israel, and plans to launch with other operators by the end of the year.

As 3G phones bring wireless video into the hands of more and more people, there is no question advertisers will maneuver their way into consumers' open palms as well. The only question is, in a world already so saturated by ads, how much time will users be willing to spend watching commercials on their cell phone?

It will likely come down to how long the ads are, and how much users get in return. In Virgin Mobile's case, it's charging a minute of ad-watching for a minute of talking - a bargain bored but cash-strapped teens may be willing to accept. Commuting professionals, on the other hand, may not tolerate more than a half-minute of commercials in a five-minute news clip.

If time really is money, we're about to find out the exchange rate. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.