A third screen for advertisers

A Baltimore CEO believes cell phones are the next hot-revenue outlet for ads

May 31, 2007|By Tricia Bishop | Tricia Bishop,Sun reporter

Paul Palmieri has the sort of gleam in his eye usually reserved for new parents about to pull out pictures of their progeny. But instead of photographs, he takes his mobile phone from his pocket, flips it open and scoots his chair a little closer.

On the screen is a 2007 Pontiac G6. He pushes a button, and color options appear. He pushes again, and tire rim choices float into view. Soon, fully outfitted, the car drives off, and Palmieri beams.

He's clearly still something of a proud papa, except his baby is a year-old company - Baltimore's Millennial Media Inc. - working to put commercials, such as the Pontiac demo, on cell phones.

"The mobile-advertising business is eventually going to be bigger than the Internet because of the personal nature of the device," he insists, surrounded by entrepreneurs and venture capitalists yesterday at a Baltimore convention.

Two out of every three Americans have cell phones. And the display window on those phones recently has been dubbed the "third screen" - as in the TV is No. 1 and the personal computer No. 2.. Given all the attention, entrepreneurs and investors are doing their best to find new ways to cash in on the ubiquitous medium.

For the most part, that has meant delivering content that consumers pay for, such as downloadable songs, ring tones and wallpaper. But during the past few years, a new crop of companies has sprung up offering advertising as another revenue outlet. Such ads are often attached to subscribed-for services - say, requested driving directions - and akin to the banner ads stripped across the top of Web pages.

In a report issued last month, industry researcher eMarketer Inc. predicted that worldwide spending on such ads would balloon nearly tenfold during the next four years, from about $1.5 billion last year to nearly $13.9 billion by 2011.

That has attracted the attention of technology giants such as Google, which has been testing mobile ads abroad. And this month, AOL and Microsoft announced they had acquired mobile-advertising companies.

It's still not clear if the idea will be widely accepted, however. Consumers have shown a pretty strong disdain for telemarketers, and those paying for content on their phones might not embrace commercials - even unobtrusive ones - along with it.

"There might be a natural aversion by some people," said Don Rainey, a Virginia-based venture capitalist with Intersouth Partners.

He was among several hundred investors yesterday at the Mid-Atlantic Venture Association's annual Capital Connection conference held at the Baltimore Marriott Waterfront Hotel. There, 40 selected technology startups from multiple states got to pitch their products and plans in the hopes of bringing in millions of venture-capital dollars.

Annapolis' Exponential Storage tried to sell investors on its large-scale storage products for digital media. Pennsylvania's Portico Systems highlighted its technology that helps health insurance companies. And in presentation room No. 2, Palmieri had eight minutes to talk about Millennial Media, where he's the chief executive and one of the founders.

He brings a work history to the company that includes time at Verizon Wireless and Baltimore's Advertising.com, which AOL bought for $435 million in 2004. Most of his management team has worked for Advertising.com at some point, and the rest of their collective resume includes stints with Sony Ericsson and Warner Brothers.

Such experience likely gives the startup a leg up, said Julia Spicer, executive director of the Mid-Atlantic Venture Association.

"If you've proven yourself before, ... you have the eyes and ears in investors," Spicer said.

Millennial Media - named for the generation of 76 million people born between 1977 and 1995 who use more than their share of mobile media - has several divisions. But it basically takes ads meant for other media and translates them for cell phones.

For example, WeatherBug, a Germantown company offering live weather reports, works with Millennial Media to take ads it might already have on its Web site and convert them for mobile devices. So consumers who subscribe to WeatherBug's information on their cell phones might also see a clickable advertisement attached.

WeatherBug charges a $3 monthly fee for services such as weather alerts and forecasts available over cell phones. But it's also drawing revenue from the advertisements.

Like their World Wide Web counterparts years ago, companies offering mobile content have reached the phase where they're trying to outline the business model that can pay the bills. Some are leaning toward subscription-based paid content, cable-television style. While others are looking to radio for an example, offering free services such as driving directions and then relying on accompanying advertising for revenue.

Millennial has brought in $6.3 million from venture capitalists based on its advertising model, which can be incorporated into paid-for content. But investors know there's a risk consumers will reject such promotional activity.

"It's an early market," acknowledged Michael Avon, a venture capitalist with Virginia's Columbia Capital, which has invested in Millennial Media.

But he's fairly certain it's a market that will follow in the Internet's footsteps.

"I think all forms of media eventually moved to advertising solely or as a hybrid," Avon said. "I think that's going to happen with mobile as well."

tricia.bishop@baltsun.com

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.