Web executives play down wireless Internet hype

Reshma Kapadia

LOS ANGELES: While wireless is still the next Internet frontier, Internet

executives are becoming more cautious about hyping revenue from yet-unproven

areas, such as sending ads promoting the nearest GAP or Starbucks to wireless

users as they walk down the street.

The caution comes as executives of Internet media firms, which rely heavily

on advertising, are facing a backlash over the meltdown in their shares, some of

which have fallen 90 per cent from highs a year ago. After hyping the first

stages of the Internet, including online advertising potential, executives

appear to be a bit more cautious about new areas, in hopes of trying to avoid

another Internet bubble.

As online advertising dries up, many Internet media companies have been

forced to temper their growth forecasts and look for other revenue sources, such

as high-speed Internet access and wireless Internet. "We thought 2001 would

be a different landscape, but we are now seeing even more intense advertising

skepticism (toward wireless)," DoubleClick Inc.'s director of emerging

platforms, Jamie Byrne, said at the Spring Internet World trade show in Los

Angeles.

"The reason we are not further along is because of a lack of compelling

services," he added. "The content platforms that carriers are putting

forth are not compelling." Several issues need to be ironed out before

executives put their buzz machines behind the sector, including the content

currently available and the type of devices most people use.

Currently, many cell phone users can access news, e-mail, financial quotes

and city guides thanks to alliances struck by companies like AOL Time Warner

Inc., Yahoo Inc., Microsoft Corp.'s MSN and others with wireless players such as

Sprint PCS Group, Research In Motion Ltd., OmniSky Corp., and AT&T Wireless

Group Inc.

However, analysts have said these deals were badly put together and that

carriers have to change the way they approach the sector. "Mobile operators

have not thought about what people want and they have made it difficult to get

things. They have just made a mess of it," said an analyst at Gartner Group

Kevin Dulaney.

"If you look at Sprint's phone today to get weather, you have to go

through three or four screens. It's easier to call someone up."

Applications have to be accessible much more easily - often within the first or

second screen a user sees, he said.

Internet firms seek to wrest power from carriers



While the control in the nascent industry appears to lie currently with the
carriers, analysts say that will have to change if the industry is going to take

off. "They (major Internet media and service providers) have to begin to

exert their prowess. They are experimenting but they haven't shown leadership.

It's more reactive," Dulaney said.

DoubleClick's Byrne agreed. "They have been tenuous about adopting

advertising, but they can drive it. They have to figure out how advertising is

going to fit into their business models and adopt," he said. Companies like

AOL Time Warner, Yahoo and MSN are battling to expand their reach and capture

the increasing number of users on wireless devices. A recent report commissioned

by AOL said that about 72 per cent of its 28 million users owned a cell phone or

a pager.

Internet service provider (ISP) EarthLink Inc. has already taken an

aggressive approach. The Atlanta-based company, which is a distant No. 2 to AOL

in terms of Internet subscribers, has set its sights on becoming the leading

wireless Internet service provider, said "EarthLink Everywhere"

initiatives executive vice president of the company's Lance Weatherby.

What people really want

Most executives dabbling in the arena have said they are trying to find out what

users want. Among the most popular features on wireless are e-mail, content and
instant messaging, Weatherby said. Most industry executives believe that the

cellular phones owned by most US wireless users are too small to benefit from

most of the content applications available. Until more people are using devices

with larger screens, they see the potential for content applications and

wireless ads as small.

Location-based advertising, which targets a passerby on the street for ads

such as a coupon for Starbucks or news of a sale at a retailer, are overhyped,

Byrne said. "Location-based advertising is expensive to do and hits a very

narrow audience that it becomes ineffective to market to," Byrne said.

"It is not realistic. Location needs to be layered in to make content more

realistic, but targeting someone on the street doesn't make sense."

The way location-based ads could work is if they are developed in a

geo-sensitive manner, sending ads about an East Coast ski resort to those living

on that side of the country for example, he said. Most executives applauded

location-based services, rather than advertising. James Ryan, director of mobile

Internet sales for AvantGo Inc. said he thinks it will be the "killer

application," or the service that is going to drive the sector.

The services do not require the level of targeting location-based advertising

do and have gotten good feedback in its early forms, he said at Spring Internet

World. Such services would include finding the closest movie theater playing a

certain film, locating the nearest ATM machine, getting directions or finding a

restaurant and making a reservation.

"Failure makes people do smart things and that's what's going to

happen," Dulaney said. "Some things are going to have to crumble

before carriers do it."

(C) Reuters Limited 2001.