Future is Orange for mobile phone ads

Orange has signed up major advertisers including Jaguar, Peugeot and Microsoft's Xbox to put interactive advertisements onto to its mobile internet portal. It is the first major attempt by a mobile telecoms company to use the ubiquitous mobile handset to open up a lucrative new revenue stream that could turn the global advertising market on its head.

Mobile phones offer advertisers an opportunity to pipe information about products and services directly into a consumer's pocket. The personal nature of the mobile phone, combined with the information that mobile telecoms companies have about customers' habits and preferences when using their mobile phone, can be harnessed to target adverts at specific users. Advertising on mobile phones is seen as raking in about £60m this year but is expected to double in 2007. By 2010, analysts predict the segment could be worth more than £5bn.

Orange is the first mobile company to push upfront advertising in a significant way in the UK. Initially, only customers with certain high-end handset models will see the adverts but by next year, most Orange customers using its portal will have to contend with advertising. Orange will soon be joined by other players. Vodafone has identified mobile advertising as a key growth area as it looks to offset the impact of lower prices and greater competition in its mature European markets.

Orange has an advantage in attracting major advertisers as it also has 2.6 million internet customers. Steve Ricketts, a marketing manager at Orange, said: "We've seen a lot of interest in complementary campaigns across the internet and mobile phones as well as pan-European advertising." Orange, part of the France Telecom group, has 57 million mobile subscribers across 17 countries.

The new adverts will target users with marketing relevant to their interests. For example, customers who download games on their mobile phones will receive interactive ads for the Microsoft Xbox. Other users will be offered a video of new Jaguar models while some advertisers will sponsor film and music video clips, providing users with free content. Users of location-based services on their handsets could be targeted with adverts for nearby restaurants or coffee shops.

In the longer term, advertisers hope customers will start using their phones to buy the products on offer.

Mr Ricketts said mobile companies needed to find a balance between the interests of advertisers and consumers who do not want to be bombarded with irritating adverts every time they turn on their phone. Mr Ricketts said: "This type of advertising holds a greater risk of irritation as the mobile phone is a personal device. The marketing has to be relevant and interesting. "

For advertisers, mobile phones represent a huge opportunity as more-traditional avenues become less attractive. Newspapers have already started feeling the pinch as more advertising moves onto the internet, while new television services such as Sky+ and BT Vision allow viewers to skip adverts.