Digital Thoughts – The Next Big Thing

Were I to have access to more time, energy, and/or a statistician, I could point out the instances in my articles dedicated to the incentive promotion space. Without those, I can only speculate, but I feel confident in suggesting that they are numerous. In many ways, these campaigns summarize our industry and are among the single point of differentiation between our space and others online. And like search, it’s a crowded and fiercely competitive market. Almost overnight, the space grew from free DVDs and gift cards to almost any premium imaginable. Ads for incentive promotions can be found on virtually all affiliate and ad networks and tens of thousands of sites and serving billions of impressions monthly for them. With that kind of exposure, the race is on, and always has been, to find the next big thing. This week’s Thoughts focuses on a market segment that to date has largely not interacted with ours but that most likely will in the near future. That market is the mobile market, but it’s not from an inventory perspective but a content one – ringtones.

The ringtone market parallels internet adoption in that it took time for a critical mass to exist. Similarly to the difference between broadband and dialup, the ringtone market applies to those people with phones capable of supporting polyphonic rings and the newest evolution, real tones. Unlike broadband which continues to build momentum but is still not the “norm,” in the cell phone market the switch from monophonic to polyphonic phones occurred rapidly. Virtually all new phones in the past two years support polyphonic ringtones, and this includes the free phones used as incentives by the cell phone carriers. What’s more, in comparison to web surfers there are far more people with cell phones. That cell phones would become a hot market no one doubted, but chances are most people would not have guessed the opportunity to be in the ringer.

In 2003, ringtone sales reached $75 million, and in 2004, that number more than doubled for the US alone. Worldwide, where cell phone adoption and technologies outpace the US, saw content sales reach between $2.5 billion and $3.0 billion putting it at approximately 10% of total music sales. Given that the majority of spending occurred overseas, most here have yet to put ringtones on their radar. This, however, has started to change as more and more surfers start to see ads for cell phone content from providers such as Jamster who offer one free ringtone for new users. It won’t be long before users can send to their phones full length music files and for that to be the norm.

So what does all of this mean for us? It’s hard to say. At one level, ringtones provide a secondary source of ever changing content. Our incentive promotion ads rely on contextually relevant giveaways and new consumer goods being introduced. Without the iPod, Plasma TV, and Luis Vuitton among others we might not have our ads. In other words, without consumer interest, we might not have ads. The incentive promotion industry follows, and is a bellwether for, consumer demand. That demand is starting to shift in the direction of ringtones. That is why in the near future, it only seems logical that ringtones will be among the leading draws. They are not only contextually relevant with pop culture but they also appeal to an often hard to monetize demographic, younger viewers. Imagine a time when advertisers will use not just a front-end promotion but a back-end conversion offer, ringtones can help make more valuable a demographic that many of today’s incentive advertisers do not want.

Some companies have started now… this is to say that some in our space have started to create ringtone related offerings, but none have cracked the nut on integrating real ringtone content for their promotions on either the front-end or the back-end. There are registration paths offering free music as well as registration paths offering free software to create your own ringtones, but as a whole, we’re still in the exploration phase. And chances are we might remain there for a while. Unlike current incentive promotion content, e.g. an iPod or Plasma TV, access to content does not come as neatly packaged as simply going to Amazon.com. Similarly, the closer we get to the actual content the more challenging the space appears. The music industry does not exemplify rapid adoption and efficiency. Think of how well they embraced digital music when it first came out. That we even have ringtones almost amazes me. Nevertheless, with scale comes opportunity, and our industry offers that scale. It certainly offers the creativity to integrate any trend into a successful marketing campaign.