Vodafone teams with Yahoo for customer outreach

Vodafone's UK customers are to be offered cheaper services if they allow advertisements to be sent to their mobile phones.

The mobile operator is joining forces with internet firm Yahoo to roll out adverts on a range of products to customers who agree to receive messages. The agreement is aimed at creating a fresh revenue stream in a cluttered and highly competiive market.

But customers needn't look for lower bills as a result of opting in. Instead, they will get discounts on paid-for services like downloadable games, music tracks and TV over mobile handsets.

"As the number of consumers accessing the Internet on their mobile devices continues to grow, Yahoo views innovation in mobile Internet services as key its future success," said Marco Boerries, senior vice president at Yahoo.

"The Yahoo-Vodafone agreement is the first time a leading Internet advertising provider and a major mobile communications company have joined forces to develop a new advertising solution for Internet services on mobile devices.

"Vodafone customers that agree to accept carefully targeted graphical advertising on their mobile devices will have the opportunity to enjoy savings on certain services, which may eventually include mobile games, television and picture messages, and other services."

Vodafone, which has 16.3 million UK customers, has been trialling sending adverts to some of its customers over the past year. The trial involved three different kinds of mobile phone adverts: click through banners leading to websites or mobile portals; ad-funded content such as a game; and video advertising.

Nick Read, chief executive of Vodafone UK, commented: "Since we announced our intention to develop revenue from mobile advertising as part of our mobile strategy unveiled in May, we have carried out extensive customer trials. We will now use the experience to determine with Yahoo! how best to ensure customers, who choose to receive targeted messages, get better value as well as a richer mobile experience. This will also ensure that advertisers are given a compelling proposition."

A record $4.2 billion was spent on Internet advertising during the third quarter of 2006, up 33 per cent from the $3.1 billion spent a year ago, according to a study by the Interactive Advertising Bureau and PricewaterhouseCoopers.

"We think the actual growth potential of advertising online is really being understated," said Yahoo CEO Terry Semel recently. "Whether it's mobile or whether it's video or whether it's more and more community, these factors have not gone into those numbers."

Tim Yates, head of Vodafone's consumer business unit, said an advert on a handset would be welcomed by customers and advertisers. "It is better targeted, less wasteful, and reaches certain target audiences that are much more elusive in terms of mainstream media," he said. "You can see that would be very appealing to certain types of advertisers."

The announcement came as the firm reported UK revenues had slipped by almost 1 per cent to £2.5 billion during the six months to September 30. Vodafone reported bottom-line losses before tax of £3.3 billion during the six month period, compared to a £3.9 billion profit last year. In the UK, an increase in people sending texts helped boost messaging revenues by 2.9 per cent.

Mobile devices are increasingly being seen as a tool for customer outreach. Last weekend Google's chief executive, Eric Schmidt predicted a time when Google users received free mobile handsets in return for accepting Google-originated advertising. "Mobile phones should be free,” said Schmidt.

"It just makes sense that subsidies should increase as advertising on mobile phones becomes more commonplace. Data should never be held hostage. We might as well get ahead of it before a law gets passed enforcing us to do that."