Mobile phones have become a true multimedia device, enabling owners not only to make calls but also watch videos, send emails and play games.
Mobile applications are becoming more sophisticated by the week and brands are realising that their basic text-to-win campaigns can evolve into more refined forms of communication.
Penetration of smartphones - which combine mobile phone and PDA functionality - has risen to 9% of sales in the UK, according to mobile research company Strategy Analytics, and application developers are now showing brands what can be done with the channel, from offering previews of games to city guides and interactive film content.
Pasi Leino, managing director of mobile ad technology company BrandHand, believes the mobile marketing revolution is about to begin. 'The sector is ready to take off. The smartphone handset market has previously been a hindrance to the mobile industry, but penetration levels are now rising,' he says.
Mark Curtis, who runs mobile development agency Fjord, echoes Leino's views. 'The tipping point is not quite here yet in terms of clients saying "We have to do mobile". But the better-funded FMCG players will be doing it soon.'
There are few working examples of downloadable branded applications on the market yet, and there is a sense that companies are waiting for others to make the first big move. Peter Larsen, chief executive of mobile communication agency Enpocket, says that while the market is ready for change, it is holding back for now. 'Most of the brands we work with are discussing the opportunities this market can give them. There is so much untapped growth and we will see these applications being used more,' he says. 'Penetration of smartphones at the moment is OK, but it will skyrocket after Christmas, which will encourage more brands to get involved.'
Cost-efficient medium
In this developing market, agencies are seeking to create a business model that will convince brands that mobile applications can be a cost-effective means of communication. A number of issues, such as the development of an advertising-led approach, are being ironed out. This sort of approach will give brands the power to develop genuine one-to-one relationships.
But the content must be relevant to the consumer in order to catch their attention. 'It is easy to imagine going to Glastonbury and being offered a download guide to the festival with advertising within it,' says Curtis.
The need to keep costs down underlies all activity in this area. Pamir Gelenbe, co-founder of mobile marketing agency Flytxt, says the services must be cheap enough to entice users to download them. 'The big issue at the moment is that these applications are almost 400kb and that would cost you almost £1 to download,' he says. 'Advertisers won't want consumers contacting them about hidden costs.'
Although Gelenbe sees this as a problem, he believes it will ease with time, as mobile data services become more commoditised and operators offer new payment models. 'In two years I believe we will see an all-you-can-download model for data charges in the style of an ISP,' he says.
The medium certainly has enormous potential. Sony PlayStation and Nintendo, for instance, could use it to preview their products, enabling users to play a single level of a new game on their phones before it is released.
Publishers, meanwhile, might use the technology to create mini-mobile magazines that could be subscriber-based and updatable.
A number of heavyweight brands are already getting in on the act. Snickers worked with BrandHand at the Donington Park Download Festival in June to provide a guide to the event.
BrandHand is also working with Disney on a prototype application that allows users to play games, interact with film content and use a Visa-verified payment system to buy soft toys. But, typical of the general reluctance to push forward too soon in this market, none of the applications are due to launch soon - despite Disney having its own mobile channel in the US.
Time Out is one brand that is making the most of the medium, though.
It has taken advantage of the technology to create a number of city guide Java applications that enable users to browse listings for restaurants and attractions in 120 cities around the world. The service can also be used with location-based technology to offer suggestions of places to visit nearby.
David Pepper, managing director of Time Out Communications, the digital division of Time Out, says the application, developed by Enpocket, will lead to the publisher offering many more branded applications on mobile phones. 'We are definitely interested in doing more things like this. We believe in putting the Time Out brand on mobile devices,' he says.
Pushing boundaries
Audi has also carried out a project using a branded mobile application (see case study). The car manufacturer is now monitoring the results with a view to developing the strategy in the future. Krishan Bodhani, digital communications manager at Audi, says the brand took the decision to use the medium because it fits with Audi's ethos of pushing technological boundaries. 'We always use press, online and above-the-line advertising, but this is a relatively new channel, and we want to be an industry leader with it.'
Many in the industry are nevertheless urging caution for the moment.
Fjord's Curtis says the market may be limited if consumers, rather than the technology, decide what will be downloaded on to handsets. 'There will be a mental limit on how many applications consumers will be able - or want - to use on their phone,' he says. 'I believe that everyone will have five or 10 things they do with their mobile. That means the proposition of an application must be very compelling (to be taken up).'
Although mobile operators may initially worry that applications will take users away from their portals, such as Vodafone Live! or Orange World, which have cost millions of pounds to develop, Enpocket's Larsen believes that the rise of branded offerings will ultimately work in their favour.
'Operators will continue to be powerful in connecting brands to consumers,' he explains. 'We will see a mix of brand and operator portals, but the operators will still have revenue streams from the data. It is still in its early days, but now that SMS is an everyday consumer application and most people can use WAP, so Java applications will be the proposition for 2006.'
Forward-thinking brands need to take up the gauntlet now, allowing them not only to drive the direction of the industry but also to gain from first-mover advantage. Once smartphone penetration is high enough, a sustainable model is found and data costs for consumers become acceptable, branded applications are likely to become the norm, just as text-message ads are today. As Audi's Bodhani says: 'This has the potential to become the next battleground for brands.'
CASE STUDY - AUDI TT QUATTRO SPORT
Audi wanted to back the launch of its TT Quattro Sport, but as the model is a niche product - about 1000 cars were being shipped to the UK - it did not warrant a huge campaign.
However, Audi wanted to make some noise about the model, as 2005 is the 25th year of the Quattro. It briefed Bartle Bogle Hegarty to create the campaign.
BBH felt that mobile communication agency BrandHand's application would be a perfect fit with Audi's ethos of being at the forefront of technology.
The application allowed mobile phone users to zoom around images of the car and focus on specific areas to gain more details. It also enabled users to download more information from the web, send details to friends and download wallpaper.
The application was sent to an opt-in audience, while other media prompted consumers to text a number for more details.
The message generated a 20% response rate and an interaction rate of more than 40%. The application, which was downloadable to handsets, was trackable, as all requests passed through BrandHand.
BBH content manager Fred Uribe says that while the medium is constrictive in terms of creativity, it works well as a marketing channel. 'The results are sitting well against DM and online,' he says. 'If the technology improves, it will become important for brands. If you can get into people's hands - and into their pockets - when they are moving around, this medium will be very attractive.'