Virgin pays subscribers to view ads

About two weeks ago, we found some news on mobile advertising. This is an idea we had previously opposed, but once we read this business model, we couldn’t help but get excited. Imagine looking at an ad…and knowing you’re getting paid for your time. It’s the best idea to come to interruption marketing since, well, ever. We had reported earlier on MyScreen Mobile, but this is a different program run exclusively through Virgin Mobile. Of Virgin’s 4.8 million subscribers, Virgin has reportedly signed up 330,000. With this program, called Sugar Mama, participants receive one free minute for every 45 seconds they spend with an ad or on the company’s Web site. This sounds great, but remember that there’s no such thing as a free lunch. That is, you’re only really getting 15 free seconds per minute you spend; the airtime for the ads isn’t free. To date, Virgin reports doling out 9 million free minutes, which means that advertisers have spent a whole helluva lot of time with Virgin subscribers. The part we don’t understand, though, is why advertisers would target Virgin, whose main subscriber base is late teens and early 20s. We all know that demographic isn’t always flush with cash. Think about it: those who opt into mobile advertising plans like this are likely in need of the free minutes. Why are they in need? Because they don’t have a lot of money, so every little bit helps. So if they don’t have a lot of money, why are you trying to sell them things? According to analysts, “people in their late teens and twenties are less price-conscious when they do spend their money.” The results bear this out. The click-through rate is a staggering 5 percent. This may not seem like much, but keep in mind that a one percent response rate is considered excellent in the direct marketing industry, and response rates to online ads is below one percent. Of course, this five percent rate won’t last long. But early results are favorable for mobile advertising. Another reason for targeting a younger demographic: they will eventually start to earn more money. “The 2007 college senior could take a job with [consulting firm] Accenture (ACN) next year,” says John du Pre Gauntt, a wireless industry analyst for eMarketer. We have a friend who did this. He makes a lot of money now. So yeah, we’re all the sudden less averse to this business plan. This form of advertising is sure to grow as we collectively move toward the smart phone. However, it remains to be seen if this “pay-per-view” advertising form will hold up. [Businessweek]]]>