I saw this post over at Reuters this week titled Virgin Mobile Introduces Ad-Subsidized Calls and my initial reaction was that it is a lame idea....


It conjured up memories of MyPoints and e-rewards. After I ignored the sick feeling in my stomach, I thought about it for a few minutes and decided, well it is not so bad. Why not - the only risk they have is that their users don't go for it and all they are left with is a few upset advertisers.
According to the article, Virgin Mobile USA will give its customers the ability to generate free minutes (up to 75 per month) when they view and respond via text messages to ads. In the article is this quote from Virgin Mobile USA CMO Howard Handler, "Very practically speaking, a lot of our customers are value conscious. They manage budgets that are finite."
And he added, "It will contribute meaningful additional top line revenue and EBITDA."
First let's look at the business side.
The math seems pretty simple, have advertisers pay Virgin Mobile a CPM for running ads and then give users back free minutes. If you take a look at their pricing, which seems a little complicated to me, and focus on the promoted price-per-minute, it translates into 10 cents. However, we should probably bump that up a little, to take into consideration the daily call fees and other pricing permutations, so let's make that revenue per minute 12 cents. Now all Virgin needs to do is provide competitive CPMs and scoop up the difference. Sweet.
So, besides earning the "float" where else do they win out?
Easy, they get people engaged in using their phone for surfing the internet, text messaging, and viewing ads. Any methods to increase usage of cell phones for something other than making calls is a good endeavor even if this product is mostly geared toward under-30s who should know how to use their phone already.
Of course, the downsides are that they could possibly increase churn, customers do not embrace the program, or advertisers see no increases on their post-click/post view actions.
I think the last two represent the biggest concerns. A Forrester Analyst mentioned in the article is not completely sold on the incentive. I, for one, think that the advertisers, if they have any sense of post-click analytics, should be worried about Response SPAM or SPARM; people just doing the bare minimum to get paid, kind of like the career focus-group participant.
Advertising to today's consumers takes more than just running some ads and paying people to respond. With all of the buzz regarding social networks, conversational marketing...heck, even PPC... it seems that Virgin is going back to the future.
Personally, I think the response will be tepid because it will take a very price conscious consumer who does not care about image to take advantage of this price schedule. However, Virgin has very little to lose and a lot to be gained by testing it out. Good luck.
PardonMyFrench,
Eric

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ABOUT THE AUTHOR

Eric Frenchman is an online marketing and advertising consultant located in the Great State of New Jersey and Chief Internet Strategist for the online political agency Connell Donatelli Inc. Since 1998, Eric has managed multi-million dollar online advertising and CRM campaigns for AT&T, DLJdirect, Harrisdirect, and BMO Investorline and is a recognized expert in online marketing and advertising techniques. In 2005, Harrisdirect was ranked as the 17th largest online advertiser in the US and in 2003 was recognized as Best Financial Advertiser. Eric Frenchman's marketing blog is located here: http://www.ericfrenchman.com