Dreaming in code

Advertising to the world's largest mobile phone user-base should be a marketer's dream. Yet China's mobile advertising market was valued at just US$17 million last year, well below the US$40 billion spent on ads in total.

A new kind of mobile advertising technology, however, could be the key that unlocks the country's 461 million mobile phone screens to advertisers.

The technology uses two-dimensional barcodes, a more evolved cousin of the humble Universal Product Code found on groceries, to create an advertising channel with an aura of science-fiction.

Two-dimensional barcodes can be used to bridge the online and offline worlds, turning, say, a coffee table into a physical hyperlink, and your mobile phone into a giant mouse pointer. You "click" the barcode on the coffee table by taking a picture of it with the camera on your phone, and then are automatically taken online.

When used properly, it can help advertisers build detailed databases and customer profiles. Location, content viewed, mobile phone used – it can all be traced.

"Advertisers will know where someone was when they clicked the ad and guess what they were doing at that moment," said Sage Brennan of research firm JLM Pacific Epoch. "If [barcode-reading software] is in every handset around the country, the incentive to insert a tiny code [in advertisements] is huge."

Short on sophistication

China's mobile advertising market is starved of such innovative delivery methods. The market is currently dominated by SMS advertising, which relies on the cheapness of untargetted text messages.

SMS advertising is a "push" technology, leaving consumers at the mercy of advertisers. But with barcodes, the consumer chooses whether or not to click. In Japan and Korea, 2-D barcodes are already used for everything from bus schedules to stock market updates.

For a three-month period that ended in February, Chinese barcode pioneer Gmedia provided Starbucks with barcodes to display on tabletops in the chain's 50 outlets in Beijing. When a user clicked on one, they were linked to a website that allowed them to redeem a free coffee.

Another company trying to cash in on physical hyperlinking is Hong Kong-based MyClick. Although it uses a patented photo recognition technology, not barcodes, the endresult is virtually identical. Any visual medium – a magazine page, billboard or television commercial – can carry an image framed by a special border. The user simply snaps a photo of the framed image.

"MyClick provides an impulsive opportunity for consumers to respond to a brand," said Steven McCormack, the company's vice president of sales and marketing.

McCormack thinks this form of advertising is culturally in tune with young Chinese consumers.

"In China, consumers are into marketing that's hao wanr (fun). It's not like the US, where the internet is a tool for purchasing products. Here, it's all about yu le (entertainment)," he said.

Consumers will not be expected to pay to click on barcodes, beyond the charges that apply to accessing the internet on their mobile phones. Instead, service providers charge advertisers.

MyClick, for example, charges an annual licensing fee and a fee for each hyperlinked frame. Once the frames are in use, the price is US$0.20-0.60 per click.

"It's still very low-cost; if I work in traditional media already, I can incorporate some interactivity," said Johan Vakidis, creative director at advertising agency OgilvyOne in Shanghai.

But cost is still largely theoretical. Mass adoption is some way off.

"It's a chicken and egg situation, you have to get enough content to attract consumers, and enough consumers to attract advertisers. Right now we just want to get the motion going," said Ron Cao, a partner at Lightspeed Venture Partners, which has a stake in Gmedia.

The waiting game

What's more, China's continued stalling over third-generation networks means barcode software lacks usability. The growth in barcode advertising in Japan and Korea that has come in tandem with bigger wireless bandwidths just isn't there in China – users are left frustrated by long waits as websites load.

"Barcode-based services cannot see fast growth before 3G launches in China," said Liu Bin, principal analyst at Beijing-based research company BDA. "For now, SMS and WAP-based advertising can grow much faster."

The barcode service providers are not waiting for that.

Gmedia and Inspiry, which promotes its own standard, have announced partnerships with China Mobile. Inspiry has also persuaded handset manufacturers to pre-install its software in "hundreds of thousands" of units, according to Lawrence Tse, a general partner at venture capitalist firm Gobi Partners, which has invested in the company.

Which barcode standard ultimately wins China Mobile's favor and dominates the advertising space is still up in the air. The consumer, however, won't want an advertising system that doesn't work.

"The end-user doesn't care what technology they use. As long as one service is more convenient, [he] will choose it," said Liu.