By Ryan Knutson
Earlier this year, Dan Check, the vice president of technology
at Slate, was looking for ways to increase traffic to the online
magazine's podcasts. After a bit of brainstorming, he decided to
try paying the toll.
Slate told some would-be listeners that the podcast wouldn't
count against the data plans on their smartphones. It turned out
that group was 61% more likely to press play.
"I was surprised at what a difference it made," said Mr. Check,
who began the experiment two weeks ago with the help of a company
called DataMi. "It turns out people have a really, really high
sensitivity to using data."
When AT&T Inc. rolled out a plan early this year to let
companies pay for data its subscribers consume, it looked like a
long-odds attempt to get a cut of the valuable traffic generated by
sites like YouTube and Facebook. But the idea is starting to get
some traction.
Hershey Co., Hotels.com and EBay unit StubHub have been taking
part in experiments by services that pay users' data cost or offer
bonus data when people visit their websites, sign up for free
trials or watch movie trailers from their smartphones or
tablets.
The efforts so far are primarily experimental. But if they catch
on, they could give carriers a way out of a conundrum: The telecom
industry is counting on rising data use to keep its sales growing,
but consumers are keeping a close eye on their usage for fear of
triggering even higher bills.
The approach is also being monitored by regulators, who worry
the practice could give traffic sent by big companies that can
afford to cover the data cost an unfair advantage.
In 2013, U.S. households on average spent $913 on cellphone
service, a 50% increase from 2007, according to the Labor
Department. A fifth of those households spent more than $1,400. The
average monthly cellphone bill at Verizon Communications Inc. has
risen 3.5% from last year to $161.24, the carrier said Tuesday.
Those rising costs mean companies trying to deliver products or
services to mobile devices face an extra hurdle: Not only do they
have to sell potential users on the idea, they also have to
convince them it's worth the hit to their data plans.
A new service launching this week called Freeway allows users of
AT&T smartphones to access a number of sites, including
StubHub.com and Expedia.com, data free. Users can also watch a
trailer for the independent film "Frank vs. God" without it
counting against their data plan.
David Doctorow, Expedia's senior vice president of global
marketing, said paying for data helps the site connect with its
users, particularly when they are traveling and more likely to be
sensitive about data usage.
"We see the sponsored-data industry as one to watch, as it could
be quite relevant for travel," Mr. Doctorow said.
Kickbit, a service launched last year, allows smartphone users
on prepaid plans to earn chunks of free data when checking out or
signing up for new services. One recent offer, for instance, gave
users 200 megabytes that could be used any time if they signed up
for a seven-day trial with Hulu.
Kickbit has been downloaded more than 100,000 times in the
Google Play store. Susie Kim Riley, chief executive of Aquto, which
launched the service, said that in exchange for engaging with
brands, its users collectively earn tens of thousands of gigabytes
of data each month--the equivalent of hundreds of hours of
high-definition videos.
The offers take advantage of a shift in Americans' behavior
toward using smartphones more often for entertainment and
shopping.
Break.com, a video humor website targeted at young men, plans to
start an experiment next week that allows AT&T customers to use
its mobile app without it counting against their data plan. The
site has 50 million total monthly viewers, and users spend a
cumulative 14.5 million hours on its mobile site and mobile app
each month.
Paying for all that data use could add up. Matt Diamond, chief
executive of Defy Media, which owns Break.com, said the economics
are attractive only if the number of viewers increases.
"If it doesn't increase the amount of time they spend on it,
then we're just spending money we didn't need to," Mr. Diamond
said.
Advertisers are approaching the offers with cautious optimism.
Paying for data could draw in consumers, but it could also bake
more cost into mobile advertising, said Jeff Malmad, who oversees
mobile for North America at Mindshare, a global marketing
agency.
"Ultimately we're going to want to watch this set of people and
see if they come back over time and subscribe to podcasts," said
Mr. Check, of Slate, whose free-data test ended this week. "Whether
or not these people will stick is still an open question. But we
know that people that don't press play aren't going to stick."
Write to Ryan Knutson at ryan.knutson@wsj.com
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