By Ryan Knutson 

Some of Sprint Corp.'s prepaid customers will soon be able to get $5 off their wireless bill in exchange for putting up with more advertisements on their smartphones.

The option, available to customers on Sprint's Boost Mobile brand, provides the carrier with an opportunity to experiment with a new model of mobile advertising.

Subscribers who choose to download the "Boost Dealz" app from the Android Play store will be frequently shown ads that cover their entire home screen after they unlock their smartphones.

Users can dismiss the ads by pressing a button to indicate whether they like or dislike the content, or they can click on the ad to engage directly with the brand.

Telecom companies have spent billions of dollars building ubiquitous high-speed wireless networks, but they have struggled to profit from the advertising revenue flowing over them. Those advertising dollars have largely gone to Silicon Valley firms like Alphabet Inc.'s Google and Facebook Inc. Smartphones are becoming increasingly important to the overall advertising market. In 2015, spending on mobile ads is predicted to have surpassed spending on desktop ads for the first time.

Digital ad tracker eMarketer estimates 52.4% of all digital ad spending was on mobile in the U.S. in 2015, or about $30.5 billion. Carriers have been trying to find a way into that market. Verizon Communications Inc. took a step last year, paying $4.4 billion for AOL, in large part for its advertising technology. The carrier also launched an ad-supported video app targeted at young people, called go90.

Sprint's move is just one step. The offer is only available to customers with Android phones. Customers must choose to enroll in the app and can turn it off at any time.

"We thought it was a very low-risk way to understand how this type of value proposition would go over with our customers," said Doug Smith, director of Sprint's prepaid product marketing. Mr. Smith said Sprint set out about a year ago to find partners who could help the carrier explore new opportunities in advertising. Sprint is working with a startup called Unlockd to offer the discount. Unlockd and Sprint share in the advertising revenue generated above the $5 that is going to each customer. Unlockd manages the ad inventory and sells it to brands and marketers. If it goes well, Sprint may expand the offer to Sprint's broader customer base, or increase the amount of money users receive for interacting with the advertisements, Mr. Smith said.

"Who knows where this could go," Mr. Smith said. "We thought it was important to start understanding consumer behavior and the economics behind it."

Wireless companies are increasingly looking to supplement slowing growth in their core business. There are more active cellphone plans in the U.S. than people, and the market is about 77% penetrated by smartphones, according to comScore Inc.

"Carriers globally are really fundamentally changing their focus to figure out how to get new revenue streams," said Matt Berriman, CEO of Unlockd.

Unlockd has launched a similar deal with a carrier outside the U.S., and says it is in advanced talks with others. Lachlan Murdoch, co-chairman of News Corp, which owns The Wall Street Journal, is an investor in Unlockd.

Write to Ryan Knutson at ryan.knutson@wsj.com

 

(END) Dow Jones Newswires

January 26, 2016 00:15 ET (05:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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