DIGITAL MEDIA

The DreamAdvertising on mobile devices has huge potential reach due to the personal and intimate nature of the devices and high targeting possibilities. Opportunities exist for advertisers placing mobile ads, mobile network providers and providers of online services such as Google and Yahoo!

Once a status symbol with the size and weight of a house brick, mobile phones are now a common sight everywhere from the boardroom to the classroom. While the potential is immense, there are significant legal hurdles to overcome before the advertising dream can be realised.

For network providers, there are a number of opportunities including the following: Acting as a supplier of media space only utilising customer data and network capabilities to develop a warehouse of consumer data and profiles for media buyers; or strategically developing and promoting mobile advertising as a business model ie. collaborating with other operators to create a new mobile advertising eco-system.

In Australia and the UK, a few companies have established themselves as mobile advertising operators leasing space from the networks of existing mobile network operators.

Blyk is an invitation-only virtual mobile network operator in the UK with up to 4.5 million subscribers. The network rents airtime (funded by advertising) from France Telecom’s Orange network and targets consumers in the 16-24 demographic. Blyk provides its customers free airtime and text services in exchange for those customers receiving ads on their handsets.

Empowered Communications group, a permission based marketing company recently acquired by Australian company CommodiTel Limited (Comtel) targets advertising to members on the basis of information provided, namely age, location and interests. Subscribers take part in promotional and marketing research campaigns in return for rewards such as free text messages and ring tones. Initial reports indicate that the group’s activities have been profitable, to the extent that Comtel increased its 2007-08 earnings guidance from $6 million to $8 million.

Clearly, a trend toward mobile advertising makes the existing subscriber databases of mobile network operators very valuable to advertisers. There are, however, legal and regulatory constraints protecting the use of information stored on these databases.

The legal stairwell

Generally the law treats advertising through a mobile device in the same manner as other media platforms. This means that advertisers and mobile network operators are required to comply with the same laws as those that apply to print or television advertisements. The following is a snapshot of some of the legal and regulatory issues that a mobile advertising business needs to address. Information stored in databases may allow advertisers to send helpful information to mobile users. However, it will also enable companies to build profile information of a mobile user’s past preferences, current activities, future plans and other personal information. The issue of how user information is used and by whom is a legal minefield. If the industry doesn’t want regulators to get involved, security policies and procedures need to be in place to protect the data from theft or misuse.

Privacy laws impose obligations on those collecting, using or dealing with personal information which include:

• The responsible use of information;

• Keeping the information secure;

• Providing individuals access to their personal information; and

• Securing consents to the collection, storage and use of personal information.

Mobile advertising delivered via SMS should have clear and strict opt-in and opt out procedures so that the mobile users give prior consent to receipt of the ads and always have the option of withdrawing that consent. Particular caution needs to be taken in pursuing the marketing opportunities presented by the mobile phone. It is a much more personal and arguably intrusive medium than other traditional advertising platforms and therefore risks the negative perception that plagues telemarketing and spam emails. ACMA’s eMarketing Code of Practice provides further guidance on spam practices and compliance with applicable spam legislation.

Content of mobile advertising

Advertising content is subject to extensive regulation in Australia. Legislation is in place which prohibits corporations in their advertising activities engaging in a number of prohibited practices including:

• Engaging in misleading or deceptive conduct;

• Conducting bait advertising (discounting very few items with very limited stock in order to lure customers to purchase other items); and

• Making false or misleading representations that goods or services have sponsorship, approval or affiliation they do not have.

While the mobile service provider may be liable where it has knowledge of the content or nature of misleading information, it is primarily the advertiser that is responsible for ensuring that the advertisement complies with the legislation. Defamation, censorship and classification laws also apply to the content of the advertisement with advertising to and contracting with children presenting further significant issues.

Rights in materials transmitted

Australia has copyright, trade mark and patent laws which are relevant to both the creation of data-intensive audio-visual material, its reproduction and the technologies used for transmission. With the transmission of the actual content, copyright laws are particularly relevant for the mobile operator in ensuring that the works relayed over the mobile network do not infringe third party copyright or associated moral rights and that appropriate royalty and licence fees have been paid to rights holders and their agencies.

The contract between the content creator (usually the advertiser or its agency) and the mobile network operator will generally include appropriate warranty and indemnity provisions in relation to intellectual property ownership and control.

Advertising Codes

The advertising industry has a self regulation system of codes and guidelines with the objective of prescribing and monitoring standards of advertising in the public interest. It complements government regulations and mandatory advertising codes which are prescribed under legislation. Some codes address particular content issues such as online promotion to children.

Further, there are best practice guidelines created by industry associations which are subscribed to by association members such as the AIMIA Mobile Advertising Display Formats Best Practice and Guidelines August 2007. These guidelines provide additional layers of compliance for association members.

The mobile web

Mobile phone content supplied via the public internet is specifically regulated under the Broadcasting Services Act 1992 and is also subject to Internet Industry Codes of Practice developed by the Internet Industry Association.

Premium mobile services

Premium services including news, mobile ringtones, games and chat services are regulated by the Australian Communications Media Authority (ACMA). ACMA makes provision for mobile carriage service providers and content service providers to develop a self regulatory scheme that contains rules about, amongst other things, providing mobile customers with clear and transparent information about the cost and terms and conditions on which mobile premium services are offered and about complaint handling.

There are additional requirements for premium services including trade promotions or competitions which are also common key advertising strategies. There is also applicable gaming legislation in each State and Territory.

Contracting issues

There are also number of contractual issues that are likely to be raised with the introduction of mobile advertising. The complexity of the contractual arrangements will be affected by the extent to which a network operator elects to outsource the mobile advertising platform and backend IT systems or resource these in house. Relevant issues important to a mobile operator will include:

• The transfer of liability for advertising content;

• Securing warranties and/or indemnities from advertisers in relation to intellectual property rights;

• Tracking the effectiveness of mobile advertising on the network operator’s revenue and profit;

• Implementing and maintaining systems for advertising data records; and

• Revenue sharing arrangements between the network operator and the advertisers – will payment to the network operator be based on cost per click from subscribers to the advertiser or by some other means?

Advertisers and advertising agencies will be confronted with similar contractual issues in their arrangements. As the mobile device crosses all borders an advertisement may be accessed from multiple jurisdictions. Laws from each jurisdiction may differ and customisation by jurisdiction may also be necessary.

Is it all worth it ?

Despite the risks and regulatory constraints involved, it seems inevitable that the advertising industry will embrace the mobile phone as an important advertising platform for the future. Technology is constantly advancing, and advertisers are already recognising the exciting opportunities and broad market reach that mobile advertising can offer. With an awareness of the applicable laws and regulations, mobile operators, online service providers and advertisers can work together to harness the valuable opportunity that mobile technology presents, to their mutual benefit.

Awareness of the potential legal challenges ahead will facilitate the emergence of mobile advertising as a vibrant advertising medium and a sustainable business for operators.

Eugenia Kolivos is a partner and Anna Kuperman is a senior associate specialising in advertising and marketing law at Sydney law firm Corrs Chambers Westgarth.

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