Virgin Mobile USA, a cell-phone service used mostly by teenagers and 20-somethings, said on Tuesday it was giving its customers the option to earn free calls if they view and respond to ads on their phones.
Wireless providers are putting more and more features such as Web browsers and video players in cell phones in an effort to expand their revenue beyond voice. They also hope to profit from using these advanced phones to display advertising.
Under the offer, customers of Virgin, a venture of Sprint Nextel and Richard Branson's Virgin, can get up to 75 minutes of free calls per month if they spend an equal amount of time looking at ads and replying to these ads via text messages.
Virgin, one of the first providers to offer such a service, hopes the service will appeal to its often cash-strapped customers, 65 percent of whom are younger than 30 years old.
Very practically speaking a lot of our customers are value conscious. They manage budgets that are finite, said Howard Handler, the company's chief marketing officer.
He said that while it was too soon to say how popular the service would be he expects it to increase revenue.
It will contribute meaningful additional top line revenue and EBITDA, Handler said, referring to earnings before interest, tax, depreciation and amortization.
He declined to reveal details of the terms of Virgin's agreements with its first advertising partners Pepsi , Microsoft Corp.'s Xbox game console unit and truth, a youth smoking prevention campaign.
Forrester Research analyst Charles Golvin believes advertising will be extremely important to wireless providers as they deliver video and news to phones.
But he said it was not clear if many customers would want ad subsidized calls because cellphone calls are already cheap.
If you give somebody the choice whether you can have free content with advertising or you can pay for the content they'll chose the former, Golvin said.
Realistically the price of voice is pretty darn cheap on a mobile phone these days so giving somebody three free minutes of mobile voice is not a compelling proposition for most mobile users.