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Coming soon to your smartwatch: ads targeting captive eyeballs

Advertisers are getting ready to invade your new smartwatch's screen.

[PORTLAND] Advertisers are getting ready to invade your new smartwatch's screen.

Anticipating a boom in wearables after the introduction of the Apple Watch, digital advertising agencies are rushing to create ads and marketing messages for the nascent industry.

In the past few months, about 15,000 people using the Golfshot app on their Android-based smartwatches saw a message take over the screen for five seconds. It started with "sponsored by." It's among the first wearable ads to go live, and in the future, no product with a Web-connected screen will be safe, from home coffee makers to cars.

"We've looked at things like wearables, digital advertisements on faucets, appliances - anything that can have advertising on it," said Frank Addante, chief executive officer of Rubicon Project Inc, a Los Angeles-based company that helps automate ad buying and selling.

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Revenue from ads that run on smartwatches is expected to jump to US$68.6 million by 2019, from US$1.5 million this year, according to Juniper Research. Although it's a fraction of total digital advertising spending, the growth prospects have prompted many companies such as Rubicon and FitAd - the firm behind the sponsorship on the Golfshot app - to work on wearable ads in the past six months.

Smartwatches let advertisers grab consumers' attention immediately, no matter what they are doing. And it's not just about screen space. Extra sensors that collect data such as the pulse, movements and even skin temperature could help marketers better target their ads.

"Is this person awake?" said Greg Ratner, head of technology at brand agency Deep Focus in New York. "Is that a good time to interact with that user at all, or should we wait for a different time to engage with them? All that is just additional context to help us connect the brands with the users at the right moment."

Making sure that consumers don't find the ads annoying - or creepy - will be a challenge. That's why many marketers are leaning toward sponsoring useful functions, such as telling users "Have a great run!" when they're using a running app or reminding them their most recent score in a game.

User-tracking policies for smartwatches are still in flux. While most mobile apps block cookies, the pieces of code that track users on their PCs, some smartwatches such as Pebble allow them. Since many smartwatch applications require users to log in and register, advertisers may also be able to reach them through the apps.

"It's not traditional advertising, it will focus on alerts and notifications that will be branded," said Mort Greenberg, chief executive of New York-based FitAd. "If the consumer is not automatically and instantly seeing value from the brand, it will negatively affect the usage of that app."

Apple Inc's watch, which can notify users of incoming messages and motivate them to reach their activity goals, is predicted to be a game changer in the industry and help boost sales of wearables fivefold this year to US$12.1 billion, based on data from researcher IDC.

Apple has been keen to protect users' privacy. The watch's developer guidelines don't provide clear instructions for advertising, Mr Greenberg said, though many ad executives believe they'll be able to send sponsored notifications or offers to the device via apps. Apple didn't respond to a request for comment.

"The Watch is going to be an inflection point; we are dealing with an industry that's about to explode," said Neil Sweeney, CEO of Toronto-based Juice Mobile, whose spinoff, Freckle, focuses on serving ads to Internet-connected devices like smartwatches.

Freckle plans to introduce wearable ads this year. Undertone, one of its rivals, has tested pushing coupons for a candy bar to consumers just as they pass a candy display at a grocery store, according to Eric Franchi, the digital advertising company's co-founder.

Meanwhile TapSense, a mobile-ad exchange, said in January it's been working on ads for the Apple Watch.

"Wearables will be a much bigger success than the iPad," said Ash Kumar, CEO of TapSense. "We expect our revenue to be at least north of 30 per cent in the next couple of years from the Apple Watch and the wearables."

Larger companies like Rubicon and Baltimore-based Millennial Media Inc. are also looking at wearables. Advertisers could use smartwatches to gather valuable data and send more effective ads to larger screens, like a tablet, a phone or a PC.

"The next ad you are going to see on your smartphone will be better because of your smartwatch," said Matt Tengler, a senior vice president at Millennial Media.

Collecting data on wearables, which are so close and personal, will raise privacy concerns, perhaps even more so than on smartphones or tablets.

"Health information. Medical. That kind of information simply is private," said Lee Tien, an attorney at consumer advocacy group Electronic Frontier Foundation. "If you don't want your employer to know, if you don't want your friends to know, why would you want your advertiser to know?" The ads also have yet to prove they are effective. Golfshot app's maker Shotzoom has been giving the smartwatch sponsorships to its regular advertisers for free, and it's still trying to figure out how well the ads work.

"The sponsors are intrigued, and they are curious about it," said Ben Addoms, president of Shotzoom, declining to identify them. "It's fun to see, good to know, but not a driver for them. I would say the jury's out." That's exactly how advertisers felt about mobile advertising a few years ago, before it took off.