The creator of the Android app Caller Ads, currently being piloted, is targeting telcos and advertisers that have messages to push to prepay mobile users.
Caller Ads is software as a service based on a patented process for intercepting inbound smartphone calls.
Once a user downloads app, they create a profile and select the type of offers they want to receive, like automotive, music, food and fashion. The app runs in the background and when an inbound call signal is detected, seven seconds of audio plays, with the advertiser's message selected firstly from the user's location, then on their categories of interest.
Phone sensors prevent users taking the phone away from their ear during the message and when it's complete, they use the device's volume rocker to accept or reject a call to action, such as a purchase or more information.
The patent covers the interception of the communication link between two devices, whether that's cellular, wireless or voice over IP. It's capable of functioning at network level to work on handsets other than mobile, but currently only operates at device level.
The app only offers audio messages at the moment, but content could extend to static images and video. The service's target demographic is 18-25 year olds.
Co-founder Sean Davis says the selling point for advertisers is the ability to directly target this audience and measure the response. For telcos it's making money from their subscriber bases and trimming capital expenditure, he says.
"Our model is sharing ad revenue with the telcos to increase their average revenue per user," says Davis. "It's about allowing the telco to engage with their consumers as well and building brand and loyalty."
Caller Ads has commissioned local research that shows the target market is willing to accept daily deal type offers on their mobile. It's talking with a number of advertisers and agencies and has also had interest from telcos in New Zealand and abroad, he says, although it hasn't yet inked any deals.
He emphasises the app has done its job once the call is connected so it's not listening in on what users say. The company might also let users whitelist a number such as their home line so audio doesn't play if that person tries to contact them in an emergency. The patent is approved in New Zealand and Caller Ads has filed in Australia.
It also plans to apply for patent protection in territories with large telco networks, like Asia Pacific, India and North America.
The company has patents in near field communication-based payments and plans in future to be able to track ad spend by transaction. It also has protection for extensions in social sharing and could later track shares and likes that promote an advertiser's message.
Once extended to video, the service could be used by Skype to make money from its free service by running pre-roll ads, Davis says. It hasn't spoken to the Microsoft-owned company but would be interested in doing so.
Payment and plans for telcos have yet to be decided, he says. The company aims to draw between three and four percent of the prepaid subscriber base of each telco it works with.
Davis and brother Gary founded Caller Ads two years ago, funded partly by the sale of Sean's company Complete Financial, which he says he sold at the time.
The startup has also had investment from friends, family and business associates, along with three grants from Callaghan Innovation totalling about $100,000.
The app was developed by Julius Spencer and Associates and the company's chairman is serial director Richard Justice, former consultant at Skinny Mobile.
Former Skinny Mobile CEO Paul O'Shannessey is its telco and media advisor. Justice and O'Shannessey are each directors of Maverick Mob, a consultancy specialising in brand engagement.