New technology is disrupting traditional advertising, and new forms of advertising are evolving. IBM forecasts that revenues from in-game, mobile, online and interactive TV promotions are forecasted to reach US$60 billion a year – or 45% of the entire digital content market – by 2010. Rob van den Dam and Ekow Nelson, of the IBM Institute for Business Value, report.
Operator interest in mobile advertising as an additional source of revenue is not surprising. The mobile is gradually turning into a media channel, and every media channel relies on advertising in some form.
For the marketers, the mobile advertising channel provides a great opportunity to optimise their expenditure. They are excited over the prospect of being able to target their ads in a highly personal way. It affords advertisers an opportunity to present very targeted and time-sensitive information that is of interest to the customer.
ABI Research predicts that worldwide spend of mobile advertising will be worth US$19 billion by 2011. The bulk of the revenue will be generated by advertising through mobile search and video. The firm estimates that advertising on broadcast mobile video alone will reach about US$9 billion.
The opportunity for the operator
As telcos move into media, an industry that has historically been part funded through advertising, it will find that relying on subscriptions and pay-per-view models is unsustainable in a world where consumers do not expect to pay for all content. Many telcos are therefore experimenting with opt-in advertising plans to fund content. Advertising may also provide consumers with access to content they previously were unaware of.
Mobile advertising represents an opportunity that telcos are particularly well-positioned to capture since they have control over what is delivered to the device.
In addition to controlling access to the handset, mobile operators have a direct relationship with the customers. They collect vast quantities of customer data, which they can use to develop profiles of their subscribers, including demographic characteristics, personal attributes and preferences of those subscribers – and even, perhaps, their shopping habits and viewing patterns.
What’s more, mobile operators are the only companies that have the right to know the location of their subscribers, information that advertisers would love to use to target customers. And telecom operators are very well placed to build and develop relationships with local advertisers. In fact, many operators have already developed solid relationships with local advertisers through their directory businesses.
As experience with the Internet shows, personalisation and localisation are becoming the norm in the advertising world. This trend represents one of the mobile operator’s greatest opportunities. They can combine their customer insights with their ability to identify where individual users are based and offer highly targeted, localized promotions.
Last but not least mobile operators also provide a direct interactive response channel for the customers. The return channel also provides a feedback loop to advertisers to allow them to track advertising performance. It provides means to measure precisely how many people have seen a particular advertisement. Payment models can be geared to actual viewers watching, the number of “red button” pressed, or perhaps a percentage of the sales.
The advertising platform
To successfully grow this advertising enabling market, operators should develop an end-to-end mobile advertising platform which meets all the needs of advertisers. This platform should not solely be focused on ad distribution, but must enable dynamic on demand ad insertion and placement, and targeted personalised advertising. It should also provide “red button” functionality for the customers, and detailed and accurate statistics to the advertisers.
Advertising on mobile devices can take many forms including banners, sponsored video content and messages sent to users, but telcos and advertisers still need to determine what works best in different circumstances. For instance, advertising techniques cannot simply be copied from the Internet. The screens and devices are smaller; the exposure time tolerated by the user is likely to be less; too many click-thrus will annoy users; and in many cases, operators must be able to identify the device type to render content appropriately.
Even more so than with Internet advertising, mobile advertising must be relevant, interesting to the audience and especially not overbearing in quantity. Advertisers must be able to target specific individuals with relevant offers, built upon permission-based push rather than pull techniques. In fact, mobile advertising should be a combination of search, location and presence, and recommendation functions based on a deep understanding of the consumer.
The players
Mobile advertising has already grown significantly in Southeast Asia. In Japan, NTT Docomo has been running small banner ads on its mobile portals for more than five years. In Thailand, Honda has become one of the first global advertisers to use the phone’s idle screen as a medium for mobile advertising. But outside Asia, the mobile operators have moved cautiously in adding advertising on cell phones for fear of alienating subscribers and increasing churn by doing so. But there have been a number of initiatives. In the summer of 2006, Virgin Mobile USA introduced a program called Sugar Mama, that compensates its phone users with free calling minutes for watching commercials, reading advertiser text messages and taking surveys from brands. In its first seven months, the Sugar Mama campaign awarded 3 million minutes to about 250,000 registered customers. Virgin Mobile recently announced that it will use JumpTab’s search-based advertising platform.
In Europe, EMI Music and T-Mobile joined forces end 2006 to pilot ad-supported mobile videos in Britain. Ad-funding company Amobee has recently launched a commercial advertising trial with Orange in France, with companies as Coca-Cola and Saab having signed up for the trial. Orange customers interested in playing games will be offered them for free, or at a reduced rate, if they first agree to watch an advert. Mobile operator 3UK announced to launch in April a service supported by personalised advertising to provide free content for its users. Also Vodafone and Yahoo! aim to launch a mobile advertising business in the first half of this year. Customers who agree to accept carefully targeted display advertisements can expect to enjoy savings on certain Vodafone services, including Vodafone live! Portal, games, television and picture messaging services.
However, media brands as Fox News, USA Today and The New York Times are now also joining the game by providing advertising via their mobile Websites, which are accessed directly through a mobile browser and not through a mobile operator’s menu. And they are not the only parties that think there will be a big business for them down the road. Internet players Google and Yahoo! have already started to include advertising in their mobile search and portal properties. Yahoo! has even launched a mobile advertising platform in 19 countries across Europe, Asia and the Americas instantly enabling advertisers to reach consumers around the globe on their mobile phones. Advertisers already signed up include the Hilton Hotel group, Pepsi and Singapore Airlines. And then there is Nokia, also jumping onto the mobile advertising bandwagon, by announcing two mobile advertising services designed for targeted campaigns on the handsets.
Several studies have confirmed that subscribers are more likely to respond favourably to advertisements if the topic is of interest to them. Therefore mobile operators have to invest in understanding consumer behaviour patterns and communities of interest, using as a base the large volume of data available to them through their networks.
Mobile advertising is the hottest topic in the wireless industry right now. Everyone from marketers to big media companies to handset makers to Internet players to telecom operators are fighting for the mobile advertising revenue. But mobile operators have the best assets to deliver marketing and advertising that meets the consumer need for relevant advertising. Operators are now at the point where they should exploit their unique technical advantages to secure their part of the pie.