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After years of resistance, cell phone outfits are working with publishers and partner vendors to try new approaches to selling their space. Mobile advertising is in the early stages of development, and major stakeholders including cellcos, content providers and intermediaries are launching ad-hoc campaigns in a bid to find a way for mobile to fit into the overall advertising landscape.
With its unique advantages of personalization, immediacy and interactivity, the mobile phone has emerged as an attractive advertising tool for brands and advertisers to reach new customers and target audiences. While using mobile as a medium to deliver advertising and marketing messages isn't a new concept, it has been used predominately for SMS-based direct marketing since 2000, and hasn't yet made a significant impact on the world of advertising.
Not until recently, that is. The industry is now seeing mobile advertising generate significant interest among mobile operators, advertisers and ad agencies. Over the past 12 months, after years of resistance, mobile operators are opening their services to advertising, working with publishers and vendor partners to pilot a number of different on-deck approaches - mostly WAP, but other platforms are beginning to emerge in video, downloads and search.
In the US, Verizon Wireless and Sprint Nextel have launched initiatives to test how consumers react to short video ads on their phones. In Europe, 3 and Orange have begun selling banner ads on their portals to drive users to click on games and video downloads. In Asia, China Mobile and China Unicom recently announced plans to sell advertising space via SMS/MMS, games, IVR and mobile Internet services. Operators like 3 HK and SmarTone-Vodafone are partnering with media agencies and advertisers rolling out mobile advertising campaigns.
Meanwhile, media companies expanding their content to mobile are also keen in tapping the medium as part of their advertising offering to their clients.
Ringo Chan, VP of wireless development at Turner International Asia Pacific, says the company is seeing increased interest in mobile advertising from its clients.
"Every time our advertising sales team at CNN presents a campaign to advertisers, some of them ask: What about mobile?" he says. "Although mobile is now far from a mainstream advertising vehicle, advertisers understand that it's an alternative they could not omit and they have to embrace it."
RICH MEDIA SERVICES
Not surprisingly, the recent buzz over mobile advertising is partly from the fact that mobile services are becoming increasingly content driven.
The increased rollout of 3G and HSDPA, mobile users' growing interest in multimedia content and emerging services like mobile TV and "off-portal" search also open doors to advertisers to exploit the mobile channel for advertising opportunities.
If nothing else, consumers' increased acceptance of mobile advertisements also helps push cellcos and advertisers to explore the business opportunities.
Findings from a recent survey, conducted by Harris Interactive and commissioned by Enpocket, reveal that mobile users are far more accepting of mobile advertising when it is relevant.
The Consumer Mobile Advertising report, conducted with more than 1,200 mobile Internet users across the US, Europe and India, shows that targeted mobile advertising is 50% more acceptable to mobile Internet users than untargeted ads.
Research firm Informa Telecoms & Media predicts that the next 12 months will mark the start of a sharp upturn in mobile advertising spend as the proliferation of cheap, high-quality multimedia handsets and the widespread availability of high-speed mobile networks reaches a critical point. According to Informa Telecoms & Media, worldwide spend on mobile advertising and marketing will reach over $11.35 billion by 2011, affording consumers cheaper mobile content as advertisers come to terms with the medium.
SPONSORSHIP TO DOMINATE
The question, then, is just what sort of advertising format plays best on mobile?
Early evidence and industry research hint that the content-sponsorship model will be a favorite. Gartner predicts sponsorships are most likely to be the dominant format for mobile advertising until 2010.
For one thing, a sponsorship model is straightforward to sell. Also, a major source of optimism is user acceptance - several consumer surveys found that mobile users in general are willing to receive and view adverts in return for free or lower-cost mobile apps. One survey from Informa Telecoms & Media reveals that music, games and mobile TV/video are the most wanted mobile content services mobile users also want for free.
As such, a number of operators and companies have launched different campaigns to test how consumers react to ad-sponsored content.
A typical example is Greystripe, which distributes mobile games for free to consumers with in-game advertising. Michael Chang, CEO and co-founder of Greystripe, says the company has partnered with 29 mobile game publishers and developers, such as Artificial Life in Hong Kong and Handy Games in Germany, to deliver over 200 game titles to mobile users through its gamejump.com WAP portal.
Chang says Greystripe sells advertising space in its game network for $45 CPM (per thousand impressions) with three different forms of adverts - click-to-call, click-to-mobile web and click-to-jump page (to a survey/poll) - and shares the revenue with game publishers. After downloading the game, end-users must view a full-screen ad before and after they play the game.
Chang says the company currently has seven brands placing adverts on its game portal and claims that the average worldwide click-through rate for its ads with actions in GameJump games achieved a remarkable 15%. Greystripe is also working with mobile application publishers to bring to market ad-supported mobile apps such as instant messaging.
While such a model may offer tier-2 and tier-3 publishers (or other apps that get lost in the deck) alternative revenue resources and channel to market, cellcos are also expected to start to test similar model as a means to supplement their largely consumer transactional model - potentially starting in niche application categories such as news, information and consumer search. Verizon Wireless in the US, for example, is testing a program that will open its phones to advertisng through a two-tier payment model (such as $15 for no ads and less for ad-supported content).
Nicky Walton, senior research analyst with Informa Telecoms & Media, predicts that mobile operators will increasingly adopt ad-funded model in the coming few years, as it will help eliminate high charges that are extensively inhibiting take-up.
"At the moment the cheapest game to download over a mobile operator's portal is around $5, which is very expensive," Walton says. "If operators started offering mobile game downloads for free or a reduced cost, even if it doesn't initially increase usage, it's going to increase the likelihood of people trialing different games, because spending $5 to download something you might not like is lot of money.
The ad-funded model would increase the number of mobile users and draw them to the portals."
Walton says music will be another form of popular content that would attract sponsorships, and by 2008 that focus would shift to mobile TV/video.
BUILDING THE AUDIENCE
While there is little doubt about mobile's potential as a powerful advertising tool, industry players and market watchers agree that it's still very early for mobile advertising, and it will only grow into an established advertising channel after a number of issues have been resolved.
The adoption of mobile advertising is closely tied to the successful of mobile content services such as video, games and music. However, mobile has yet to attract a dedicated advertising budget despite the establishment of a couple of mobile ad networks in the past 12 months, says Gartner analyst Daren Siddall.
Advertisers at this stage, he says, are cautious about allocating budgets to the mobile channel chiefly because there is not yet an audience for advertisers to reach.
"Consumption of mobile content is very small, around the 10% mark, while the penetration of 3G subscribers at most is in the low single digits in most countries. Watching live TV or video, meanwhile, is a relatively new phenomenon and will remain a niche application for some time, which means that the potential reach for advertisers will be too low to attract widespread interest," Siddall says.
Therefore, he notes, the industry at the moment is facing a classic "chicken and egg" situation: advertisers won't commit budget to the mobile channel until they see there is audience to reach. Content providers and mobile operators, which realize that advertising will be an enabler for mobile content, conversely, are worrying whether or not they can generate enough impressions for advertisers and enough revenues to compensate changing their business model from pay-to-use to ad-sponsored.
Ricky Ow, general manager at Sony Pictures Entertainment Networks, who oversees AXN and Animax TV channels in Asia and orchestrates AXN Mobile, agrees that an established audience is vital to lure advertisers. Consequently, Sony Pictures' priority for now is getting viewers and the AXN brand out there in the mobile market.
"With viewers there will be proof of evidence of data which we can sell more intelligently to advertisers," Ow says, adding that AXN is currently is working with a few handset makers for ad sponsorship on mobile, but it's too early to offer details.
MEASUREMENT AND METRICS
Mobile advertising's nascent status also means that the delivery format is still in development, as is any standard to guide that development.
Another issue is that there is little in the way of transparency or metrics available to measure the effectiveness of mobile adverts. There isn't even any agreement as to what those metrics should be.
Measurement technique used in online advertising - such as click-through rates, impressions, cost-per-sale and cost-per-thousands - can be applied in the mobile environment, but they can't provide concrete details like whether the mobile user is clicking through on the Internet via the mobile phone.
For the mobile advertising market to move from test and niche levels to becoming part of the mainstream buying process, analysts say the industry must provide more visibility into the medium, including the establishment of reliable measurement and metrics for advertisers to measure the effectiveness of mobile adverts.
Ow of Sony Pictures agrees: "I think those questions have to be answered first before we see the influx of advertising on the mobile channel. This is not just for us, this is for everybody."
But such issues are not expected to be resolved soon, as a value chain for mobile advertising has yet to be established, Gartner's Siddall says.
"The advertising value chain is highly fragmented, involving advertisers, ad agencies, media agencies, media content owners and others in the delivery of ads to consumers," he says. "Throwing mobile into the mix adds even more complexity, with the addition of network operators, mobile marketing specialists, messaging or WAP gateway providers, and perhaps mobile application developers."
He adds that, given the lack of a single voice evangelizing the medium, migration of spend to the mobile channel is expected to be slow over the next five years.
That said, in the next year or two we'll be seeing a lot of experiments carried out by each stakeholder in the industry as they try to form standards and some level of understanding of what will work on mobile and the kind of format consumers will find acceptable.
"It's really about finding its way and its role in this overall advertising landscape," he says. "And that at the moment is not certain."
BusinessWeekOnline (Provided by Telecom Asia—Copyright: © 2006 Questex Media Group, Inc.)
