New technology is disrupting traditional advertising, in its place new forms of advertising are evolving.
A report of the IBM Institute for Business Value has shown that revenues from in-game, mobile, online and interactive TV promotions are forecast to reach $60 billion a year - or 45% of the entire digital content market - by 2010.
Marketers using these emerging advertising channels are seeking more effective ways of optimizing their expenditure and are excited over the prospect of being able to target their ads in a highly personal way. Telcos also are starting to realize that advertising can become an important source of revenue.
Although telecom operators have little presence in advertising today, advertising represents an emerging opportunity that operators are uniquely positioned to address.
First of all, they have a large customer base. And with their authentication, authorization and accounting controls telcos are able to determine who the customer is and what services and products they are buying.
Telcos have a direct relationship with customers. They collect vast quantities of customer data, which they can use to develop profiles of their subscribers. These are useful not only for controlling where the ads go to, but also for tracking advertising effectiveness.
Telecom operators are typically better-placed to build and develop relationships with local advertisers than global organizations like Google, precisely because they are local or national themselves.
Telcos are also well-placed to enable the advertising experience practically anywhere, on any device and at any time. They can, for instance, manage the delivery of ads across the mobile, PC and TV-set, over fixed, wireless and other networks. What's more, they also provide a direct interactive response channel for the customer, and a feedback loop to advertisers to allow them to track advertising performance.
To successfully grow this advertising enabling market, operators need to develop an end-to-end advertising platform that meets all the needs of advertisers.
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.
Content is expensive to generate and offer to consumers, and advertising provides a means to offer richer content at a more reasonable cost. Many telcos are, therefore, experimenting with opt-in advertising plans to fund content. Perhaps this is the most significant benefit as it allows consumer access to richer content and media.
Land rush
Mobile advertising represents an unexploited opportunity for telecom operators. It is one that telcos are particularly well-positioned to capture since they have control over what is delivered to the device and 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.
The mobile phone is the most personal consumer device we own, and one that most people carry with them 24 hours a day. With nearly three billion cellphone users in the world, it's clear that mobile advertising represents a huge opportunity. Informa Telecom & Media predicts that worldwide spending for mobile advertising will be worth $11.35 billion in 2011.
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.
Mobile advertising must be relevant and interesting to the audience, and 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 recommended functions based on a deep understanding of the consumer's passions, hobbies, purchases, past click-patterns and the like.
Outside Asia, where mobile advertising has grown rapidly in markets like
But there have been a number of initiatives. In the summer of 2006 Virgin Mobile US 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 three million minutes to about 250,000 registered customers.
Virgin Mobile recently announced that it will use JumpTab's search-based advertising platform to offer ads that are highly targeted and relevant for its users. Companies as Verizon, Sprint and Cingular are now also beginning to test and roll out advertising on mobile phone screens.
In Europe EMI Music and T-Mobile joined forces at the end-2006 to pilot ad-supported mobile videos in
Media brands such 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.
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.
Rob van den Dam is with the IBM Institute for Business Value