With subscribers paying less for telecom services every year across the globe, mobile consumer applications like music, games and video are presenting telcos opportunities for new revenue streams.
As these applications gain popularity, there is also a huge opportunity for advertisers and brands to effectively deliver customized communication, including promotions, to a highly segmented target group.
With the availability of high-speed networks like GPRS and 3G, mobile advertising campaigns have undergone a transition and are now providing over the mobile internet everything from video and location-based services to downloadable applications and contextual advertising within search results, as well as other environments.
Almost every type of mobile data service can be used to deliver advertising effectively. However, business models still need to be tested in the market and advertisers need convincing that this is as legitimate a medium as print, online and TV advertising.
With the entry of the large online search solution providers such as Yahoo, MSN and Google, the entire search and advertising space also gets more competitive. Mobile advertising is expected to become a standard feature across the tier 1 mobile operators in Asia Pacific.
For example, Google has partnered with Bharti Airtel, MSN with Vodafone, and Yahoo with Reliance and BSNL. This makes mobile search and advertising available to more than 200 million mobile customers in India alone. Another interesting example of the potential for mobile advertising is UK-based Blyk, which offers free voice and download services for the 16-24 age group if users agree to mobile advertising. The company launched in September 2007 and currently has 100,000 subscribers in the ultra-competitive British market.
Obstacles to adoption
The main challenges preventing mobile advertising from becoming widely accepted include off-deck mobile advertising industry participants finding it extremely difficult to achieve individual-level targeting, which reduces the attractiveness of mobile advertising.
Another is the unclear revenue sharing for mobile advertising within the value chain across the multiple delivery domains. Then there is the need to sway subscribers' willingness toward accepting mobile advertising - especially when monetary benefits accrue to the value-chain participants.
There is also the threat of eroding the value proposition established between mobile operators and subscribers by subsidizing content with advertising. Finally, there is the need to present mobile advertising in an unobtrusive manner, and the lack of standardized metrics to measure the effectiveness of mobile advertising.
To over comes thee barriers, industry players need to mine operators' wealth of data on their subscriber base, but subscribers' privacy needs to be respected. And then a revenue-sharing model favorable to all participants, along with the consumers, needs to be established. The revenues accrued from ads need to be passed to the customers in the form of less expensive mobile services and more relevant value-added services.
Also, customer expectations need to be managed effectively. Once advertising hits a threshold, it will be too intertwined with free content and it will not be possible to get sponsorship for all mobile content, resulting in difficulty to charge for content in the future.
To make mobile ads as unobtrusive as possible, cues should be taken from online search and advertising in avoiding the annoyance of pop-up ads.
Further, effective metrics need to established to measure the consumer acceptance and effectiveness of mobile ads. There should also be clear and well publicized examples of successful applications of mobile advertising.
While it is still too early to comment on how bright the future of mobile advertising will be, there is little doubt it will flourish in the long term. This is based on the premise that the medium is ideal for targeted marketing. With the considerable amount of data that operators hold, they can identify users, where they live, what type of phone they have, what they bought before and what kind of content their interests lies in.
With the 3-inch displays improving the experience of mobile web browsing, more and more activities like blogging, social networking and search are moving on the mobile. The future of mobile advertisement is intertwined with content and mobile search, so it will take some time before mobile advertising has been fully integrated with different services and forms.
A matter of time
'Advertising follows eyeballs,' an old adage says. With the number of mobile subscribers rising year on year and more than three billion mobile subscribers around the globe, there is a huge installed customer base ready to be tapped with the mobile advertisement services. Technology evolution (with 3G and Wimax becoming a reality in many countries) and the falling cost of consumer devices will give a fillip to the mobile advertising industry.
We believe that operators will continue to experiment more with advertising as 3G becomes more available and adopted across the globe, which will enable more advanced ads over streaming video. We also believe there will be more interest in new channels as consumers continuously turn to the internet for information as opposed to the TV or print publications.
The upside of mobile advertising are personalised message delivery to a large targeted audience, increased usage of data and other non-voice services, and potentially subsidized services to end-consumers.
The downside are privacy concerns, users getting accustomed to free services (which could interfere with established business models), and the annoyance factor similar to internet spam and pop-up ads.
The Wireless Advertising Association and the Wireless Marketing Association have defined a comprehensive set of guidelines for non-intrusive end-user advertising experience with subscriber opt-in and permission-based marketing at its core.
The telecom industry is already grappling with the issues of customer churn, and with mobile number portability being implemented in many countries, operators need to be careful in the manner they deliver the mobile ads. While the 'do not call registry' can keep the telemarketers at bay, it can be extended to avoid SMS ads as well.
The annoyance factor is a serious issue, which is why we believe that mobile advertising will only flourish in an environment where the ads are either agreed to by the subscriber or are extremely targeted and relevant.
Kamlesh Kalwar is an industry analyst at Frost & Sullivan in Singapore