Mobile advertising
Mobile advertising encompasses everything from banners on portals, to sponsored video content, to messages sent to users. With operators desparate to monetise content, can they find a model that works for all?
In 2005 when the mobile advertising market was estimated by one research house (VisionGain) to be worth $255 million in Europe and the United States. But in these two territories the business is forecast to exceed $1 billion by 2009. VisionGain makes that number contingent on certain elements falling into place, including outstanding issues to be resolved around business models and revenue share, the type, length and frequency of ads, consumer attitudes and many others.
“Operators will have to walk a fine line between maximising the revenue potential of advertising, while at the same time not risk alienating subscribers and increasing churn by doing so,” a report from the company (Mobile advertising and marketing: Market analysis and forecasts 2006-2011) states. Perhaps the most surprising thing is that mobile advertising is still in its infancy with operators who have, after all, been keen to present themselves as content distributors for some time now.
Mark Slade is managing director of 4th Screen Advertising, an agency which works with the brand advertisers and the mobile operators. For example, 4th Screen is working with 3 to sell its sponsorship and advertising inventory (meaning all the content and space it has available to carry advertising). Earlier this year 4th Screen brokered a deal with Canon for sponsorship of all the World Cup clips sent on 3. And now Slade says he is also working on a Premiership package with operators.
Slade says, “I would like to think advertising will be core to mobile content going forward. Every other channel is keen to attract advertising. Why mobile has been any different I don’t know, but that’s the way it’s evolved. The industry is working out what model works best and who pay for that delivery of content.”
Laurens de Beer is another who thinks that there are definite signs of increased interest in mobile marketing.
“Both brands and media-buyers are more receptive to the idea of mobile marketing then they were eighteen months ago. With companies like Adidas running high-profile, successful campaigns, the idea of mobile marketing is really starting to take hold,” he says.
As Slade points out, the chief issue for operators and the would-be advertisers is working out the business model, and which type of advertising will work best in which circumstance.
Operators face the choice of opening up content for free, and hoping to leverage increased views by then selling advertising. But to do that they have to be sure that they would receive the necessary advertising to support free content.
“It is chicken and egg at the minute, Slade says. “Usage is starting to get there in terms of mobile usage, and operators don’t want to give it away free. But when you do see free content the usage is immense. Is the operator going to take the leap of faith, see the uptake and then get advertising?”
Faced with such a scary decision, one way to dip a toe in mobile advertising is to seek to use a channel which is already essentially already “free”.
One example is Orange, which is claiming a first in the UK with the launch of interactive banner advertising on its WAP portal, Orange World.
Ads from companies such as Jaguar, Peugeot, Xboa and United international Pictures went live on its site in August 2006. One indication that this is still early days for the concept is the fact that at the launch of the service, only four devices on Orange’s network were able to access the adverts.
Steve Ricketts, Third Party Relationship Manager at Orange, says that the devices have been chosen for their different display and functional characteristics, as the operator seeks to build up its metrics on user response to banner advertising. It will also be technically easier to transcode the adverts to the correct formats and sizes for a limited number of devices.
Ricketts says that mobile marketing until now has tended to “enrich” other forms of advert, such as an SMS or voice shortcode. This is the first time in the UK that on-portal banner advertising has been tried out, and he thinks it stands to bring new revenue streams into the industry.
“ARPU is well known as a term, but people are also now starting to talk about ARPO – average revenue per others.”There’s no doubt that mobile advertising is still a work in progress, though. Ricketts says that the operator wants to build up its knowledge of usage rates, click throughs, how and when adverts are accessed and responded too. The operator will also keep track of which types of user, bearer and devices are most and least active.
Technically, there is an overhead for operators too. Orange is transcoding, reformatting and supplying on the fly all the materials itself, rather than working with a technology partner, although Ricketts adds the operator is working with Screentonic, a French company which has worked with Orange France. The Orange Broadband team (Wanadoo) is also involved in online sales.
But banner advertising is not a favourite with Slade.
“Operators are reticent to get mobile content companies advertising on their deck, and the big brands are really not hugely interested in running banner campaigns in mobile. They want visibility and interaction through 3G and video services — more so than banners leading through to little WAP sites.”
It seems that brand advertisers might be more comfortable with the TV model, and, crucially, so might consumers.
Pitch’s CEO Lourens de Beer says,
“We already understand that to watch a programme on a commercial channel we must also watch three to six minutes of adverts every half hour. On the internet, we accept that if we use certain search engines, a list of advertising partners will come up alongside any search we make. The real question is how to present advertising-funded content in such a way that we are equally prepared to accept it on our mobile handsets.”
Ricketts points out that in terms of content, it is important ads are made for mobile.
“These phones are smaller, screens are different, WAP usage differs from PC web browsing, all of these things mean we have to make sure mobile ads work effectively.”
De Beer concurs, and adds that users must not be overloaded with adverts.
“To bring advertising-funded content to life for the mobile market we need to ensure that the content is constantly updated, providing the latest and best products on a par with traditional paid-for content. At the same time we must ensure that advertising messages sent are relevant, interesting to their audiences and, perhaps most importantly, not overbearing in quantity. At Pitch we place a strict limit on the number of advertising messages our members receive. No customer receives more than three messages a week, which our research has shown us is the level that most people are comfortable with.”
“At the same time we believe that targeting is crucial. All ads sent over the Pitch network are carefully matched to the hobbies and interests and the customer has identified at the registration
stage.”
This issue of personalisation is just as important to Slade.
“Theoretically you could run a one to one advertising campaign, referencing the CRM database profile. That’s some way off! But we can deliver impressions and uniques, forecasts for channel traffic, those kind of things, to work out a profile of the type of people using the service. There’s already a fairly niche demographic using mobile content and that’s quite valuabe.
“It’s also about creating specific campaigns for mobile, targeting people’s different mindsets at different times of day and what people are using their phones for. There are campaigns designed for people in a certain mindset when they are coming back from work, for example.”
De Beer adds, “The real power of the advertising model is in its ability to target specific individuals with relevant offers. Our approach is to find out the customer’s interests and hobbies at the registration stage so that they are only sent advertising messages that are not only relevant but also of genuine interest to them.
Finally, the growth of mobile advertising is likely to lead to a new value chain, between the brands and the operators. Pitch uses specialist sales partners to work with major Media sales houses, as they consider they have the right skills to deal with large agencies.
“But equally we find that we need to educate potential customers as they do not understand mobile advertising well enough to trust their Media Agencies to buy correctly,” de Beer says. “We believe the value chain will become more sophisticated with specialist brokers once the industry matures further.”