Guest column: Mobile advertising – the million dollar question?

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One of the first technologies to kick off mobile advertising has been SMS and it is crucial that mobile users view this form of mobile advertising as delivering value.

Mobile advertising is one of most unique developments in the mobile space since mobile messaging gained mass consumer adoption. With marketing departments integrating web or online channels to their advertising portfolio, mobile advertising has a high potential to generate higher levels of effectiveness and impact compared to existing above the line.

Advertisers have started to experiment with advertising on mobile devices as such medium offers a direct advertising experience, with goals of ultimately personalising the advertising experience.

Mobile advertising offers mobile operators an excellent opportunity to grow their revenue by capitalising on mobile services by offering personal interactive advertising medium. Mobile data services (SMS, MMS, video and mobile internet, games, download and mobile TV) are particularly appealing to mobile advertising channels. For mobile operators, generating 10% of their revenues from mobile advertising is what Acision believes is a minimum requirements for a sustainable business model.

Some of the key success factors need to be considered to make mobile advertising successful and a sustainable business for operators.

  • Obtain detailed insight into their mobile users – Operators generally know their mobile users demographics but low data on the customer preferences. Operators need to be able to capture more detailed customer preference information in order for them to better tailor advertiser packages and customer services.

  • Provide relevant and timely adverts - Using location, customer identity and preferences will become key in ensuring relevant advertising is sent to customers which is both appreciated by customers and, as a result, of high value to advertisers. To understand this, we need to consider that timing is the most important determinant of advertising campaign success. A coffee coupon for Starbucks in Japan sent 5 weeks after an Australian tourist went home after visiting Tokyo has literally no value. Similarly, offering a ringtone to match the wallpaper just downloaded by a subscriber has a much higher success rate than offering the ringtone a few days later. In advertising, timing is everything and understanding what is on the consumer’s mind is the key to advertising success. The ability to know this is the main advantage of mobile service providers over any other media industry.

  • Design a business process for media buyer or advertisers - Offer mobile advertising to media buying agencies and invent a complete model to plan media campaigns, with levels of detail above what current media planning tools deliver and buy media space on a range mobile services (not just SMS).

  • Monetise the whole mobile inventory. Operators will need to include the business model across all services, especially those with mass penetration such as messaging. Operators could offer free voice and SMS services to mobile user in exchange of including advertisement messages in the voice or SMS. An audio advertisement could be played before the consumer’s call is connected or as a ringback tone, but both approaches lack interactivity (the ability to respond instantly) and the inability for the consumer to bypass it to make a time critical call could become a nuisance. Sponsored SMS messages, where an advertisement messages in 160 characters or less in inserted in the outgoing messaging or incoming messages.

  • Ensure an attractive, consensual advertising user experience. A seamless user experience is essential to the success of mobile advertising, inserting adverts as part of the existing communications streams not as intrusive stand alone push events. Think Yahoo!Mail where each email that is received has an advertisement messages at the bottom of the email. User opt-in coupled with some level of reward is essential to ensure consumer adoption. Any operator launching mobile advertising packages would have customer contact points where opt-in procedures could be incorporated before service connection.

With the mobile being a personal, direct and interactive communications device, mobile operators own/have data on their subscribers, in terms of subscribers’ details, such as demographics, mobile usage behaviour, content preferences and location.

The key to the mobile advertising promise lies in the fact that the mobile device provides a very personal, direct and interactive communications channel to customers. In advertising terms, mobile operators own some of the best advertising inventories available anywhere. In addition they own two key assets: the customer’s location and personal identity in terms of behaviour, demographics and content preferences. Indeed, this puts mobile operators in a very strong position when competing for advertising budgets.

Operators need to be able leverage these assets or their advertising channels will be perceived to be as (un)attractive as semi-targeted radio or magazine ads. The value of that advertising space is not nearly enough to deliver free communication services.

Mobile Advertising: A new revenue stream for operators?

It took the Internet almost 10 years to move 10% of media spend to the online platform. How long will it take for mobile to move a significant percentage of media spend to the mobile platform? Operators are generally voicing ambitions of around 10% of revenues from advertising in the foreseeable future.

Mobile advertising would prove to be a viable revenue source in future for operators but how do you calculate revenue from mobile advertising?

The key question here is whether operators will be able to earn enough advertising revenue to cover their cost of service. Consider that the total global advertising media spend (including TV, radio, magazines, billboard, the Internet and so on) amounts to some $450 billion. However, global mobile services revenues amount to $670 billion. So in a global perspective, even if all advertising media spend were to go mobile, this would not be sufficient to cover mobile service charges. The answer is no, mobile advertising revenue is not meant to replace service revenue, only supplement.

For mobile users – permission-based model for SMS adverts

There is a thick line between sms advertising (textvertising) and spam. SMS-based advertising or any mobile advertising content remains as one which deters spam . This is largely due the cost factor of who should bear the cost of the spam SMS; the sender or the recipient. In most cases it is the sender that will pay for SMS being sent. However, mobile advertising, SMS spamming is one of the key concerns for mobile users when it comes to mobile advertising. The mobile device for the user is a personal communication device and is not intended a public broadcast device. Mobile users fear that they will be annoyed with spam SMS of advertisement offers that are not relevant or useful for them. With SMS, it is difficult to ignore a message and advertisers know that they have a captive audience in their hands.

Mobile advertising delivered via SMS should have a clear and strict opt-in procedures. Clear, because the mobile users should be informed up front of what they are opt-in into be it advertisers and its 3rd party partners or just the advertiser only. The mobile users should also be informed that SMS advert charges is borne by the advertisers and not the mobile users. Such things should not go assumed by the mobile user.

Strict, because if the mobile users opt-in to receive SMS adverts, they should be given a clear opt-out option. Because mobile advertising is more intrusive than any other method of advertising, a proper code of practice should be implemented to give mobile users the choice to opt-out at any time, unless they are contractually bound for a certain period of time.

It is not a surprise that the mobile advertising business model is one of the few hidden gems for mobile operators. How to develop this mobile advertising model into a viable business model need not be a million dollar question. Facilitating the mobile advertising value chain requires deep understanding and capability in the mobile advertising, customer intelligence, profiling and mobile telecoms domains.

Boudewijn Pesch is managing director Asia-Pacific for Acision.
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