The brave new world of wireless advertising is giving rise to a wide variety of business arrangements between network operators, content owners and mobile marketing firms. And carriers are working to ensure their place in the value chain.
Marketing messages on the wireless Web are nothing new, of course. Content owners like ESPN and The Weather Channel Interactive have long sold ad space on their own sites, sharing revenues with Tier 1 carriers in exchange for prime placement on the carrier deck. Sprint Nextel Corp. recently announced plans to monetize its own “inventory,” selling marketing space on WAP sites it owns, including navigational pages and menus.
Meanwhile, mobile advertising brokers such as Google Inc.-which recently launched its mobile marketing business-and AdMob Inc. are serving as a matchmaker for off-deck wireless content publishers and advertisers. The clearinghouse approach allows advertisers to launch mobile marketing campaigns far more cheaply, but it also leaves operators out of the revenue mix.
So carriers are hastily working to strike deals with every player in the value chain. And unlike most agreements between operators and their content partners-which are largely boilerplate, revenue-share deals-advertising dollars are at the heart of a wide variety of business arrangements.
“Of all the places where things are still emerging, the carrier ad space is one of the most wild of the wild, wild West,” said Alfredo Narez, vice president of marketing for Air2Web Inc., an Atlanta-based developer of mobile marketing technology. “And we’re talking about a pretty wild space to begin with.”
In these early days of the mobile Internet, network operators still carry a tremendous amount of clout thanks to the deck. Subscribers are far more likely to drill down through menu options to find the latest sports scores, for instance, than try to triple-tap a URL into a wireless browser. But high-profile content owners-like anchor tenants in a shopping center-are negotiating with carriers in an effort to leverage their brands and strike more favorable deals than some lesser-known properties that have garnered deck space.
Operators, content owners and marketing firms are struggling not only to hash out business models, they’re struggling to quantify the effectiveness of mobile advertising campaigns. Many are beginning to experiment with pay-per-click or pay-per-call models, although many marketing messages on the wireless Web are simple banners rather than calls to action. And as the wireless Web evolves, advertisers will find opportunities for more engaging tactics such as mobile video and location-based marketing. Rather than worry about filling their coffers immediately, then, operators are hoping to find the most effective types of advertising to mobile users, said Adam Levine, founder and chief executive officer of FunMobility, a developer of community-based messaging applications.
“I think what (carriers) are doing right now is just trying things out and seeing what works,” Levine said. “I don’t think they’re that worried about the dollars and sense. If (mobile marketing) gets big, they can always go back” and renegotiate.
While that may be true for their on-deck partners, though, off-deck advertising via WAP pages will likely prove far more difficult for carriers to monetize. The operators face a challenge similar to-but also very different from-the world of direct-to-consumer content. Off-deck content providers continue to pay a premium to carriers for the privilege of billing through monthly subscriber statements. In the world of WAP, though, operators have no such leverage. So operators may be forced to choose either to allow users to surf anywhere they want on their handsets or to limit the WAP browsers only to publishers who agree to split revenues.
Technologically, carriers can easily monitor the flow of traffic on their networks and prohibit access to any Internet destination they wish. But such policies not only risk incurring the wrath of consumers looking for unencumbered wireless Internet access, they may be legally dubious, according to Air2Web Chief Technological Officer Dale Gonzalez. Operators that keep their wireless Web surfers in a tightly walled garden could find themselves targeted by both subscribers and owners of mobile Internet sites.
“None of the legal casework has been worked out,” said Gonzalez. “You don’t have the necessary, seminal, wireless-oriented big test case happening that would lead you to make any conclusions about how this will or will not play out. Everybody right now is just hoping not to be the guy who has the lawsuit.”
