Editor’s Note: Welcome to our Monday feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Compete’s Miro Kazakoff, Current Analysis’ Avi Greengart and iGR’s Iain Gillott.
AOL’s acquisition of Third Screen Media was only a matter of time. Like many new mediums, mobile is a stand-alone channel for many advertisers and vendors at the moment, but won’t be for long. The longer-term vision for mobile marketing includes integration with Internet, TV, radio, print, outdoor, product packaging and in-store, to name a few of the obvious options being explored today. Advertisers will use the phone both as a direct response mechanism (e.g., voting, sweepstakes from product packaging) and as a tool for delivering personalized ads. Direct response will also be a component of the advertising as it is online. Third Screen adds a mobile component to AOL’s portfolio, and one that will only grow in importance over time. While they have a sizeable ad network today, the process of building mobile ad networks is in its infancy with significant upside awaiting those who achieve this daunting task.
Mobile advertising is a fragmented mosaic on many dimensions. Three dimensions is a bit of an oversimplification, but serves the purpose of demonstrating the challenge facing those looking to build ad networks in a mobile environment. Not every campaign will involve each dimension-sometimes there will be only two depending on how loosely the framework is applied. In the near term, at least, carriers will be involved since advertising runs over their network, and some entity will pay them either directly or indirectly.
Dimension one: The carriers
The carriers add a layer of complexity not present in the online environment that goes well beyond the standardization of ad formats as well as the processes or tools for managing ad campaigns and serving ads. Carriers have observed the success online giants such as Google and Yahoo have had on ISP networks and are looking to avoid the same fate of being a dumb pipe. Wireless carriers can offer value on many fronts including offering up detailed information about subscribers including their location. Moreover, they have a billing relationship with the subscriber to which they allow third parties access on a conditional basis.
To what extent they will allow their inventory to be included in a broader ad network remains an open question that is a philosophical one in the near term and a business decision longer term. The desire for control as this market evolves and the need to protect consumer privacy will lead them to controlling their own inventory in the near term. Highly targeted inventory across the technology dimension will be a key play for them in the near term.
The wild card in this scenario is the carriers’ desire to be a media company. The production of made-for-mobile content (e.g., concerts) along with their walled garden portals will open up new opportunities. One stand-out to date has been Amp’d Mobile. They position themselves more as a media company than a wireless carrier, but they will be one of the first entities (carrier or media company) porting mobile content to the TV.
Dimension two: Content
Content represents one of the most diverse and complex dimensions of mobile content when using a broad definition of media that includes video, Internet, downloadable applications, etc. Media properties are building cross-technology audiences across a range of wireless carriers. Key advantages they hold today include loyal audiences as well as knowing how to sell advertising. Not all advertising inventory will include the carrier, but mobile subscribers must pay for access to the content.
Traditional TV players (e.g., ABC, ESPN, MTV Networks, etc.) are looking to add the “third screen” to their portfolio, but are not limiting their mobile strategies to video. Mobile content, WAP sites and alerts are also part of their mobile portfolio. Their revenues are primarily based on subscriptions and ala carte purchases, but will include ad revenue as they look to grow their audiences.
Traditional online players (e.g., AOL, Google, Yahoo) are developing audiences across a range of wireless technologies on the cellphone. Their focus through most of 2006 was on the consumer experience, but they are now looking to monetize this mobile audience even if the revenues are paltry in comparison to their total revenue in the near term.
Meanwhile, print and online news entities (e.g., USA Today, Reuters) are building WAP sites and offering text alerts. These have been some of the most successful efforts to date as measured by their ability to generate and monetize an audience.
New models in the wireless space that blur the line between ad networks and content aggregators are offering ad-sponsored, downloadable applications. Companies in this category include Cellufun, GetJar, Greystripe, and Hovr. Others such as MobiTV have traditionally been subscription-based, but are now looking to ad revenues as well.
And the opposing wild card: some media companies want to be wireless service providers though not necessarily with an ad-sponsored model. One such MVNO has launched while rumors of a Google phone are circulating. Paid models such as Disney and Amp’d are in yet another category of this complex landscape.
Dimension three: Technology
Few mediums have the technological complexities of the mobile environment. Ad inventory is available as SMS, MMS, display ads and video clips. New ad-life forms (e.g., interstitials between levels of game play, animations while applications are downloading) based loosely on Internet formats are emerging as well. Each of these formats requires unique creative as well as delivery. Some can be delivered completely independent of the wireless carrier while others will require tight integration as well as carriers’ permission.
Initial challenge: Ad inventory critical mass
One of the key challenges faced by content players and wireless service providers is that of building an audience worthy of multi-million dollar ad spends. Mobile can be layered onto existing ad sales (e.g., TV, paid search), but these entities will not realize the full value of their inventory by doing so. Cellphones offer a more targeted and highly personalized audience than any other medium. Demand for highly targeted inventory may not exist today, but will grow as inventory and opportunities become available.
Continuing challenge: Maximizing the profits of mobile ad inventory
Ad networks can help content providers and carriers achieve critical mass in the near term as well as help them maximize their profits. The extent to which they can do so will depend on the size and scale of the players involved, but the impact can be significant in the near term. Large media properties can achieve these benefits on their own, but could benefit from working with those with ties into the carriers. For those with less inventory, ad networks (my label, not theirs, as they are not all doing the exact same thing-just loosely) such as Ad Infuse, Admob, Amobee, Third Screen and Millennial Media, which are aggregating inventory across technology platforms, will play a valuable role. By amassing and categorizing inventory, they will create a market worthy (as measured by amount of inventory) of the attention of large advertisers. Moreover, their ability to represent the inventory by categories will drive higher rates for the content publishers.
Questions or comments about this column? Please e-mail Julie at jask@jupiterresearch.com or RCR Wireless News at rcrwebhelp@crain.com.
