Editor’s Note: Welcome to a special edition of our weekly 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 Jupiter Research’s Julie Ask, iGR’s Iain Gillott and more.
Mentioning mobile advertising three years ago likely would have provoked sideways glances and up turned noses. Legitimate concerns about privacy and intruding on user experience were typically raised along with the mantra “nothing is free on wireless.”
Of course, nothing’s ever really free.
The “free Internet” has prospered in large part thanks to the increasingly large spending by advertisers working to grab the attention of distracted, Web-surfing consumers. The Internet Advertising Bureau (IAB) reports that that industry is on track to surpass $20 billion in Internet advertising this year. With dollar signs in their eyes, a raft of companies are looking to ride that wave of spending, betting that advertisers will be attracted to the promise of ads delivered to mobile phones, the most personal connection to the digital world.
Pioneers like Third Screen Media (now part of AOL) were ringing this bell back in 2005-but, as happens in the wireless industry, it has taken time for this new business model to be widely embraced.
Make that business models. As companies aggressively experiment with the advertising opportunities afforded by mobile, multiple advertising modalities are popping up in the wild.
With text messaging penetration in excess of 40%, it is understandable that a wide array of advertising approaches would aim to leverage this service. In September, nearly 18% of mobile subscribers received a text message ad or promotion. Most of these were from service providers, but more than five million subscribers received offers from companies with whom they’d opted in to receive messages. Disturbingly for this nascent market, more than twice as many consumers received messages from companies they had not approved to send them advertisements and offers.
Beyond the straight text-message ad, companies such as 4INFO (in which Gannet is an investor) are appending ads at the bottom of text alerts and text searches. It is only a matter of time before we see the big players in Internet search do the same as they continue to make their moves in mobile.
Mobile video and TV services, which have been slow to meet their much-hyped potential, are also looking at advertising as both an additional revenue stream and a way to grow the audience. Research M:Metrics conducted on behalf of the Mobile Marketing Association (MMA) found that a much larger audience for mobile TV would exist if advertising subsidized the cost of these services. Consumers expressed a willingness to accept advertising to get their mobile TV fix, and this is precisely the model embraced by companies like Rhythm New Media, which launched services in Europe and likely will show up on U.S. shores next year.
Some of the hesitation around mobile advertising has come from fear of undermining the perceived value consumers place on mobile content and the willingness of some of them (but not a majority) to pay for content. Apart from ringtones and wallpapers, the largest category of titles on every carrier deck is mobile games. Yet even here, companies like Greystripe and Limelife are working to build businesses based on inserting advertising into downloadable content. The lesson to be learned from other media is that it’s not a question of paid versus ad-supported free: Both models can co-exist.
On the Internet, spending on search-related advertising accounts for 40% of dollars spent, according to the IAB, followed by display advertising. Start-ups such as Medio Systems and JumpTap are hoping to do for mobile search advertising what Google has done for the Internet and, in the process, try and box out the Mountain View juggernaut form the still-developing market by being the carriers’ best friends.
Display advertising on the mobile Web sounded like a bad idea in a world of slow networks, small screens and minimal, “mobilized” content. The landscape has changed significantly in just the past 18 months, with dramatic increases in consumer adoption of mobile broadband, and devices that are finally making mobile browsing engaging.
Here we see a picture that shows clear promise, but also flashbacks to the early days of the Internet. M:Metrics’ monitoring of mobile Web advertising in October revealed that brands-more than a dozen of them from the Fortune 100-are using mobile as a vehicle to sell cars, hotel rooms, automobiles and fruit spritzers, to describe just a few products.
These ads, often delivered via ad networks such as Third Screen, AdMob or Millennial Media, are currently presented in a cacophony of shapes and sizes. More than 50 different ad formats were tracked in October alone, an indication that the sector is in an experimental mode, which demonstrates the need for the work being done by the MMA to develop standards for mobile advertising across most of these formats.
While no good estimates exist of today’s total mobile advertising spend, it is certainly a fraction of a percent of the $20 billion that will be spent online this year. Yet companies in nearly every sector of the mobile industry are working to find ways to change that. The only up-turned noses these days are those that are following the smell of money.
You may contact Mark directly at [email protected]. You may contact RCR Wireless News at [email protected].
