Mobile Marketing's Promise: The Universe of One

Editor’s Note: This special report on mobile marketing first appeared in the March Special Edition of RCR Wireless News. The special report is running in two parts. The second part of the report will be available online on Tuesday.
Mobile marketing promises to connect brands with users on a one-to-one basis, providing customers will relevant information that is important to them. While the sector is still in its infancy, and today uses SMS technology as the main method to deliver marketing messages, the potential of the mobile advertising market has brands, operators, advertising executives, content publishers and technology enablers anticipate great things as the space evolves.
As more people buy smartphones, with their large screens and enhanced computing capabilities, the mobile advertising sector expects to see wider of ways for mobile marketers and advertisers to connect with end users going forward, but how the segment develops has yet to be determined.
Wireless operators have been cautious to introduce mobile advertising to their customers, in part because they have a trusted relationship with their customers, said Jo Wall, proposition manager for Acision’s mobile advertising initiative. Operators have to honor the customer by delivering marketing messages that are relevant; otherwise customers will perceive marketing messages as spam. As such, advertisers are starting out slow in the mobile ad space, with WAP banner ads or push SMS. But as devices evolve, brands will use text, imagery and audio to tap into a consumer’s emotions, Wall said. With broadband adoption, she expects to see video advertising on wireless devices.
“What’s clear at the moment is that mobile advertising is very embryonic,” Wall noted. Carriers and brands are trying a variety of approaches to figure out what works best in the space.
Applications allow companies a more direct way to connect with customers, said Paul Reddick, CEO of content publisher Handmark. “It’s easier to get on the shelf now, but harder to get noticed.”
There are ways to connect the media company with the end user that delivers the best experience for that end user, Reddick said. He sees advertising in a variety of places in mobile content, including within the content application.
Mobile marketing is often associated with mobile search. “But search in mobile is very specific,” Acision’s Wall noted. The messaging company partnered with a subsidiary of Singapore Press Holdings Ltd. called SPH Search to launch a location-based mobile search and directory called Rednano Locate. Singaporeans love their mobile phones and are often early adopters of new technology. However, the country’s residents had a negative connotation of mobile marketing because they are used to being spammed by SMS messages that are not relevant, Wall said.
Rednano Locate uses local search results, like directory listings, news updates, maps and images from Singapore Press Holdings’ extensive database. Users download the search application for free and then have access to search through Rednano’s 100,000 business listings. Once they find the business they are interested in, they can access a map to the business’s location, a traffic update that advises the best route to get to the location and promotional offers from the business. Companies that want to be higher on the list pay for premium spots, Wall said. In the three months the service has been operating, people have accessed the database 200,000 times, she said. The application is successful because the experience is tailored to the consumer’s needs, Wall said. “You have to make it about the consumer. Customers don’t want to inadvertently opt in to something they don’t want.”
Social networks also are going to change mobile marketing, putting the consumer in control of the marketing message, said Deepak Swamy, associate VP of communications, media and entertainment practice at Infosys. Going forward, consumers are not going to listen to traditional branding messages, but rather will pay more attention to recommendations from their social-networking friends. End users may share what sites they’re browsing and items they are buying via their social networking sites, like Facebook. Using opt-in filters will enable end users to share what they’re doing and what they’re buying digitally.
Wall agrees that consumers will be in control of the mobile marketing experience in the future. In a whitepaper focusing on what mobile advertising will look like in 2020, Acision and partner OgilvyOne came away with these predictions. “In 2020 mobile advertising will have become mobile directed advertising. It will be about more collaboration with the individual and individual’s control. Consumers will decide where, when and on what screen they receive a chosen advert with the device becoming a technological representation of them. Adverts will transform to initiate two way dialog with that individual. All players in the mobile advertising value chain will need to recognize this and embrace it.”
Delivery and Distribution
If this story had been written five years ago, we would have needed several paragraphs to explain what exactly an “application store” was and probably even more to explain why consumers would care. Now, you can’t attend an industry conference without the term app store being mentioned in nearly every conversation or keynote. (As proof of this, one only has to cite the recent Mobile World Congress event in Barcelona, Spain, where whole sessions were dedicated to the app store phenomenon.)
Before Apple Inc. unveiled its iconic iPhone and corresponding Application Store, consumers either were forced to navigate a carrier’s out-of-control on-deck portal in an attempt to download an application or game or venture off-deck into the seedy world of direct-to-consumer offerings. These options provided customers with some choices, but the implementation was so difficult to navigate that few bothered and correspondingly the revenues from such ventures were minor.
But, Apple changed all of that with an applications store model that not only made it much easier to shop for applications through an easier to understand format and pricing model, but also for the fact that the company opened up the code required to develop games and applications for its platform for all to use. And, Apple came up with a brilliant financial scheme that provided application developers with 70% of the revenues from sales, with Apple keeping a smaller, but still significant 30%.
Some will point out that Apple also had an advantage in that its app store only needed to support one device, aiding the company’s ability to ensure that the user experience was top notch, but whatever the advantage was, Apple ran with it and caught the rest of the wireless world off guard.
“Games and apps were very hot in 2003 to 2005 with a ton of expectations,” noted Ryan Morel, VP of business development for mobile content developer and enabler Reaxion. “And in 2005, everyone realized games were not meeting high-growth expectations and they became a side business for carriers.”
Fast forward to today and nearly every operating system has its own application store modeled after the Apple model. Further, a number of handset vendors and wireless carriers have also announced plans to launch their own application stores looking to tap into the revenue stream that so far is dominated by Apple. One analyst estimated that Apple currently controls more than 99% of all application downloads to handsets, and that’s significant as a recent Gartner report forecast consumers will spend $6.2 billion on application store purchases this year.
“Apple and the iPhone brought that back around and now carriers are saying ‘oh my
gosh, consumer do want games and ap
plications,’ assuming it’s on a platform that they can take advantage of,” Morel added.
Fragmentation forcing decisions
This rush of new storefronts is both a boon and bother for developers that — while having substantially more options in distribution points — must now choose where to focus their efforts. And with nearly all of the current outlets for applications requiring different coding, this equates to a substantial amount of work for smaller developers.
“If you want to be successful you need to hit as many of these points as possible,” said Reaxion’s Morel. “Clearly there are costs associated with that, but our business is based on using one code base and spreading it across all platforms. If you are a small developer, it’s going to be a challenge.”
While Apple is still the 800-pound gorilla in the distribution space, developers are looking to cast a wider net in hopes of monetizing their assets.
“Apple and iTunes is a great storefront, but there are still issues with it and it’s not the gold mine everyone makes it out to be,” Morel said, noting Apple’s App Store has a limited reach in most markets and is still limited to just one platform.
Google Inc.’s Android operating system is seen as the up and comer in the space and over the past several months has seen a number of new device launches and growing support from developers. Unlike Apple’s proprietary OS, Android is an open-source platform with Google not only giving away the OS for free, but offering to share in the application revenues with handset makers and carriers.
“App developers will follow two things, volume and ease of use,” said Christos Georgiopoulos, GM of Intel Corp.’s developers relations division. “Will you provide me with what I need to make it as easy as possible. Whoever answers that question will have the better chance to defragment the industry.”
Georgiopoulos added that while the race is still in its early stages, two platforms have separated themselves from the pack.
“Developers are moving to the platform that gives the best chance to make money and that appears to be Apple and Android at this point,” Georgiopoulos said.
Other options
Other app stores gaining attention include Research In Motion Ltd.’s App World, which is available across the device manufacturer’s line of BlackBerry smartphones and from most major carriers around the world, as well as Nokia Corp.’s Ovi efforts.
RIM’s model has garnered considerable attention because while it lacks the sheer number of available apps that can be accessed across Apple or Android, industry observers note that BlackBerry users are more likely to fork over dough for a useful app on the device.
“I have encouraged a number of developer companies to put RIM first, even in front of Apple,” said David Weiden, partner at VC firm Khosla Ventures. “But that depends on what you are looking for. Are you looking for 1 million paid users or 100 million non-paid.”
More difficult to predict is Nokia, which has put a lot of effort behind its Ovi storefront that has yet to garner the accolades heaped on some of its rivals. Nokia also has the advantage of being the largest handset manufacturer in the world, though many note that Nokia’s market share advantage is built on low-end devices that lack the ability to render more advanced applications.
“It’s hard to ignore Nokia because of market share, but not hard to ignore as they are mostly overseas,” said Reaxion’s Morel. “They have made mistakes and admitted it, but it’s hard to justify their Symbian platform at this point. We do expect to include it in the future, but for right now it’s a tough sell.”
Morel noted similar reluctance to invest much time or effort at this point in Palm Inc.’s WebOS.
One wildcard could be Microsoft Corp.’s new Windows 7 OS, which the company unveiled at the MWC event. Analysts have noted that Microsoft has a strong history of opening its platforms to developers and its new OS is looking to build on consumer demand for more feature-rich touchscreen devices.
For the second half of this special report, click here.