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Mobile advertisement

Opportunities and threats

Alf_Martin_Sollund

Alf Martin Sollund
Telenor

alf-martin.sollund@telenor.com

The mobile telecommunications industry is starting to realise the large potential of the mobile phone as a channel for advertising. The mobile phone is a ubiquitous, always-on and personalised device. Based on these characteristics, it allows advertisements to be tailored to individual users according to the users’ context and preferences.

Furthermore, the mobile phone is an interactive device, offering a response channel to measure satisfaction and allow purchase of services and goods. Mobile advertising constitutes a large possibility for mobile operators in terms of taking new roles, while also introducing the risk of exposing the valuable asset of trust by intrusion into the private sphere of the user.

Definition and scope

Mobile advertisement (m-ads) is defined as the business of encouraging people to buy products and services using the mobile device as a medium to deliver the advertisement. More precisely, m-ads can be seen as a subset of promotion, which itself is a part of the marketing of services and products.

The market for mobile advertisement is already here and growing rapidly, in spite of different barriers. Barriers are regulatory issues in Europe, mobile terminal capabilities, handset diversity, operator acceptance, uncertain business models, accessibility and acceptance for advertisers, and last but not least user acceptance.

Eurescom Study P1654 analysed the market potential of mobile advertisement from different perspectives in order to assess the opportunities for new revenue sources for the mobile operators, but also to analyse the risks related to privacy intrusion.

Current market

m-ads exist today, and mobile operators should position themselves in the value chain. There is consensus that the market will grow significantly within a five-year perspective, although the big success stories are missing. The advertisers are interested in the new possibilities of the mobile channel, but lack the knowledge to fully utilize it. This gives opportunities for new roles, such as “aggregator”, to be taken. Consumers are sceptical to-wards m-ads, but research show that they become more positive if the ads are of relevance to them and delivered with their consent.
Several global companies have entered the market as advertisers, but so far mainly on branding. Companies, such as Admob, Enpocket, Jumptap, Screentonic, and Third Screen Media are moving towards the aggregator role by proposing solutions for the technical aspects, such as the platform to deliver m-ads as well as the marketing and communications aspects to provide advertisement on mobile phones.

Operator positioning in value chain

When an operator enters the value chain (see figure), there are several scenarios, but two that should be considered first:

  • Scenario 1: authorize m-ads over the network, but focus on the core business as mobile operator – this approach can be considered the safest in the short term.
  • Scenario 2: enter the roles of enabler, ASP and aggregator in the m-ads value chain – this approach can have different variations and provides many possibilities for partnerships. It needs more investment but could be a good opportunity to de-velop new revenues.

Since the business models are uncertain yet, one possibility to reduce risks and exposure is to partner with companies in related market segments to exploit business opportunities. As most mobile operators are not set up to perform sales of advertising inventory, such partnerships are very useful in the short to medium term.

However, if mobile advertising becomes a strategic business, mobile operators could wish to control a larger portion of the value chain, assuming also the advertising sales agency’s role as well as the aggregator’s role. Currently, some mobile operators have chosen to enter partnerships with advertisers or marketing agencies instead of developing their own technical solutions for m-ads delivery and develop their own sales network towards advertisers.

Overcoming intrusion

Personalisation is a key enabler to overcome end-user reluctance, in particular on push of ads. Thus, personalisation is an essential function in any solution enabling targeted m-ads. Personalisation must be introduced by the operator, in order not to endanger the valuable asset of trust by the user when dealing with m-ads. In fact, m-ads that are perceived as spam must be avoided at all expenses in order to steer clear of any churn that may result from the reception of unsolicited advertisement.

Ad-space solutions

A mobile ad-space is the means of bringing an advertisement to the end users through a mobile device, and covers both the physical space at the device, which is where the advertising message is placed, as well as the engagement mechanics to bring the message to this space. A large number of mobile ad-spaces are mature enough to be utilised, such as mobile Internet banners, SMS/MMS push, Bluetooth, physical handsets, ringtones, screensavers, and wallpapers. Another set of mobile ad-spaces is close to potential realisation, but awaits maturity of the services themselves, such as mobile TV. Finally, some mobile ad-spaces should be mature in 2-3 years; they include the dynamic mobile desktop, SMS/MMS tails, in-call content, and Near Field Communication (NFC).

Conclusion

In summary, the market of mobile advertisements is a growing market with many opportunities, uncertain business models as of the time of writing, and different options for the mobile operators to position themselves in the value chain.

Whatever the choice of the mobile operator in assuming a role in the mobile advertisement value chain, the most critical enabling parameter is the personalisation of the m-ads to fit precisely the context and the preferences of the user. Otherwise, m-ads may negatively impact the trust by customers, which mobile operators enjoy today.

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