For the past few years, marketers’ minds – and increasingly their budgets – have been focused online, with a wealth of opportunities and a raft of new channels to reach consumers. Yet they have treated the potential medium of the mobile phone with more suspicion. But, as phones become increasingly technologically advanced and subscription models ever more subtle and sophisticated, networks, content providers and brands are looking at how they can monetise the medium.
It’s a huge market, with mobile phones having 100% penetration in the UK, according to Netsize Guide 2006, and outnumbering PCs by ten to one. The iPhone’s launch last week has also highlighted the greater capabilities of the modern handset, with its free wi-fi proposition, as well as its touchscreen viewing panel via which users can view films and access audio-visual content. No more is a phone just for talking.
Increasing numbers of companies are looking at, and providing, ad-funded content, mobisodes and user-generated content, as they look to gain a foothold on the mobile platform.
Inevitable next step
Moreover, with deals including AOL’s purchase of Third Screen Media in May and Microsoft’s acquisition of ScreenTonic, there is a clear signal from the industry that consumers should get ready to see ads on mobile phones soon. In fact, DoubleClick announced its move into mobile just this week.
Meanwhile, WPP Group chief executive Sir Martin Sorrell has admitted he sees mobile advertising as an interesting area, which has much growth ahead. “My sense is that it is a small area that is growing fairly rapidly,” he said at Reuters Global Technology, Media and Telecoms Summit.
Randy Falco, head of AOL, the internet division of Time Warner, predicts mobile is one of the great growth opportunities, believing it will be worth up to $5bn (£2.5bn) in terms of the market in five years.
The vice-president of marketing at on-device portal company Action Engine, Anne Baker, is less optimistic about such figures, but believes fast uptake is inevitable: “Although mobile advertising is in its infancy, it is predicted to be a billion-dollar market in less than five years; and it looks like many of the big brands are counting on it as a new source of future revenues. The question that remains is: do these companies have the technology in place to make the experience of receiving mobile advertising on the phone simple and non-intrusive to the consumer?”
She points to studies detailing a lack of consumer tolerance for mobile phone ads that are irrelevant, slow to load and screen-space intensive. “If the big brands don’t combine their new mobile advertising investments with the technology necessary to deliver the ads in a consumer-friendly manner, they have the potential to drive consumers further away from the mobile internet and cause real damage to their brands,” adds Baker.
That, says David Barker, European managing director of mobile specialist Enpocket, which was snapped up by Nokia earlier this month, is because the mobile is so personal, and brands must beware of seeming to be invasive.
“The greatest opportunity is also its biggest threat. The phone is such a personal device,” he says. “By associating yourself around content, you have to be very, very aware of consumers and how you treat them at all times. Quite a lot of activity at the moment is about ‘spam’. I don’t want spam on my phone. It is rubbish on the internet and crap in mobile phones.”
Zapped by ads
Spam has been an issue with Bluetooth advertising, which allows content to be sent to phones from Bluetooth-enabled poster sites. Some complained that being “zapped” content without overtly agreeing to it was an invasion of privacy, while others say that having Bluetooth switched on is agreement in itself.
Moreover, activity can be hugely targeted and welcome, says John Scorah of specialist agency Bluepod Media. It has deals with a number of football clubs, cinema chains such as Vue, which is helping to promote the launch of Microsoft’s Halo 3 game, and shopping centres, such as Bluewater. “What we’re sending is not spam advertising,” he insists, “but real, valuable messages that users actually want.”
He says the area is growing and allows advertisers to target consumers with relevant advertising and messages, tagged to content that people actually want. At Birmingham City Football Club, spectators can – and do – download team sheets and club news. “On average we have over 10,000 downloads a game,” he says. “Not bad for a club that has a capacity of just 25,000.”
As Barker says, brands invading the mobile space must do so in a way that offers something to consumers – hence also the excitement around ad-funded programming, sponsored content and subsidised gaming.
“The issue there, though, is that there are no answers yet on how to best monetise it: it may well cannibalise on the content revenue stream that operators were successfully selling through subscriptions.”
Operators and broadcasters are also looking at mobile television, where content is simultaneously streamed to mobiles, as it appears on TV. Satellite giant BSkyB partners with network Vodafone to offer Sky Mobile TV, a range of channels including news, sports, entertainment, music and films. The service is priced between £3 and £10 a month, depending on the packages chosen.
But the future potential of streamed TV took a knock this summer with Virgin Mobile’s much vaunted service to close in January after operator BT Movio pulled the plug. Launched last October, the five-channel BT Movio was the UK’s first broadcast TV and digital radio service for mobiles.
Virgin Mobile sold just 24,000 of its Lobster handset, despite a high-profile, above-the-line campaign starring Baywatch actress Pamela Anderson. Observers blame the demise on “over-optimistic” expectations for a subscription service already offered free at home.
Real take-up of mobile TV isn’t expected until spectrum is allocated to allow phones to receive content via integral aerials, as 3G-quality deteriorates if too many users in an area download at the same time. Such spectrum in the UK is unlikely to be available until 2012, with the Government gearing up for a spectrum auction.
Others have looked at shorter, bite-sized content on phones. Channel 4 partnered with Domino’s Pizza to support its Celebrity Big Brother series earlier this year. Users requesting clips of CBB on mobile first had to watch a pre-roll of a Domino’s ad, which included a two-for-one pizza offer. There were more than 200,000 downloads of footage and cost per complete view was 5p, according to Domino’s media agency BLM Quantum.
Head of emerging channels at BLM Quantum Dominic Finney believes mobile advertising will come of age over the next few months and the “key dynamics” of the market will be in place. He says: “The mobile platform is finally user-friendly. The medium is on the cusp of going mainstream through lower costs and ease of use.”
Meanwhile, ITV is offering its clients a range of “mobile creative solutions” through partner MIG. It allows advertisers to exploit the medium by using ITV’s already established five-digit shortcodes as an overlay on their linear ad or sponsorship credits. It says it is also the first UK broadcaster to offer an interactive chip-and-pin service, allowing advertisers and retailers to send mobile coupons to its viewers, which can then be redeemed at retail outlets.
The service and technology, created by mobile specialist Eagle Eye Solutions, offers brands and retailers the ability to link their ad spend directly to sales generated via the sales data provided by the coupon system. It is looking for retail partners to join the service.
There are also opportunities on mobile internet – particularly for publishers and brands in the entertainment space. Barker points to the “off-portal” players and to brands such as The Sun and Sky launching ad-funded WAP sites to complement or replace existing subscription content, such as The Sun newspaper’s java site.
They are becoming, in a sense, mobile media owners, as well as advertisers, talking to other advertisers about linking with their brands and developing real, serious commercial targets. Barker says: “It follows the logic of the early Net, with the main areas of interest being passion centres, such as football, music and adult content.”
Brands migrating to the mobile advertising market are traditionally those already involved in the mobile space, with mobile networks the largest spending, he says. “This is still a relatively young market. It is going to get bigger and bigger. The future of monetising mobile will follow a similar curve to the internet. Big brands are going to see mobile as an opportunity, integrating themselves with content, rather than just banner advertising. They will start sponsoring sections and building associations and relationships.”
However, European managing director of AdMob Russell Buckley strikes a note of caution. The company has run more than 1.3 billion ads on mobile handsets across the globe. Buckley says: “As far as ad-funded mobile content is concerned, this is clearly a hot topic, as many content-owners ponder falling margins and seek to replace them.”
However, he is not fully convinced that the numbers add up in most cases. “Certainly ad-subsidised content is very realistic, but giving premium content away free is not likely to be realistic in the next two years at least, and probably not even then, without a radical realignment of costs and margin expectations,” predicts Buckley.
A wealth of opportunities, then, for mobile operators, advertisers and content providers. The key will be how exactly to monetise the medium, making it a profitable and growing revenue stream, while avoiding cannibalisation of existing routes to market and profit streams. Lessons learned from the boom, bust and subsequent rise and maturing of the internet market may prove invaluable.