Advertising To Save Mobile Operators?
By Steve Wallage, Mon Sep 03 00:00:00 GMT 2001

The idea sounds ridiculous - surely thousands of failed dot coms can attest to the limitations of advertising. Yet new forms of sponsorship and branding will accelerate the introduction of new mobile services.

IT research companies have tried to group m-advertising as another revenue stream in their m-commerce calculations. In reality, m-advertising will be as far removed from the current SMS adverts, as banner adverts are from the future of Internet advertising. And trying to calculate m-advertising revenues is a rather meaningless task.

For the advertiser, typically a FMCG (Fast Moving Consumer Goods) company, m-advertising will be more about branding, increasing awareness, fitting m-advertising into a total marketing budget, and using the strengths of the mobile medium such as timeliness, personalization and location-aware.

Daryl Arnold, CEO of interactive advertising agency Profero, suggests m-advertising is about a "dialog" with customers. It is an opportunity for companies to communicate with their customers in a far more personalized and interactive manner.

What do consumers want?

Critics of m-advertising have suggested that consumers positively hate the thought of advertisements on their mobile, and have major privacy concerns. This has certainly worried the m-advertising industry - for example, the UK Wireless Marketing Association (WMA) has made it part of its code of conduct that; "permission to communicate in the form of transmitted data must be solicited from the recipient in advance".

However, consumers are not stupid. They know that advertising can support new services. That is why we have had the emergence of free ISPs, free DSL, free fixed telephony and even free PCs.Often the adopters of such services are not those one would expect. Gratistelefon offered free minutes of fixed telephony calls in Sweden, in return for listening to ten seconds of advertisements on the call. It was amazed to discover that its average user was in their mid-thirties.

For the elusive Generation Y (normally considered something like 12-25 years in age), advertisers can barely reach this market with existing channels. Generation Y consumers are so used to 'texting' that actually speaking on a mobile device is decidedly history. They are far more accepting of advertising than other user groups, assuming it is appropriate products and communicated at appropriate times, and are happy to do their own viral marketing.

Although Generation Y is a demanding audience, with most products being highly faddish and novelty quickly wearing off, the mobile device is a great outlet for advertisers.

What do the mobile operators want?

The mobile operators have had a bruising 2001. They are having to focus on margins and the most attractive customer segments in the face of a maturing marketplace. This focus on margins means that the mobile operators' portals are already trying to work out which content they can charge for.

Yet, they need their customers to quickly adapt GPRS handsets and new mobile data and value-added services. Mobile operators do not want to provide heavy subsidies to users to attract them to GPRS, nor offer extended free trials to lure users to new services. Handset manufacturers are not going to be a generous partner in supporting heavy subsidies on new handsets.

Mobile operators are also (finally) coming alive to the need for new partners and new skillsets to take advantage of the opportunity of mobile data. They are also reappraising their skills and market positioning. For example, Hutchison 3G in the UK now describes itself as a 'media company'.

New advertising-led models

Three obvious possibilities exist.

First, consumers could be offered the opportunity to pay for their mobile service according to how much advertising they were prepared to accept. There would be set levels, and they could feasibly have the option of choosing when they would like to receive advertisements and the sorts of companies from whom they would like to be contacted.

Second, branded mobile handsets could be offered, particularly offering the opportunity for consumers to buy subsidized GPRS devices. As part of the contract, the handset could be replaced by a new fascia at regular intervals, and advertisements could be delivered to the handset by the sponsor and its partner.

Third, new mobile services could be provided as sponsored offerings. For example, services such as m-postcards could be sponsored. This is already starting to happen with sponsored ring tones and logos, with recent examples being visuals for newly released movies.

The challenges - not in the most obvious areas

Interestingly, the delays in GPRS and 3G are not seen as major obstacles by marketers. Steve Wunker, CEO of wireless marketing solutions company Brainstorm, believes that "visuals would help but are not critical". He points out that newspaper adverts are in black and white. Arnold of Profero suggests that, even with MMS, mobile advertising would not be that rich a media, and the mobile interaction is far more important.

The problems of differing messaging platforms and handset specifications are also being solved by a host of companies such as conVISUAL, magic4 and Empower Interactive. The Wireless Advertising Association (WAA), in July, published specifications for WAP, SMS and PDA advertising. The WMA plans to issue standard response metrics for m-advertising in October.

Although the difficulty of targeting users and managing mobile user databases should not be under-estimated, it is important to remember that personalized advertising is not meant to be exactly one-to-one. It really refers to mass advertising that is carefully segmented, and designed to give the appearance of being customized.

Perhaps the single biggest challenge is convincing the advertisers of the benefits. Although many major corporates have trialled m-advertising in Europe such as McDonalds, American Express and Nestle these have generally been very limited investments. The timing is hardly wonderful. According to Zenith Media, global advertising spend will fall by 2.6 percents in 2001. They also predict that, for the seven largest markets, growth will only be 0.8 percents in 2002.

Arnold at Profero believes one of the main challenges is that the person best equipped to see all the benefits of m-advertising is probably the marketing director, hardly the easiest person to contact or convince. Vested interests also protect many of the other advertising channels.

Looking ahead

Advertising can never be the savior of the mobile operators, and there are many obstacles to its development. The current vogue of claiming ridiculously high success rate for simple SMS advertisements is also not helpful.

However, handled correctly, advertisers can allow mobile operators to offer subsidized services, and more choice, to users. Without advertisers, how many consumers will be early adopters of 3G?

Steve Wallage works and writes for the451, a website that offers critical news analysis, comment and opinion on the technology, communications and media industries with an emphasis on their convergence. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.

Most recently, he was a principal analyst at Gartner Group tracking the voice, data and IP service markets for the carrier, vendor and financial community. He predicted how these markets are likely to grow, and helped develop the business plans of leading vendors while analyzing key trends in the market.