Mobile marketing is a curious subject; marketers seem to agree on many of the things that could make it more effective, yet there is widespread disagreement on how large a market it could become. While Ovum estimates the global mobile advertising market will reach €18.95 bn by 2005, Jupiter MMXI estimates European mobile marketing revenues at only €680m in 2006.
Key issues in making it more effective are widely believed to be interactivity, respect for privacy and preferably opted-in recipients, 'emotional' buy-in from the user and offering some value such as information or entertainment.
However, there exist three areas on which there is widespread agreement. First, mobile marketing is a far better description than mobile advertising – this has been clearly illustrated by the formation of the Mobile Marketing Association (MMA) from the wireless advertising bodies. Second, that multi-channel marketing is key – mobile marketing will never exist in isolation. And third, that the Asian market is clearly ahead – for example, in Japan NTT DoCoMo has formed D2 with the largest Japanese advertising agency, Dentsu.
Standing at a crossroad
It is important to understand the 'bumps' in the development of mobile marketing. Back at the start of 2000, 35% of the Jupiter MMXI advertiser panel planned to trial mobile advertisements. Many FMCG (Fast Moving Consumer Goods) companies did undertake limited trials, and Internet advertising companies such as Doubleclick planned huge investments in the mobile sector. Some of the response rates from mobile marketing trials were reported to be as high as 40% compared to even carefully targeted Internet advertising campaigns rarely surpassing 5% response rates.
Then, the nascent mobile marketing market got hit by a 'double whammy'; the economic slowdown and doubts about the attractiveness of mobile marketing. The economic slowdown meant that, according to Zenith Media, global advertising spend fell by 2.6% in 2001.
Concerns about mobile marketing grew over such issues as the high CPM costs (cost per 1,000 advert impressions), low penetration of WAP, limitations of SMS, unclear metrics, privacy issues and lack of standardization. This has also led to the demise of some of the pioneers in mobile marketing such as Zagme.
Hence, the mobile marketing market stands at something of a crossroad. Limited campaigns still continue, such as a recent initiative to promote the 'Lord of the Rings' film by Warner Village Cinemas and Flytxt in the UK. Mobile marketing companies flag up 2002 as the 'year of the m-advert'. Yet, many of the same concerns and barriers still remain.
For the advertiser, mobile marketing is one channel fighting among many for their time and money. As in a typical campaign, the advertiser's key issues are meeting their marketing objectives – which could be a number of elements such as increased sales, brand building or brand re-positioning – and then choosing the best channels to achieve this aim.
Worryingly for the mobile marketing industry, the advertiser has an increasing choice of interactive channels, and typically does not currently see mobile as the most attractive. A Jupiter MMXI survey of European FMCG companies asked what will be your most important interactive platform in 2003. Only 7% said wireless, compared with 52% for PC, 37% for interactive TV and 4% for kiosks. However, the survey was taken from a very small sample and partly reflects the current lack of understanding that FMCG companies have of the potential of mobile marketing.
Who’s sitting in the driver’s seat?
As with many elements of the mobile market, the value chain is complex in mobile marketing too. Simplistically, advertisers rely on their traditional agencies who will either have their own mobile division or work with a specialist company in the area. The agencies will work with portals and operators to run the campaign using the mobile marketing server and platform companies. In reality, the situation is far more complex as companies fight for control of the customer and try to offer a wider portfolio of services.
Take Japanese carrier, J-PHONE. It has a joint venture, J-Mobile, with leading Japanese Internet advertising company, cci. This manages mobile marketing solutions and services for their customers.
The mobile operators are desperate not to be excluded from the mobile marketing opportunity. However, they often don't have the necessary skills. Handset manufacturers are also mightily keen to create the direct relationship with the consumer, as illustrated by Club Nokia, and the giant Internet portals such as Yahoo are eagerly eyeing up the mobile market.
For the advertiser, it is partly a numbers game - which player can deliver the audience they need, whether that is a newspaper, TV channel or mobile portal. It is partly about functionality – who can provide the features and flexibility needed. And partly about cost - Jupiter MMXI estimate that the current European mobile marketing cost per CPM is €77 for SMS and they expect this to reduce by at least 55% by 2006.
Mobile operators should be well-placed for mobile marketing but the picture will vary between countries, and other portals will dominate in some markets.
Flexible billing models
Among the challenges in mobile marketing is the whole issue of billing. There are a wide variety of ways in which to bill advertisers for mobile marketing, including the industry standard CPM figure, monthly flat rate, transaction-based or cost-per-click.
For mobile marketing to be successful, advertisers need to be able to offer a variety of billing options to consumers from monthly subscription to per view, per response, per transaction and so on. Billing systems need to adapt for levels of service, categories of customers and sponsored offerings. Billing solutions also need to be highly scalable, work with legacy systems and offer such functionality as reverse billing and mediation services.
It all sounds a long way away, but there are a number of companies leading the charge in developing new billing platforms such as XACCT, Geneva and MoreMagic. The key requirement is to offer IP billing.
Gearing up for m-marketing market
Evidently, mobile marketing is hugely challenging. A Cahners In-Stat Group survey recently concluded that 'consumers’ first reaction is to reject mobile advertising'. However, there is strong evidence that mobile marketing can be made attractive to users. The same Cahners study suggested that mobile marketing can work if it give some benefit to the user, such as special offers or discounts.
An ARC consumer survey found that around 30% of consumers in Europe and the US were willing to provide personal information in exchange for mobile adverts. A Jupiter MMXI study of users unwilling to accept mobile marketing, found that 36% would accept it in return for subsidized access, and 35% in return for a subsidized device.
Mobile marketing will always have limitations but it has three clear advantages which can make it a huge market.
First, the youth audience. Advertisers are desperate to reach this market. The industry needs to show the tangible rewards it can provide in its easiest market.
Second, the unique advantages of the mobile industry in terms of interactivity, location-aware, personalization and being always with the user. The industry needs to look at ways of taking advantage of the 'save time, waste time' usage of many consumers. For example, marketing messages as part of mobile gaming and entertainment.
Third, the development of sponsored services. One of the main barriers to the take up of mobile data services is the cost of the handset and services. Jupiter MMXI believes that, even in 2006, only 31% of European mobile subscribers will regularly use the mobile Internet. Sponsorship of services and devices is needed by the mobile industry, and is a great opportunity for advertisers to reach their target market.
The challenge for the mobile marketing industry is to get the execution right, and focus on meeting the needs of the advertising industry in an extremely competitive market. But it also requires far more imagination from the industry – mobile marketing is far more than the mobile equivalent of 'banner ads'.
Next time your mobile phone signals a text message, and it's an advertisement, let’s hope it's worth your attention.
What’s brewing in the mobile marketing arena? Tune in for original reports, viewpoints, analysis and discussion covering the mobile marketing field all week on TheFeature.
Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications.