Ad Supported Mobile Devices
By Mike Masnick, Wed Sep 08 20:15:00 GMT 2004

Subsidizing mobile devices is nothing new. However, those subsidies are always to push service plans or add-ons. Now comes a new business model: subsidizing mobile hardware with advertisements.

Subsidies are basically a way of life for mobile operators these days. They want to get subscribers to sign up for fancy new phones that include plenty of data hogging applications. Those phones can be pretty pricey on their own, however. So, to help push the demand for higher level mobile phone plans, the operators often subsidize the handsets quite a bit. This is a large part of the reason that many operators lock their handsets. If they're paying for a large portion of your handset, they certainly want you to stick around for a while and make them back the money in service fees.

In the video gaming world, the story is somewhat similar. Just like the famous "give away the razors, sell the blades" strategy, the hardware is cheap, but the games are marked up. With new mobile gaming devices showing up every month or so, it's really no surprise that the business models involve some form of hardware subsidies as well. However, one company seems to be taking a slightly different strategy on these subsidies. Gizmondo, makers of a GPS-enabled handheld gaming system (which, at one point was called the Gametrac), has decided to subsidize its device with video advertising.

It certainly might make you think back to the dot com era when you could get a free PC and a free car if you didn't mind advertising slapped all over it. However, now that advertising is back in fashion, Gizmondo wants to do the same thing on their mobile gaming devices.

There are just a few problems, however. As mentioned, most gaming devices are already well subsidized to make them fairly cheap. Just last week, for example, Nintendo said they were cutting the price of the GameBoy Advance SP to make it even cheaper in the face of rising competition. More importantly, though, is that Gizmondo seems to be assuming that these ads will have some value. Too many attempts at mobile video ads miss the boat completely or seem to forget the nature of mobile device users. They're mobile. They're on the go. There's lots of things for them to pay attention to, and a boring, repurposed TV commercial is unlikely to hold their attention very long. Yet, Gizmondo wants to repurpose TV commercials (mostly film trailers) rather than focus on content that might really engage a user -- perhaps by associating it with a game on the device. If Gizmondo forces users to "view" the ads, most will set them to run, and then go do something else while the ads run.

If that's the case, advertisers will quickly realize they get no value in advertising on such devices, and the ad supply will quickly dry up. That won't be good news for the device makers, who have given away the devices at a loss, and won't be able to make up the difference. Advertising can be a fickle market. If mobile device makers want to subsidize their devices via advertising, they should at least make sure it's advertising their customers will want.