Is the tide turning for off-portal? Slowly but surely,
industry professionals see it happening.

It’s been a quandary for the U.S. off-portal industry. The general theory is off-portal content makes up about 30% of content revenues in the United States, with the other 70% coming from on-portal.

In Europe, the numbers are just the opposite, with more revenue coming from off-portal than on-portal. So when will the trend shift in the United States?

Expectations are fairly high that the tide toward off-portal content will turn more in 2008. Optimists point to the Google-led Open Handset Alliance (OHA) that will produce open handsets in the second half of 2008 and presumably will allow access to more Internet sites, therefore leading to more awareness and more off-portal content downloads. Big brands will start participating more, possibly in the form of more advertising-sponsored models. And carriers have been “hardening” their systems over the past year or so in preparation for handling the issues involved in off-portal.

Pessimists might point to rumblings over potential class-action suits over participation TV contests, like those associated with “Deal or No Deal,” that could throw a wrench in to the shift to off-portal. If smaller content companies don’t get better revenue share or support from operators, they won’t have enough money to spend on marketing, which keeps the wheels turning and more revenue coming in. If aggregators don’t step it up a notch as big brands join the fray, that could slow progress, and of course, one big mistake could throw the whole train off course.

Those are a lot of “ifs.” However, for the most part, industry executives are encouraged by the signs.

LOOKING AHEAD
“I think 2008 is going to be a very, very strong year for off-portal,” says John Styers, a former Sprint Nextel mobile advertising executive who is now a partner at Moblico. “There’s definitely an interest, at least, to trial the open platform in some way or define what is an open platform … The fundamental question is when is that inflection point for off-portal and on-portal. We’re going to be very close to 50-50 by this time next year, definitely in the 60-40 range.”

Livingston: Expects a major shift to off-portal beginning in 2009.

Executives at off-portal aggregator mBlox are upbeat by recent statistics as well. Steve Livingston, chief marketing officer at mBlox, credits ringtones and participation TV as the two big drivers of off-portal content in the United States. If you do a quick search for ringtones via Google, most of the links that pop up are off-portal, not direct from carriers.

As for when the pendulum will swing for off-portal in the United States, mBlox is betting it will probably be the 2009 to 2010 timeframe. “I see more things coming into the mix than I see things slowing down,” Livingston says. “It’s a progression.”

That’s in line with the general feeling during a session at the Mobile Marketing Forum (MMF) event in Los Angeles last month, where panelists’ predictions ranged from 16 to 20 months. Informa Telecoms & Media predicts the shift will happen in 2008, when U.S. off-deck revenue will begin to surpass on-deck revenue.

The shift already is happening at AT&T Mobility, where industry insiders say the mix is more like 50-50. Company sources wouldn’t confirm that, but “on- and off-portal complement each other very well,” says Chris Black, director of mobile marketing at AT&T Mobility.

AT&T is the exception. Industry professionals who work closely in the on- and off-deck content space say it’s a different story at the next two biggest carriers, Verizon Wireless and Sprint Nextel. There, they say, the mix is still more like 70-30, with on-deck taking the lead, although they also see the shift occurring at the other carriers as well.

When asked at the MMF event to predict when the off/on-portal mix will shift in the U.S. market overall, Stephanie Bauer Marshall, manager of mobile advertising at Verizon Wireless, hesitated to make a forecast, saying it depends largely on how the term “off-deck” is defined. Part of the off-deck issue revolves around going to sites that are not optimized for the mobile phone, which can leave users with a bad experience.

Olschwang: Many American English sites optimized for mobile still aren’t delivering a great user experience.

About 30 million American English mobile sites are technically optimized for mobile, yet most of those sites are outdated, says Dan Olschwang, president and CEO of mobile search firm JumpTap. Many of the sites were put in place in the late 1990s and optimized for mobile at that point, but meager traffic meant the content was never updated. Olschwang estimates less than 10% of those sites are relevant and updated for today’s users, adding that some technologies are successful to some degree to enable on-the-fly auto transcoding. Such solutions help improve the compatibility of a Website to a mobile phone, but the general thought is those kinds of solutions are better than nothing – and still not delivering a great end-user experience.

AT&T spokesman Mark Siegel notes that AT&T customers already can go anywhere they want on the Internet with their phones. MediaNet content is what the carrier offers on deck, but customers can go off MediaNet and find content for which the carrier bills. AT&T works with about 12 aggregators and 500 content sources, making sure the content works on its devices. If the content that doesn’t pass best practice guidelines, like that associated with hate crimes or gambling, that doesn’t get condoned by the carrier, he says.

ALL FOR ONE
Big-name vendors like Qualcomm are doing their part to foster the off-portal market. Last summer, Qualcomm announced its BrandXtend platform to help major brands drive uptake of mobile content – both on- and off-deck. In November, the company announced that Major League Baseball’s interactive media and Internet company MLB Advanced Media is using BrandXtend to extend its mobile direct-to-consumer content offerings. (The service was actually up and running during the World Series in October, but the news announcement was delayed because so many of Qualcomm’s employees were affected by the wildfires in Southern California around that time.)

Dunphy: Qualcomm is technology agnostic and committed to openness.

Qualcomm is trying to get the message out that, despite years of fighting for its intellectual property rights (IPR), it is technology agnostic and committed to openness, says Brian Dunphy, head of brand and affinity relations for Qualcomm Internet Services.

Big brands such as MLB are helping to promote off-deck. “They can help kind of push that,” he says. Qualcomm intends to support as many phones and services as possible because that’s what the big brands want; supporting only a select few doesn’t do them any good. “We believe that with our position in the industry, along with the operators and these media companies, that we can probably start to work on better consistency” in billing and business practices, he says.

It might take big companies with resources like Qualcomm to make sure brands’ content will work on a multitude of handset models, similar to what aggregators do. Dunphy and his team made sure MLB’s services would work with as many handsets as possible, going out and buying handsets by the boatload and hunting on eBay for models already in consumers’ hands but no longer available in brick-and-mortar retail outlets. “We tested phones left and right,” he says, noting that MLB expected as much.

THE NO-CARRIER MODEL
For some time now, companies, disenchanted with the carrier process or simply out of frustration or loss of patience, have been going around the carriers to offer content, using credit cards or PayPal as payment mechanisms.

Off-Deck vs. On-Deck Revenues: U.S.

Source: Informa Telecoms & Media

Going around the carriers is a mistake, says Richard Siber, president and CEO of SiberConsulting. “You have a lot of companies that don’t see the value of the mobile carrier,” he says. “My view is the carrier is the nucleus of this wireless ecosystem, and it’s naïve and wrong for some of these guys … I don’t agree with that model at all.”

As one might expect, AT&T’s Black agrees. Carriers are the engine that makes the industry run, and they’re going to hang on tight to the steering wheel. “It’s very hard to do it without us,” he says. “We want to help these folks succeed.”

And he notes that AT&T has found a way to make off-portal content work, with a standard revenue share for everybody, the details of which the company won’t reveal. “We’re in this to make money and we’re doing a great job of it,” he says. “It’s a very important part of our business, and we have found a way that we can give our customers what they want when they want it.”

What About “Free”?

One way brands want to use short codes is to offer free content. The problem is, sometimes the content they want to offer is the type of content that carriers want people to pay for, such as ringtones. If the ringtone is specific to the brand, that’s one thing, but if it’s a popular artist providing the ringtone, that can conflict with what the carrier offers on its own deck. Carriers, namely Verizon Wireless, got a bad rap after Verizon erroneously rejected a short-code campaign from a pro-choice group. The carrier ultimately admitted its mistake and let the campaign continue. Later, a VoIP company, Rebtel, which offers cheap international calls, complained that carriers were acting in an anti-competitive manner by rejecting its short-code campaign that would encourage the use of its services. Carriers said they had the right to reject campaigns that try to advertise competitors’ services. Marriott: Each carrier needs to approve or reject any short-code campaign that will run on its network. So how many short-code campaigns get rejected, and on what grounds? Industry insiders say short code campaigns typically get rejected if they either compete with a carrier’s offering or if they violate the Mobile Marketing Association (MMA) guidelines for best practices. Laura Marriott, president of the MMA, says it’s up to each carrier to approve or reject the campaigns that run across their networks. But she says the majority of programs are approved. mBlox is working within the MMA to draft guidelines on free content as well, but in a different sense. Free content is a confusing area, with some of it having to do with the term “free” and how explicit the definition needs to be, says Steve Livingston, chief marketing officer at mBlox. “Some carriers don’t like the use of the word ‘free’ without explicitly calling out what is free and what isn’t free,” he says, and it’s not so much an issue of cannibalizing other content that the carrier offers for a fee because carriers still make money off the downloads. He expects the future of off-portal content will grow around things like social networking, where if someone wants to change or update their profile and doesn’t want to pay $10 to send a message to their community, a major brand could step in and sponsor the messages.