Overcoming Challenges To Capture Mobile Ad Dollars

Mon, 11/10/2008 - 5:42pm
Alan Pascoe

Leveraging SMS to reach the “low hanging fruit.”

In a recent interview on CNBC, Google CEO Eric Schmidt said the company eventually will make more money from mobile advertising than from the desktop business. That’s a powerful prediction coming from one of the Internet’s most successful business leaders. And he’s not the only one seeing dollar signs.

Alan Pascoe

Industry analysts predict skyrocketing growth as well. Frost and Sullivan conservatively estimate the mobile advertising potential to be eight billion dollars globally by 2011. Why all of the excitement? Because mobile advertising offers advertisers the ability to build highly targeted, personal relationships with consumers in a way that has never been possible with traditional media.

This is great news for mobile operators, right? Possibly. The first thing to note is the caveat in Schmidt’s comment – eventually. In fact, his exact words were, “. . . not now, but over time.” Many media savvy folks view the next two to three years as the “make it or break it” period for operators and advertisers as they begin their foray into the new medium.

A number of potential stumbling blocks stand in the path to the pot of gold. The most obvious is technological. Mobile broadband is not widespread. Until 3G networks are more widely deployed, operators will be forced to interwork 2, 2.5 and 3G networks and resources well into the foreseeable future.

Then there’s the issue of handset compatibility. With more than 2,000 models on the market, screen sizes and hand-set capabilities are fragmented. There is no one-size-fits all, standardized ad format; each must be optimized for the particular end device, a time-consuming and expensive proposition for advertisers.

The greater challenge for operators is adapting to a completely new business model. In the voice industry, providers have operated in a relatively closed environment, controlling the relationship with their subscribers and revenues.

Mobile advertising will make that model obsolete. With advertisers as customers, operators will have to take on new roles as consultants, advisers and partners. The mobile ad value chain will introduce a host of new players – advertisers, ad agencies and content providers – all vying for access to subscriber data and a piece of each advertising dollar. If mobile operators do not maintain control of the subscriber experience and add enough value to command a significant share of the revenues, they face the real danger of simply providing the pipe that pumps content.

With mobile devices outnumbering televisions and personal computers, operators have access to a lucrative advertising channel. They own a very unique asset – access to real-time demographic and behavioral data. That information, coupled with presence and location awareness, enables them to offer the distinctively personalized and relevant communication that has advertisers salivating. But converting all that subscriber data, spread among hundreds of networks, into useful marketing information creates another stumbling block for operators.

Most do not have the systems or processes in place that can harvest the data to provide the precise targeting and measurement that advertisers demand. “It is all about delivering the right message, to the right person, at the right time (and ultimately at the right location as well),” said Vikrant Gandhi, senior analyst at Frost & Sullivan. “Simply displaying the mobile advertising message in a random manner is not going to be successful in the long run.”

The subscribers themselves cannot be overlooked in the discussion. Advertisers and operators will have to step carefully to avoid treading on the privacy of their consumers. Also, the annoyance factor cannot be underestimated.  There is no surer way to sour consumers on the experience than by bombarding them with unsolicited advertising.  To create a win-win situation, mobile advertising must offer consumers something in return – either in the form of rebates or by providing extremely relevant and targeted advertising that is perceived as information.

The mobile industry has proved itself fully adept at solving technology and business challenges in the past. So it can be safely assumed that operators will figure out the issues associated with mobile advertising as well. While they do so, there is one piece of low-hanging fruit they can pick now – in-message short message service (SMS) advertising. eMarketer forecasts that mobile message advertising will make up more than 85% of mobile advertising revenues through 2010.

The ubiquity of SMS and potential for 160 characters
Next to voice, SMS is the most commonly used mobile technology; virtually all phones can send and receive text messages. With billions of SMS messages zipping around the globe every day, operators have a reach that is difficult to match with traditional media.  To illustrate further, a total of around three billion SMS are expected to be sent per day in the United States alone in 2008, according to Frost & Sullivan estimates. The potential audience dwarfs that of the largest Websites, radio stations and TV shows. And the characteristics that make SMS a great tool for personal communication – pervasiveness, immediacy and relevance – also make it a great tool for advertisers, and a revenue source for operators.

In-message SMS advertising is interactive and engaging. It’s a perfect vehicle for local and national retailers to promote products and services and create brand loyalty and awareness. Advertisers are finding that in-message ads are a valuable tool to leverage other marketing efforts such as print ads, television and radio. Text advertising is particularly suited to ad-funded SMS business models where subscribers opt-in to receive advertisements in exchange for reduced rates. The secret to successful SMS advertising is its ability to provide real value for mobile subscribers in the form of personalized, relevant content or by providing free or discounted messaging.

From the operator’s perspective, text advertising is an ideal money maker. It does not require any Web browsers on the phone and runs on the existing SMS network. The average subscriber only uses 50% of the 160-character message allotment. That leaves a lot of white space on the screen into which operators can insert commercial text for sponsored messages, voicemail enrichment and news flashes into incoming SMS messages.

With a substantial subscriber base and the unique ability to track those subscribers’ behavior and personal preferences, operators have the opportunity to tap into the growing and lucrative mobile advertising market with SMS advertising. SMS is a pervasive communications channel with the ability to deliver relevant, personalized advertising unmatched by traditional media. It has the potential to be the largest advertising opportunity in the mobile world – one that operators can tap today using their existing SMS networks – to generate new revenue and deliver attractively priced services and programs that create subscriber loyalty.

Pascoe is senior manager of product marketing for Tekelec



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