Operators will move to advertising model - Analyst

Operators will start to consider moving from subscription-based services towards an advertising-based business model in the near future according to analyst group, Informa Telecoms and Media.

Informa, which owns Telecoms.com, says mobile operators will have to re-examine their business models and consider one that generates revenue from advertisements rather than subscriptions. Vodafone has already embraced the trend and earlier this month announced that it had inked a deal with search firm, Yahoo that will allow customers who agree to receive targeted ads to earn savings on Vodafone services.

“The telecommunications industry is evolving at lightening speed, undermining and refashioning business models for all players in the value chain,” said Mark Newman, Informa’s chief research officer. “In the future, a mobile business model could look much more like broadband and internet economics, with the operator charging for access to the internet and deriving advertising and click-based revenues.”

Newman’s comments appear to be in line with those of some of the biggest names in communications. Earlier this month, Google’s CEO, Eric Schmidt said that while Google has no intention of giving away mobile phones, he does believe calls could be paid for through advertising. Schmidt believes consumers shouldn’t have to pay for their calls, as long as they don’t mind watching targeted adverts being sent to them.

Next year, Blyk, a startup from the former vice president of Nokia, Pekka Ala-Pietila will launch in the UK. Blyk says it is a “pan-European free mobile operator for young people, funded by advertising” which will provide free calls in exchange for users’ eyeballs on targeted ads.

Earlier this year, Informa predicted mobile advertising to be a $11.35bn (£5.95bn) market by 2011.

In its annual Mobile Market Status report for 2007, Informa says there is a “bullish” outlook from the mobile industry as a whole, with 65 per cent of respondents feeling more confident about prospects for 2007 than for 2006.

However, the analyst group says that mobile operators are significantly less optimistic. While handset manufacturers and equipment vendors look set to profit from the continued growth of the communications industry, the figure falls to 54 per cent among mobile operators. Informa says the glum outlook is fuelled by the knowledge that challenging times lay ahead as they battle to halt the slide in voice revenues and determine the best strategy as convergence takes hold.