Mobile ads: selling space

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Mobile Advertising

Mobile advertising is a work in progress and it seems clear that the emphasis must be on collaboration if the sector is to yield benefits for every member of the value chain.

It is refreshing, in an industry so often sent giddy with hype, that the mobile advertising sector appears broadly to have settled into a groove of realism and toil. Perhaps it is simply that the hard numbers make for an impasse that not even the most optimistic of outlooks can surmount. Informa Telecoms & Media calculates that the total mobile advertising market for 2008 will represent just $1.72bn; some way less than a third of the annual advertising budget of Proctor & Gamble which, with an estimated spend of $6bn this year, says Informa, is the world’s most prolific advertiser.

In relation to the size of the mobile and advertising sectors globally, the intersection they create represents small potatoes. In 2008, that $1.72bn equates to 0.23 per cent of global mobile revenues and accounts for 0.41 per cent of global advertising spend. By 2013, when Informa predicts the mobile advertising market to be worth $12.09bn, it will match up to 1.29 per cent of the overall mobile market and 2.2 per cent of all advertising revenue.

Still, these projections show rapid growth-admittedly easier to achieve from a lower starting point-which should give some cause for positivism.

And it can certainly be said that the mobile community is looking to lead by example. Informa estimates that some 75 per cent of mobile advertising spend this year-$1.29bn-will come from mobile content companies. “The earliest organisations going into this market are the ones that are mobile application based,” says Jeff Herrmann, vice president for Mobile Media at specialist media measurement house Nielsen Mobile.”

As Informa points out: “Despite the excitement surrounding the big brands’ entrance into the mobile advertising arena, they are likely to contribute only around US$430 million in 2008. If the big brands do not ramp up their spend in mobile advertising, market growth will be severely hampered over the next five years.”

While some big name brands are moving into the space, collectively they clearly remain to be convinced. Going back to Proctor & Gamble by way of an example, the firm has set aside $10m for mobile advertising, according to Informa; less than two hundredths of one per cent of its overall budget.

This illustrates a key point for the mobile advertising sector, which is that big, non-mobile brands, will not be allocating incremental budget for mobile campaigns. Rather, the sector has to convince them to shift budget already reserved for familiar media-TV, print, billboard and online-to the less proven territory of mobile.

Evidence suggests that the majority of mobile inventory being sold at the moment (inventory is a term that describes available advertising space, be it on television or in a text message) is outside of operator portals, reflecting the erosion of walled gardens that has been a key facilitator in the growth of mobile internet usage. Admob runs one of the leading mobile advertising networks, serving 3.5bn text and banner adverts on mobile media each month. Russell Buckley, as well as chairing the Mobile Marketing Association, is European managing director for the firm, which doesn’t serve adverts on carrier inventory.

“The vast majority of our traffic tends to come from off-portal,” says Buckley. “We’re not missing out on huge volumes by not working with the operators. Certainly our combined traffic in any of our top five markets would easily beat any single operator, so it’s not really going to move the needle for us if we suddenly start working for them.”

In monetising their own inventory, some carriers are employing in-house sales teams, while others are assigning partners, as Vodafone has done with Yahoo. But if even in the mobile space third party sales organisations are making most of their sales to third party publishers and content owners question marks begin to appear over the role played by operators in this space and the security and revenue potential of that role.

In part this will be addressed as the range of formats routinely used for mobile advertising increases. The majority of mobile adverts today take the form of banners and text links on mobile web pages but there are opportunities for in-message adverts, served in text or multimedia messages, which are entirely controlled by the operators.

But the carrier community risks damaging the sector as a whole if it seeks to maintain control over the value chain, with some experts suggesting that they should face up to the fact that such control cannot be maintained and that their interests would be best served by embracing the collaborative nature of the sector.

“I think the dominance of the carriers will probably be strong for another couple of years,” says Harald Neidhardt, chief marketing officer of California-headquartered Smaato, a firm that specialises in in-application mobile advertising. “But I think what will happen is what happened in the fixed internet with companies like AOL. The carriers have to be smart and be more like media companies. Carriers have to evolve in this direction, then there’s a strong place for them,” he says.

For large, non-mobile sector advertisers, reach is key. And even if carriers can boast millions of subscribers in any given market, they won’t be supplying service to every member of a given demographic. “The agencies are really anxious and eager to spend money on mobile advertising,” says Jeff Herrmann at Nielsen. “But they can’t get the scale that they need. They’re used to a volume metric, page impression buy. They buy reach and are really focused on reach estimates. And because of the way the mobile ecosystem is structured today, which is very operator centric, the agencies-from a reach standpoint-are left with experimentation or discretionary campaigns.”

So if operators are unable to maximise their own inventory because mobile advertising is predominantly off-portal, how can they maintain their stake in the game? One option is for them to act as enablers. “For me their best position is as a facilitator of brand contact, for compelling cross platform activities,” says Nielsen.

“When you consider the consumer relationships they have, they will always be in the process. They have the cross platform perspective to offer integrated campaigns like SMS tied to a mobile WAP site, a video or even location based services,” he says. “This hasn’t been fully developed yet but that’s how they’ll maintain their position of prominence in the mobile advertising market.”

Another answer, it appears, lies in the field of profiling and measurement. Henry Jenkins manages the mobile advertising activities of carrier lobby group the GSM Association. “On the long list of things that the advertising industry would like operators to do,” says Jenkins, pretty much everybody agrees that some form of consistent, transparent measurement is at the top of that list. We think this is the key enabler that the operators can deliver working together, an enabler for the whole ecosystem.”

In February of this year, the GSMA announced an initiative in the UK market that sees all five carriers-Vodafone, Telefonica O2, T-Mobile, FT-Orange and Hutchison’s 3-collaborating to define common metrics and measurement processes for mobile advertising. The aim of the programme is to outline “a range of metrics that will describe the mobile audience and measure the effectiveness of mobile advertising,” the GSMA said at the time. Speaking in August, Jenkins clarified the goal:

“Long term, the sort of ambition that we should be looking at for mobile is that there’s an opportunity to say we understand a unique user and we can actually identify that user across multiple channels.”

This is not a simple task, but the GSMA believes that if big brand advertisers from outside the mobile sphere could be given consistent, reliable, independently audited figures like this, they would be far more comfortable allocating more of their advertising budget to mobile. The Association is taking it upon itself, simply, to prove that mobile advertising can work.

“The burden of proof lies with the operators,” says Jenkins. “We need to demonstrate that operators can work together and we need to demonstrate that they can do that in a way that adds value to the broader industry. If we achieve that, we’re building credibility; a trusted role for operators.”

Jenkins says that responses from all stakeholders in the UK has been favourable. The advertisers are interested, the agencies that plan and manage their spend, and the operators themselves all see real value in the project. But still, it is a slow process. The technical challenges involved in working with all of the operators, processing huge amounts of data from multiple sources are significant to say the least, he says. “It’s a bit more time consuming than we’d like,” he offers, by way of an understatement.

A further problem is that this initiative is patently not a money making exercise. The point of the exercise is not to maximise the value of the metrics themselves, the GSMA says, but to grow the mobile advertising industry. And when operators are prioritising their activities, they tend to put the ones that generate revenue at the top, and the ones that don’t at the bottom.

“It’s one thing to go into an operator and say to the IT department, ‘I need this resource to change this facility’ in a system if that change brings a five per cent uplift in revenue. It’s very different when you’re saying ‘here’s a strategic initiative that we believe is incredibly important. There isn’t an immediate revenue uptake, we’re doing this because it’s important for the broader industry, we’ll see benefit in other ways further down the line’. It is changing the way in which a lot of them work,” he says.

The GSMA’s deadline is fast looming; the group pledged to complete its proof of concept by the end of 2008. It is still mulling over the timelines in terms of commercial launch. And even commercial launch does not signal a conclusion. Just as well as advertisers want to reach consumers irrespective of their choice of carrier, so too do they want to contact end users in multiple countries. A reliable system of metrics is no good if it’s restricted to just one market. Which is why the UK-home to the biggest international players of the West-was chosen as the guinea pig market.

If the GSMA is working on similar projects in other markets, then it’s keeping tight-lipped on the subject. “Meaningful conversations” are ongoing, but that’s as far as Henry Jenkins is willing to go. “Regional would be an achievement,” he says. “Global would be even better. We could characterise our ambition by saying we need to create a global level of consistency in terms of methodology, what we measure, what are the definitions and how we do it.” You only need to stop and think about that for a minute before you realise just how significant a challenge it represents.

For Russell Buckley, wearing both his Admob and MMA hats, the measurement initiative is a winner. “Any more clarification we can give in terms of measuring people or unique users, is great. One of the issues which we have as a company like Admob is that very often our advertisers want to target unique users. Very often we don’t have that data, and that’s held by the operator.”

The collaboration between operators on measurement raises an interesting question of whether they should unite to sell their own inventory; after all advertisers don’t measure their target markets by carrier selection. In all likelihood this remains some way off, but it may turn out to be necessary for operators to maximise their own revenues.

Jeff Herrmann suggests that the greatest innovation in the mobile advertising supply-side sector is being done in the area of customer profiling. And for all the hard graft around measurement and consumer identification that is being undertaken, it must be remembered that mobile advertising as a concept is itself a tricky sell where end users are concerned. The uniquely personal nature of the mobile phone-which is exactly what excites potential advertisers-is also one of the biggest obstacles they must overcome. One man’s advert, after all, is another man’s spam.

So is there a concern that operators might be persuaded into offering up information to advertisers that would make end users uncomfortable? Henry Jenkins doesn’t think so. “Operators’ core business is to provide communications services to their customers and they’re not going to do anything that provides a threat to that customer relationship,” he says.

He even goes so far as to predict that operators will provide services to end users around managing their privacy. “I do believe that you will increasingly see operators developing capabilities around managing permission. Creating that as a service, so they become the trusted guardian of the end user’s personal information, enabling them to manage their preferences.”

In any case, Smaato’s Harald Neidhardt offers up some optimism as regards users’ willingness to engage with mobile advertising. Smaato did a trial with Swisscom that placed audio adverts before and after voice calls. He explains: “We asked consumers if they would install the mobile advertising application on their handset if they were given 100 free minutes in return.” According to Neidhardt, more than half, 52 per cent, said they would take the application for 100 minutes. But, he says, “astonishingly, 30 per cent said they would install it just because it was fun. They didn’t even want the free minutes.”

It makes for a warming anecdote, perhaps, but the reality is that consumers’ feelings about mobile advertising will only really become clear when mobile advertising takes off. So it is the large consumer brands whose view of the whole sector is most crucially important in the immediate term. If they can be convinced by collaborative initiatives like that being run by the GSMA, then perhaps the sector will hit the blue sky figures that some of its more upbeat proponents are wont to proclaim.

Adverts and the iPhone

Apple’s iPhone has had a tremendous impact on the mobile industry, in terms of hype alone. But speak to those involved daily in the mobile advertising space and you’ll hear that-in this sector at least-the iconic handset is much more than just talk.

“The iPhone shows us that the future has arrived,” says Admob’s Russell Buckley. “For the first time we’re seeing clear, blue water between what the PC world does with advertising and what the mobile does. It enables us to play to the great strengths of the mobile itself, particularly on the usability side of things.”

The iPhone enjoys a particualrly high penetration among staff at advertising agencies, Buckley says, enabling the people that make decisions about where large firms advertise to gain first hand experience of the kind of interface that could be key to the success of mobile advertising going forward. “It’s put the mobile right at the centre of people’s attention,” he says, “so in terms of influence, it’s hugely disproportionate.”

Smaato’s Harald Neidhardt agrees describes the handset as a “catalyst”. He says: “Because the iPhone was from Apple, all of the creative directors and agency folks are running around with it right now. There is a wake up call that you can do something with it; people are more open to it now.”

And if you want to see just the sort of thing that’s exciting people about the iPhone and its potential role in the world of advertising, go to You Tube and search Carling iPhone. It’s pretty clever stuff.