Telcos tread lightly into mobile advertising

Kamlesh Kalwar/Frost & Sullivan
08 Aug 2008

With subscribers paying less for telecom services every year across the globe, mobile consumer applications like music, games and video are presenting telcos opportunities for new revenue streams.

As these applications gain popularity, there is also a huge opportunity for advertisers and brands to effectively deliver customized communication, including promotions, to a highly segmented target group.

With the availability of high-speed networks like GPRS and 3G, mobile advertising campaigns have undergone a transition and are now providing over the mobile internet everything from video and location-based services to downloadable applications and contextual advertising within search results, as well as other environments.

Almost every type of mobile data service can be used to deliver advertising effectively. However, business models still need to be tested in the market and advertisers need convincing that this is as legitimate a medium as print, online and TV advertising.

With the entry of the large online search solution providers such as Yahoo, MSN and Google, the entire search and advertising space also gets more competitive. Mobile advertising is expected to become a standard feature across the tier 1 mobile operators in Asia Pacific.

For example, Google has partnered with Bharti Airtel, MSN with Vodafone, and Yahoo with Reliance and BSNL. This makes mobile search and advertising available to more than 200 million mobile customers in India alone. Another interesting example of the potential for mobile advertising is UK-based Blyk, which offers free voice and download services for the 16-24 age group if users agree to mobile advertising. The company launched in September 2007 and currently has 100,000 subscribers in the ultra-competitive British market.

Obstacles to adoption

The main challenges preventing mobile advertising from becoming widely accepted include off-deck mobile advertising industry participants finding it extremely difficult to achieve individual-level targeting, which reduces the attractiveness of mobile advertising.

Another is the unclear revenue sharing for mobile advertising within the value chain across the multiple delivery domains. Then there is the need to sway subscribers' willingness toward accepting mobile advertising - especially when monetary benefits accrue to the value-chain participants.

There is also the threat of eroding the value proposition established between mobile operators and subscribers by subsidizing content with advertising. Finally, there is the need to present mobile advertising in an unobtrusive manner, and the lack of standardized metrics to measure the effectiveness of mobile advertising.

To over comes thee barriers, industry players need to mine operators' wealth of data on their subscriber base, but subscribers' privacy needs to be respected. And then a revenue-sharing model favorable to all participants, along with the consumers, needs to be established. The revenues accrued from ads need to be passed to the customers in the form of less expensive mobile services and more relevant value-added services.

Also, customer expectations need to be managed effectively. Once advertising hits a threshold, it will be too intertwined with free content and it will not be possible to get sponsorship for all mobile content, resulting in difficulty to charge for content in the future.

To make mobile ads as unobtrusive as possible, cues should be taken from online search and advertising in avoiding the annoyance of pop-up ads.

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