The Mobile Advertising and Marketing Revolution

SUMMARY

“While mobile voice spend is plateauing in many markets, obstacles to mobile advertising are beginning to fall. Mobile operators, handset manufacturers and advertising agencies alike may be able to exploit mobile advertising to generate new revenue streams.”Martin Scott, Analyst

It is vital for operators, handset manufacturers, content providers, advertisers and marketers to fully understand the potential that mobile advertising holds. For mobile operators and handset manufacturers, mobile advertising could provide an additional source of revenue. Because it enables market segmentation to an unprecedented level of detail, mobile advertising could allow advertisers to carry out much more highly targeted advertising campaigns than have traditionally been possible. Mobile advertising could - if implemented correctly - provide consumers with advertisements tailored to their interests, as well as extra services and content at little or no cost. Mobile advertising has the potential to benefit all parties concerned, but those who move first stand to gain the most.

This report presents an overview of mobile advertising, identifies the value chains involved and explains how operators can avoid disintermediation and maximise their share of total mobile advertising revenue. The report show how effective mobile advertising strategies can be implemented in a way that would benefit operators, advertisers and consumers alike.

The Mobile Advertising and Marketing Revolution answers your key questions:

• Where does mobile advertising fit within the larger context of advertising and marketing?
• What forms can mobile advertising take and which forms are most effective?
• How big a share of mobile advertising revenue can mobile operators expect to take?
• What are the timescales for implementing mobile advertising?
• How do the mobile and Internet advertising industries differ?
• Who benefits from a mobile advertising strategy?
• How can consumer privacy issues be addressed?
• How will the industry look five years from now?

Who should read this report

• Mobile operators: identify which forms of mobile advertising are most advantageous, see how to gain an optimal place in the value chain and understand how to facilitate a 'virtuous cycle' in which all players benefit from mobile advertising.
• Advertising agencies: identify the most appropriate media for use in mobile advertising.
• Banks: gain insight into the business models in the mobile advertising space, the shape of the value chains, and the opportunities and threats of mobile advertising.
• Content providers and broadcasters: learn how to improve content propositions in order to benefit from mobile advertising and increase revenue.
• Search providers: understand the mobile advertising search value chain, how it differs from the traditional Internet model and how it compares to other forms of mobile advertising.
• Handset manufacturers: gain insight into the mobile advertising industry and learn what handset capabilities will best facilitate its evolution.

Companies discussed in this report:

3 UK, Adlocal, The Advertising Association, Amobee, Amp'd, Apple, Celltick, Dentsu Inc., ESPN, European Interactive Advertising Association, Facebook, Google, Internet Advertising Bureau, ITU, JumpTap, Mobile Marketing Association, Motorola, Nokia, Reebok, Samsung, Sony Ericsson, Telecom Italia Mobile, Ultramercial, Virgin Mobile USA, Virgin Mobile, Vodafone, Yahoo!

TABLE OF CONTENTS

• 0. Summary
• 1. Well-executed advertising could boost plateauing mobile revenue
  • 1.1 Mobile advertising presents a unique new-media marketing opportunity
  • 1.2 In mature markets mobile voice ARPU is stabilising and alternative revenue streams are needed
  • 1.3 There are five broad categories of mobile advertising
  • 1.4 Mobile offers excellent penetration into many different demographics
  • 1.5 It is important that advertisers recognise the opportunity that mobile advertising presents
• 2. Barriers to implementation are finally beginning to fall
  • 2.1 Increasing network bandwidth will facilitate enhanced advertisements
  • 2.2 Increasing screen size and resolution will make advertisements less obtrusive
  • 2.3 Geographical positioning technology will facilitate location-based advertisements
  • 2.4 Operators' mobile advertising processes are likely to be harmonised
  • 2.5 Data pricing will become more affordable
  • 2.6 Whether consumers will use handsets in a manner conducive to advertising remains to be seen
• 3. Mobile operators can occupy a secure position in the value chain
  • 3.1 Mobile operators that follow the Internet model risk being sidelined in the value chain
  • 3.2 Both handset vendors and operators want to control which features are preloaded on handsets
  • 3.3 Operators are uniquely placed to add value by identifying the 'segment of one'
• 4. Providing valuable advertisements is the best way to overcome consumers' distrust
  • 4.1 Maintaining perceived consumer privacy is vital to mass acceptance
  • 4.2 Subsidies are an effective means of encouraging users to accept mobile advertising
  • 4.3 An opt-in advertising strategy will yield the greatest returns
• 5. Innovators will shape the mobile advertising market
  • 5.1 The outcome for mobile advertising depends on maintaining value, permission and quality
  • 5.2 Key market factors will become more conducive to mobile advertising in the medium term

Actions

Figures and tables Figure

• Figure 1.1: Position of advertising and one-to-one marketing within marketing as a whole
• Figure 1.2: Mobile voice and data ARPU in Western Europe, 2002- 12
• Figure 1.3: Mobile and Internet advertising spend in Japan, 2004- 6
• Figure 2.1: Penetration of advanced-generation handsets in China, Europe and the USA, 2006- 11
• Figure 3.1: The Internet search value chain
• Figure 3.2: The mobile search value chain
• Figure 3.3: Mobile as a response channel
• Figure 4.1: Receptivity of survey respondents to receiving mobile advertisements in exchange for various rewards
• Figure 4.2: The 'virtuous cycle' of mobile advertising
• Figure 4.3: Free voice minutes awarded by Virgin Mobile USA as part of its Sugar Mama campaign
• Figure 5.1: Potential outcomes for the mobile advertising industry
• Table 3.1: Relative merits of different forms of mobile advertising
• Table 5.1: Degree to which key market factors will be conducive to mobile advertising in the short, medium and long term