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With mobile advertising expected to be worth US$2.7 billion in 2008, it is an industry that few can afford to ignore. Timo Ahomäki, VP of product management and chief scientist at mobile messaging specialist Airwide Solutions, tells CommsMEA about the latest trends in the mobile advertising sector and how mobile operators stand to benefit from the growing industry.

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By  Administrator Published  September 14, 2008

With mobile advertising expected to be worth US$2.7 billion in 2008, it is an industry that few can afford to ignore. Timo Ahomäki, VP of product management and chief scientist at mobile messaging specialist Airwide Solutions, tells CommsMEA about the latest trends in the mobile advertising sector and how mobile operators stand to benefit from the growing industry.

How can operators profit from mobile advertising?

There are multiple ways to generate revenue from mobile advertising depending on the chosen business model. On one extreme, you have operators and MVNOs operating an entirely advertising financed model with free calls and texts in exchange of receiving advertising, while in the other you have things like "sponsored content" with an internet banner like revenue model.

Currently, in the Middle East, many consumers are expressing frustration regarding the amount of spam they receive on their mobiles. While nothing to do with operator driven mobile advertising offerings, this is degrading the image of mobile advertising before the whole business has even started. - Timo Ahomäki.

In essence, the operator revenue potential revolves around the intrinsic values the operator can bring to the table. Things like personalisation and location awareness come to mind. By creating an environment where advertisers have access to the assets of the operator in a controlled manner, the operator can facilitate a better experience to the advertiser and consumer while generating some revenue in the process.

Is there a lack of understanding among operators about how to best deploy mobile advertising?

Maybe not so much lack of understanding, but a multitude of possible paths to take. Not only is there uncertainty about the correct business model, but also some of the technical building blocks are not in place. In addition, consumer acceptance is the driving force for the whole concept and before jumping into one model or the other, all the parties in the ecosystem (operator, media broker, advertiser, consumer) should be aligned in understanding of the rules of engagement.

In the short term, the operators are trying to come to terms with the advertising community on the right way of entering the market. Once this is established, it will be the time for controlled consumer trials before a full scale deployment.

What are the main issues that operators should be aware of?

Privacy is probably the most important aspect to take care of. Consumers do not want to be spammed on their mobiles. After ensuring that consumers' private information is protected as such, the next step is to ensure mobile advertising remains personal and interesting. This is naturally a very fine line to walk. The more consumer profile information an operator exposes to advertisers the more personal their advertising can be, but at the same time there comes a point after which things become too intrusive. The issue, then, is finding the right balance between advertisers' expectation of "full disclosure" and consumers' expectation of "total privacy".

How about operators in the Middle East - is there anything they should be aware of specifically, with respect to mobile advertising?

Continuing from the previous question, in one word, spam. Currently, in the Middle East, many consumers are expressing frustration regarding the amount of spam they receive on their mobiles. While nothing to do with operator driven mobile advertising offerings, this is degrading the image of mobile advertising before the whole business has even started.

Again, there is no single solution to this particular problem. For any cross-border, non-paid for SMS spam, there are technical solutions in place in the form of SMS firewalls or anti-spam systems. However, there is a significant amount of "legitimate spam", if you can call it that, that is actually originating from an operator's own network and most of the time is even paid for. A different, more co-operative, approach is required in controlling this revenue generating - but in one way unwanted - traffic stream.

How much is mobile advertising revenue growing year-on-year?

I would refer to any of the published industry reports that forecast mobile advertising globally to be a business worth US$11 billion to $16 billion in 2012-2014. Growth during 2008-2009 is forecast to be quite modest, but after 2010 it is expected to accelerate quite significantly.

The way things currently look is that 2008 will be the "year zero" of trials and initial deployments, with 2009 seeing brands allocate budgets specifically for mobile in their advertising mix.

What percentage of an operator's revenue might be made up of mobile advertising typically?

Again, it is very difficult to give a single number to describe a very broad range of business models.

For MVNO start-ups relying on advertising as their main revenue model the number could be as high as 80-90%, while for an incumbent operator running advertising as a sideline activity it could be in the ballpark of 5-15% in a couple of years' time.

What are the main barriers to growth of the sector?

Currently the main issue seems to be getting all the parties in the ecosystem talking the same language. Speaking to advertisers, media agencies and operators separately, you get the feeling that everyone agrees more or less about everything. However, once you look a bit deeper, you start to realise they are not always talking about the same thing.

So the first thing is to get the parties aligned and looking at this as an ecosystem play, not just something any single entity can put together alone.

Beyond this, we do have alternative solutions to delivering the advertising message and which of these alternatives suits which scenario needs to be ironed out in market trials and the like. But this is not so much a barrier at the moment if the ecosystem is put together right. If not, later on we may run into issues in deciding on the technical aspects of the service.

Do some operators view mobile internet as a threat? If so, do you think any potential threat is counterbalanced by potential profits from mobile advertising?

I see advertising as the main revenue model for the internet, mobile or otherwise. While there have been many attempts to build premium services into the internet in mobile devices, they have all - save for i-mode in Japan, the exception that proves the rule - failed the test of mass market adoption.

In my view this is mostly due to the complexity of the charging arrangements from content owner's perspective.

Advertising offers a reasonably hands-off way for content owners to start earning money from mobile internet usage, just as they are doing in fixed today.

However, if we managed to add the abovementioned mobile specific flavours to this advertising model,

I believe there's additional value to justify some complexity in terms of contractual arrangements. But any contractual and technical involvement has to be kept in proportion to the real benefits.

Breaking the barriers

Worldwide mobile advertising is projected to surpass $2.7 billion in 2008, up from $1.7 billion in 2007, according to US research firm Gartner, Inc. However, the market has developed slowly and obstacles remain.

Ease of use and relevancy to consumers are two important factors that must be addressed to help build momentum in the mobile advertising market, according to Tole Hart, research director at Gartner.

Furthermore, slow adoption of multimedia, lack of consumer acceptance, lack of metric transparency, immaturity of standards, diversity of platforms, form factor issues, cross-media integration priorities and the complexity of the value chain, inventory of content, privacy, education and ease of accessing content, are among the obstacles hindering the progress of mobile advertising.

"Many of these issues will be resolved during the next two years, but the make-or-break question of mobile advertising is: Will customers accept advertisements, and can brands and advertisers drive revenue via mobile advertising?" Hart said.

"Innovative developments, such as minimizing the number of keystrokes required to access information, using the phone's camera to improve the overall user experience and tying content or shopping location relevancy to advertisements will move the market forward," he added.

"To encourage users to accept advertisements, advertisers must improve the way search results are managed on the handset so that the experience is painless and rewarding to end users."

Andrew Frank, research vice president at Gartner, added that there are a number of players that stand to benefit from the mobile advertising market moving forward, including brand owners, merchants, carriers, banks, and bill paying agencies. "An important attribute of mobile advertising is relevancy, because the device is very personal to the consumer," he said.

"The market and consumer will gravitate to content - all parties win when greater relevancy occurs," he added.

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