March 24, 2008
The Role of Mobile Advertising in Messaging
By: Oz Eleonora, Acision LLC.
No single player can make mobile advertising a success on their own. The deep technical requirements and dynamic nature of the emerging segment require an ecosystem of players. Mobile bandwidth limitations make access QoS a critical issue, thereby making carriers equal partners in the game. At the same time, carrier dominance is a thing of the past. Each player will need to recognize their own value-add and focusing on making it their core business. Trying to cover too many aspects of the eco-system oneself is what creates disproportionate cost structures, which in turn lead to unworkable revenue share demands.
As the market evolves, mobile advertising business models will likely revolve more and more around micro-revenue units that will see a distribution balance comparable to the new digital music models. The following is a high level overview of the required business parameters and technical capabilities in order for mobile advertising to be successful.
Increasing the Advertising Pie
Mobile advertising discourse often focuses on how advertising will revolutionize the mobile sphere and infuse the medium with new revenue. However, true success will require mobile to have an equally beneficial effect on advertising. According to Informa, the global advertising market was worth $430 billion in 2006, while Ovum valued the global mobile market that year at $671 billion. Extrapolating from that, if mobile advertising is to generate 20 to 30 percent of global mobile revenues by 2011—as some analysts predict—then mobile advertising could account for as much as 50 percent of the global advertising market.
This is hard to believe, because it would require advertising spend on certain existing channels to drop down close to zero in 36 months. More plausible is for the majority of the revenue success for Mobile Advertising to come from igniting a new segment, thereby increasing the overall advertising revenue pie.
Personalization: Segmentation and Targeting
In order for Mobile to increase the pie for Advertising it has to enable a new value proposition in Advertising. This is most commonly addressed in discussion under the broad brush of personalization. However, it is worth getting a little bit into what personalization will need to deliver in order to truly represent a new value proposition. It is neither demographics nor personal data, certainly not in the traditional definition. These kinds of data would not add enough additional value to what is already known within advertising.
What is required is behavioral data at an individual level—data that will enable a new level of segmentation. These behavioral data have to be as dynamic and real-time as the medium within which they move. Additionally, the segmentation models have to be sophisticated enough to reallocate themselves along with the patterns, yet flexible enough to allow modeling that will drive campaign generation and execution.
Most importantly, personalized data have to cover person-to-person traffic as well as other forms of traffic. This is because person-to-person traffic still far outweighs other forms of mobile communication and it will be some time before this changes. The profiles will thus not be complete (read: effective) if they do not include P2P traffic.
Furthermore, the segmentation models created have to be sophisticated enough to reallocate themselves along with the behavior, yet flexible enough to allow dynamic modeling that will drive campaign generation and execution. Having data available with the characteristics discussed above will be useless unless the data is actionable. The action must be as dynamic and real-time as the medium—if I am able to know what user X really wants and I have it, I need to be able to offer it when user X needs it most.
Capabilities Required
By now it should be clear that making Mobile Advertising happen requires some significantly advanced capabilities. This is not to say it is impossible. However, as an industry, we are in serious danger of repeating the over-hype and over-promise of WAP and 3G if we do not recognize the complexities such that they can be addressed. An evolutionary path is obviously the way this will need to happen, since going for an all-or-nothing approach is more likely to produce nothing and that will not be useful to any of the stakeholders, especially the consumer.
From the mobile side, making usage data available means real-time extraction through direct interfacing on service nodes without affecting QoS. Furthermore, targeting needs require session-intercept capabilities on both voice and data. Specifically, on the P2P level this is an advanced network requirement. In addition, all of this needs to happen not just in Mobile Internet, but in Mobile Messaging as well. The most optimistic estimates (Ovum) have Mobile Internet generating an equal amount of revenue compared to Mobile Messaging by 2011. Thus, even in the most optimistic Mobile Internet scenario the capabilities must cover both channels or risk missing half of all interactions (read: advertising opportunities).
From the advertising side, real-time ad ‘customization’ will soon be needed. The behavioral segments will shift dynamically in real time in accordance with variable, programmable parameters and real-time ads may need to be ‘customized’ dynamically. The actual concept development process may need to be adjusted to accommodate a model based on some form of core-concept-framework that automatically adjusts to a target segment under specific circumstances.
Finally, both the Mobile and Advertising environments envisioned will need to be targeted toward a scenario where the consumer directs the action end-to-end. With the level of personalization envisaged, it is only a matter of time and technology evolution before consumers start to determine for themselves what they want ads to look like. In the extreme case, there may even be new revenue opportunities within this element itself.
The Role of Advertising in Mobile
Advertising can bring about an evolutionary shift in mobile, but it will require the stakeholders to be willing to work together. While an industry-wide nirvana is unlikely, specific deal-based alliances will form. The issue of ‘who will dominate’ becomes less relevant; given the personal nature of mobile communications, if mobile advertising is successful the consumer will ‘dominate.’
