Revenue forecasts for the mobile advertising industry vary significantly, from less than USD1 billion to USD30 billion per year worldwide during the next three to five years. Two factors are responsible for the uncertainty about the market’s value and growth timescales: the unresolved issues surrounding the fragmentation in the value chain, and the consumer’s potential reaction to mobile advertising. At T-Mobile’s roundtable discussion on mobile advertising last week, one message became clear: all of the market players have to be very careful about how they approach the mobile consumer.
The mobile advertising market needs two things in order to be successful:
- investment from key players (such as operators, handset manufacturers, advertisers and brand owners)
- an emphasis on maintaining a high-quality, unobtrusive mobile advertising experience for the consumer.
The market will remain niche if it lacks investment, and will not achieve its potential value if key players fail to pay sufficient attention to consumers’ preferences and needs. Players in the mobile advertising value chain will only be able to form a new and exciting revenue stream for all market participants if they concentrate on satisfying both requirements. (see Figure 1).
Figure 1: Potential outcomes for the mobile advertising industry (Source: Analysys Research, 2008)
Mobile phones could present high risks as well as high returns for advertisers, because they are personal devices. “Consumers have a really personal attachment to the mobile device in their pocket, so advertisers can’t interfere with that relationship,” pointed out Lysa Hardy, European head of Internet on mobile and entertainment for T-Mobile. Operators and advertisers need to position mobile advertising as a valuable service for consumers, ensure that advertising is relevant to individual subscribers and offer rewards (either as part of the advertisement or in exchange for receiving them) if they are to avoid repeating the mistakes made with the email advertising model. Email advertising had a reasonable click-through rate 10–15 years ago, but it rapidly declined as users became bombarded with irrelevant (and unwanted) messages. Estimates suggest that the amount of ‘spam’ sent per day worldwide has reached about 100 billion emails – most of which are caught by spam filters, while the rest are ignored when they reach the end users’ inboxes. Operators can help to maintain subscribers’ trust by ensuring that advertising is ‘permissive’ – that is, by ensuring that subscribers explicitly choose to receive it.
Brand owners and advertisers must also invest their trust in mobile advertising, if it is to be successful. Mobile advertising was a much-discussed topic at this year’s Mobile World Congress in Barcelona, but significant investment in this market might not materialise for several years. A critical mass of success stories from early campaigns must be reached before many brand owners will be willing to invest in a relatively untested medium. As a result, the industry has reached an impasse – many players are unwilling to invest in mobile advertising until others have done so. The future of mobile advertising, therefore, is in the hands of pioneering brands and advertisers that are willing to experiment.
