The dramatic events of the past few weeks in the world’s financial markets have left business leaders desperately trying to understand their impact on commercial prospects and business models for the coming year and beyond. Service and content providers that rely on emerging markets such as mobile advertising are likely to be especially anxious about the consequences of the global credit crisis.
The mobile advertising market has gathered momentum during the past year. There are a number of success stories of specific campaigns yielding impressive click-through and response rates, both for banner adverts on mobile portals and mobile Internet sites, and for messaging-based adverts pushed to subscribers. Mobile advertisers report an average click-through rate of 2–5% for most mobile advertising campaigns, but this can be much higher for specific campaigns or service providers: youth-oriented MVNO Blyk reports an average response rate of 25% in the UK. By contrast, online banner advertising achieves average click-through rates of only 0.2%.
Early indications of the scale of themobile advertising market are also encouraging. For example, mobile ad serving company Amobee reports that it delivered over 4 billion mobile advertisements worldwide in August. Vodacom South Africa’s Please Call Me service allows subscribers to send a free, advertising-tagged SMS to ask the recipient to call them back, and Vodacom reports that approximately 25 million messages per month are sent over the service.
Despite these promising signs, it is certain that the credit crisis will slow the development of the mobile advertising market. Advertising buyers will reduce their budgets, and their attitudes towards experimenting with mobile advertising are likely to be conservative. The clear message from the mobile advertising industry, echoed by many participants at the recent Mobile Marketing Ireland 2008 conference in Dublin, is that while mobile advertising is exciting and interesting, it will not become a mainstream advertising tool in the short-to-medium term. Advertising buyers still find mobile advertising:
- complicated to purchase
- difficult to understand
- fragmented in terms of both advertising formats and measurement metrics.
Compared with other media channels, mobile advertising is complicated and untested, making it challenging for advertisers and their mobile partners to construct sustainable business cases for mobile advertising campaigns.
Companies that depend on mobile advertising as their sole or primary revenue stream are likely to find the next 12–24 months very difficult. However, in a tough economic climate, mobile advertising may offer advantages over other types of promotional channels:
- It offers the potential to address a mass audience, with a degree of immediacy that is difficult for other media to match. In particular, advertising that uses or is linked to messaging can reach a huge audience and can be highly cost effective. We expect mobile Internet advertising to be hit much harder by the credit crisis than messaging-based advertising, primarily because the mobile Internet user audience is much smaller than for online advertising.
- By contrast, it also offers the chance to reach a more targeted audience with advertising that can be more relevant, more engaging, and better structured to elicit more information about the consumer, than traditional media. Service providers and mobile advertising networks are nowhere near the point of using ‘long-tail’ targeting to reach the proverbial ‘audience of one’ with perfectly relevant advertising. However, even simple market segmentation has proved remarkably effective in achieving high response rates.
In order to realise these potential advantages, sellers of mobile advertising have to take a pragmatic and proactive approach, whether they are service providers, mobile advertising network operators, platform companies or digital advertising agencies. They will need to keep in mind the need of advertisers to establish clear business cases with measurable campaign results, built around either mobile or cross-media advertising propositions. This is not the moment to suggest that mobile advertising should command a price premium over other types of advertising, although once mobile advertising has been tried and tested, and the market has recovered, that may be viable. Nor are many advertisers likely to have the time, patience or budgets to develop technically complex campaigns for mobile (for example, location-based advertising using cell IDs). Simple, easy-to-grasp formats and scripts, and a one-stop-shop approach, are key.
For service providers and others along the mobile advertising value chain, partnering will become more critical than ever, as a means of sharing both costs and risk. Different parties in the value chain should co-operate to provide advertisers with a unified and appealing proposition, that highlights the specific strengths of the mobile medium and how these translate into potential sales, and clearly demonstrates the cost-effectiveness of mobile. This approach is the best way to ensure that the mobile advertising market retains some momentum during the challenging months ahead.
Interested in more information on the impact of the credit crisis on the mobile advertising market?
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