Mobile Advertising: Buy In or Lose Out. An Oracle White Paper September 2008
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1 Mobile Advertising: Buy In or Lose Out An Oracle White Paper September 2008
2 Mobile Advertising: Buy In or Lose Out INTRODUCTION Throughout the history of mass media, technology and the advertising industry have been inextricably linked. The development of faster and more efficient printing presses in the 19 th century led to the popularity of newspapers and newspaper advertising. The radio boom in the 1920s led to a new genre of advertising, despite early pressure to ban direct advertising from the radio airwaves. As the price of television sets came into reach for the average household in the 1950s, television became a powerful medium for the advertising industry, which now had to learn how to target consumers via images versus written or spoken words. And rapid adoption of the Internet over the last decade has driven a booming market in online advertising, ranging from simple banner ads to more sophisticated advertising that leverages online communities such as Facebook. Rapid advances in wireless technology have made mobile devices the latest frontier in mass media. For advertisers, the mobile phone represents an opportunity that they don t have with other forms of media, including: One-to-one access: Advertisers can target the specific user, as opposed to the larger household associated with the service Device attachment: Consumers tend to be more attached to their wireless devices than to other mediums, keeping them with them, and switched on, at all times Customer data: Wireless operators maintain a treasure trove of information on their subscribers, including data on customer usage, location, and demographics. Mobile Advertising: Buy In or Lose Out Page 2
3 In a Vanson Bourne survey of global brand-name companies conducted Fall 2007, 71% indicated that they planned to spend a greater proportion of their marketing budgets on mobile campaigns within two years time. However, there is an onus on operators to develop mobile advertising environments that enable them to: Attract and satisfy advertisers by providing a standards-based, open mobile advertising platform and customer data that advertisers can use in developing targeted campaigns Monetize the mobile advertising value chain by fairly pricing the assets that each entity brings to the table and enabling alternative revenue sharing models Maintain a focus on the overall customer experience by marketing to subscribers in a way that offers them value without violating their privacy THE MOBILE INDUSTRY: PRIME FOR ADVERTISING? The mobile phone s shift from communications device to media vehicle has occurred in the context of phenomenal industry growth over the last several years. On the network technology side, upgrades have resulted in higher capacity, faster data rates, more seamless connectivity and improved quality of service. Facing pressures created by churn and declining average revenue per user, mobile operators are now exploring alternative business models. Mobile advertising is one business model that holds promise as its success on the web is brought to the mobile web. It s an avenue that advertising agencies have already begun to explore. Major advertising conglomerates such as GroupM and Publicis Groupe have launched mobile divisions, joining a glut of startup mobile marketing and advertising firms that do everything from producing mobile advertising to acting as intermediaries between brand advertisers and traditional agencies to hosting and managing the actual mobile ads. Fueling the market is the fact that consumer acceptance of mobile advertising shows early promise. According to a recent Yankee Group survey, more than half of adult active mobile web users indicated that they have encountered advertising, and a significant 23% of users indicated that they clicked through that ad. Mobile Advertising: Buy In or Lose Out Page 3
4 In Figure 1, we see that a significant percentage of mobile web users are as likely, more likely, or very likely to click on a mobile banner ad, and those acceptance numbers continue to move upward. Figure 1: Consumer response to banner ads (Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey) These results are validated by early mobile advertising successes, including the following: Luxury brand Dolce & Gabbana launched a mobile advertising campaign targeted at teen and young adult customers in which clicking on a banner ad on the mobile handset leads to a downloadable game, branded wallpaper and a catalog. The click-through rate for this campaign was reported at 10%, significantly higher than average click-through rates for Internet banner ads. A mobile advertising campaign for the New Line Cinema film The Golden Compass played full-screen ads to consumers downloading mobile games, increasing awareness of the movie by 19% and raising interest in seeing the movie by 10%. A display ad for Hampton Hotels on Weather.com s mobile WAP site resulted in a 14.6% increase in message association, a 13.2% increase in brand favorability and an 11.4% in stay consideration. Mobile Advertising: Buy In or Lose Out Page 4
5 MOBILE ADVERTISING MODELS Up to this point, mobile web display advertising, in which a banner or interstitial ad is displayed on a mobile Web site, has been the most common format for mobile advertising, as advertisers seek to replicate tried-and-true models from the Internet advertising world. As illustrated in Figure 2, Yankee Group believes that the market for mobile web display advertising will reach over $1 billion in the United States by 2012 and similar investments around the globe will be propelled by a more rational mobile advertising ecosystem, greater visibility into performance and overall growth in mobile web users. Figure 2: Mobile Web Display Advertising (Source: Yankee Group, 2008) While the sophisticated browsers on next-generation mobile devices such as the iphone are being touted as a key driver behind mobile banner advertising, other mobile advertising models that rely on WAP and SMS enablers, remain at the forefront. These models include: Direct message marketing, in which a text message is sent directly to a subscriber s phone, possibly based on the subscriber s location, time of day or web browsing activity for example, an advertisement and a coupon could be pushed via WAP to a user passing a restaurant at midday. When combined with customer information such as preferences or history, direct message marketing can be highly effective, but is the most likely form of mobile advertising to raise concern about privacy issues, making it critical that this form of advertising be permission-based Mobile Advertising: Buy In or Lose Out Page 5
6 In-message advertising, in which advertising is inserted into text messages that are sent between subscribers, potentially as part of an ad-funded SMS service in which users accept ads in exchange for free text messaging a model particularly well-suited to the cost-sensitive youth market. On-device portals (ODPs), which are clients that reside on the mobile handset to provide a richer user experience than traditional interfaces. ODPs enable consumers to browse and view content including advertisements while offline, then executes searches and refreshes the interface when the handset connects with the network, so users do not feel as though their airtime is being used up with ad downloads. Interactive services, which incorporates mobile advertising with voting, polls, contests or other community- and brand-building exercises, enabling the advertiser to create a relationship with the user. One example leverages advertising that is tied to mobile social networking applications, or WAP site that is created around a specific brand that includes games, messaging and content. Brand and product placement in mobile video games or video clips, similar to product placements in movies and television shows. This approach holds promise as being a less invasive but still highly effective form of advertising. WIRELESS OPERATORS: BUY IN OR LOSE OUT Mobile advertising creates a similar challenge to that of mobile content delivery ecosystems where mobile operators have seen their customer base acquire 18% of their mobile content off-deck. The most obvious way for mobile operators to monetize and stay relevant in the mobile advertising opportunity is via their own branded portals, which for many subscribers are still primary destination sites on the mobile web. However, as mobile users become more web-savvy, they will begin exploring the broader mobile internet and use of operator portals will decline. The better, more future-proof solution is for mobile operators to leverage their unique characteristics to build third-party advertising and marketing relationships, and thus ensure that they are able to maintain a spot in the value chain. These characteristics include: Ownership of customer data Control over mobile web adoption Distribution control Value-added capabilities Ability to create revenue relationships The following sections describe each of these characteristics. Mobile Advertising: Buy In or Lose Out Page 6
7 Ownership of customer data: Unlike other media devices, mobile phones tend to be specific to their users. Telecom operators are a wealth of information about their customers, including data on usage patterns for voice and data services, including tracking of mobile WAP sites that customer visit and content downloaded; billing data; network utilization information; subscriber location information; data from the CRM system; plus any external demographic data they may have purchased. Combined, this information is a gold mine to advertisers looking to target specific customer segments or tailor their campaigns. Mobile operators primary value to advertisers or indeed any third-party content provider--is their ability to collect, analyze and segment that information for use in delivering highly targeted, personalized messaging to the end user. The delivery of that information can then be monetized, creating an additional revenue stream for the mobile operator. Control over mobile web adoption: Ultimately, the success of mobile advertising depends on the overall success of the mobile web, a phenomenon that wireless operators can influence by offering web-enabled devices at reasonable prices and offering economical, user-friendly data plans. Distribution control: Mobile operators own the network, which is the essential medium that connects the advertiser to the end user. While the success of the iphone has spurred more interest in sideloading as a content delivery model, the dynamic nature of advertising makes a direct delivery model the best alternative, and the significant investments that wireless operators have made in their networks have only made them more valuable by improving speed, quality and bandwidth capacity, thus enabling a better experience for the customer. Value-added capabilities: Mobile operators are deploying IMS- and SDPbased enablers such as presence, location and device awareness, which can support more targeted and/or situational advertising, such as a coupon that is sent to the subscriber based on his current location, or a video clip that is optimized for the type of wireless device being used. When implemented in conjunction with policy rules, the advertiser can also tailor messaging based on criteria such as subscriber preferences or time of day. Ability to create revenue relationships: Operators are now starting to free themselves from the constraints of antiquated billing systems by leveraging advanced billing technologies and SOA. Mobile operators have the capability to offer billing models to monetize relationships across multiple criteria based on clicks, downloads, hits, and thresholding thus making them more attractive to multiple types of mobile advertisers. Mobile Advertising: Buy In or Lose Out Page 7
8 While all of these characteristics can help mobile operators maintain their relevance and ensure that they receive a cut of the mobile advertising opportunity, they must understand the limitations of their role. Operators may prefer to keep advertising as part of their own portals as a way to maintain control over its relationships with customers and advertisers, including the revenue generated by any ads, but that approach will ultimately limit the range of opportunities available to them. Mobile advertising, like mobile content, represents a complex ecosystem with multiple players; in order to ensure their continued relevance in that ecosystem, operators must be willing to accept different revenue-sharing models, including those in which they step back and play a supporting role by supplying and being compensated for their value-added capabilities. CREATING AN ADVERTISING-FRIENDLY ENVIRONMENT Mobile operators recognize that being able to provide innovative content to their subscribers is a valuable tool in their efforts to boost ARPU and improve customer loyalty. However, they also recognize that they may not be the best source of that content, preferring to rely on an ecosystem of third-party content partners to offer that capability. This realization has spurred interest in the concept of the service delivery platform (SDP), a standards-based architecture for the creation and delivery of services. Mobile advertising is essentially a more dynamic form of third-party content, and as such, the environment required to support a mobile advertising initiative is extremely similar to parts of a service delivery platform. These essential common functions include the following: Real-Time Advertising Revenue Management: If a video clip is downloaded, the mobile operator must share the revenue generated by that download with the developer of that content, plus possibly additional third parties, such as a content aggregator. Along the same lines, if a mobile advertisement is delivered to a subscriber, revenue associated with that transaction both the cost of placing that ad and possibly any revenue generated by a response to it must be distributed among multiple parties, including the operator, the advertiser, the advertising or marketing firm, and so on. This requires a real-time billing platform with the following features: Support complex new revenue models, including third-party content, mobile advertising, etc. Manage a 360-degree view of all revenue relationships, including consumer, business-to-business, wholesale and other partner relationships, as well as any advertising or royalty payments. Mobile Advertising: Buy In or Lose Out Page 8
9 Pre-integrated business process flows from concept to cash to care that guarantee the integrity of information as it passes among systems, enabling faster time to market while lowering total cost of ownership. Standardize via secure Web services-based APIs that enable secure third parties access and integration to the operator s other internal systems. Policy management: Policy management capabilities for the network and the consumer become particularly critical when it comes to understanding and managing ecosystems. It is critical that the carrier recognize and proactively address how subscribers want to be approached and targeted. While some customers may be amenable to receiving ads via their mobile phones, particularly in exchange for coupons or discounts, others may want only certain types of information, or simply not want to receive ads at all. The policy management system must proactively wed subscriber information and preferences with network behavior in order to ensure that customers receive advertising that is in line with their comfort levels and/or any privacy limitations that may be in place. Business intelligence: As noted earlier, mobile operators own a wealth of information about their customers, but generally lack the ability to tie that data together and use it to create marketing that is more relevant. The solution to this challenge is a centralized business intelligence solution with predictive analytics capabilities that enables operators to integrate disparate data points to create a single view of the customer that it can then make available to its advertising and marketing partners. Secure exposure of network elements: Sophisticated advertising capabilities rely on next-generation network enablers such as location and presence servers; yet operators are understandably concerned about making to make those enablers available to third parties without compromising the security of their networks. A third party applications environment could provide access to those network elements via Web Services or Parlay APIs while maintaining the integrity of the underlying network. Mobile Advertising: Buy In or Lose Out Page 9
10 Advertising Repositories OSS/BSS Mobile Advertising Framework Fulfillment Real Time Revenue Management Policy Management Business Intelligence Secure Exposure of Network Assurance Billing Ad Ingestion and Management Subscriber Management Data Transformation Device Management Next Gen Networks Legacy Networks Figure 3: Mobile Advertising Functional Components Operators mobile advertising initiatives should be deployed hand-in-hand with their larger content strategies. While the current surge of interest in mobile advertising has spurred the development and marketing of multiple mobile advertising platforms from startups, operators run the risk of implementing a point solution that address just one form of content advertising that cannot then be integrated with any other content management solutions. A better solution is a single, flexible content delivery platform based on industry standards such as SOA that enables mobile operators to evolve their mobile advertising strategy as part of their larger initiatives around creating, delivering and managing all types of content. CONCLUSION The emerging mobile advertising opportunity is a growing but complex opportunity that is currently being addressed in a highly fragmented manner. The risk that mobile operators face is that they will wind up with yet another operational silo to handle their mobile advertising initiatives, which will preclude them from doing convergent marketing or advertising. Mobile operators must also view mobile advertising as another opportunity to strengthen their relationships with their customers in an increasingly competitive market. As noted earlier, operators possess a wealth of information about their customers, from network usage to location information to demographic data; mobile advertising provides them with the opportunity to create sticky relationships with subscribers by providing them with another category of highly personalized, useful content. Ultimately, mobile advertising should be managed hand-in-hand with the mobile operator's overall content management and delivery strategy. As web-based models continue to be delivered into the telecommunications environment, mobile operators are best suited by finding a strategic partner that understands the intersection of those two spaces. Mobile Advertising: Buy In or Lose Out Page 10
11 Mobile Advertising: Buy In or Loose Out September 2008 White Paper Inquiries: Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA U.S.A. Worldwide Inquiries: Phone: Fax: oracle.com Copyright 2008, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners. 0408
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