Contact:
Chris Coffman
Mobile Media
chris.coffman@informa.com

It is a routine familiar to any mobile data user: click, pay, click, pay. This is not "pay-per-click" - the lifeblood of Internet advertising. But it is the reality of the mobile content ecosystem, in which the end-user pays at every turn - through data charges, monthly subscriptions and expensive downloads. While no users want spam delivered to their phones, they have accepted well-targeted promotions and are even amenable to ads that subsidize the cost of a service.

Content providers and carriers, burdened with the high cost of developing mobile content - particularly video and games - are also looking to offset some of their costs through advertising, though they are proceeding cautiously so as not to drive away customers.

Both sides require advertisers before advertising directly on mobile can take off. "We're keen to get involved with this medium," says Adam Smith, futures director for GroupM, part of advertising giant WPP. Smith says groundwork must be laid before agencies and - by extension - their clients will get involved. "I'm interested in a liquid market, so there's some intelligence going on behind the pricing, and some element of research," he adds.

Enter a host of companies providing platforms, serving ads into different forms of mobile content, and providing advertisers with a market for purchasing those ads. Combining their efforts with those of the carriers and content providers, such companies have taken steps to provide an attractive marketplace for advertisers.

The mobile web

Keyword advertising has already revolutionized Internet search, which Smith claims is the fastest-growing element of Internet advertising. The small screens on handsets mean concise text advertisements are likely to convey information more clearly than a miniaturized banner ad. "The mobile platform is probably as good a portal as any for word-based ad-searching," he says.

Google continues to strike deals aimed at making its search box ubiquitous on mobile (see "Google, Yahoo!," p. 3), pushing keyword advertising onto the mobile web. Even where Google fails to make inroads, startups like Medio and JumpTap are ready to provide their own mobile-focused, but Google-inspired, search platforms (MM, 18 Nov, 2005). And just as Google took keyword advertising beyond search with its AdSense offering - enabling web sites to cash in by displaying text ads - U.S. startup AdMob has launched a similar service for mobile.

AdMob brings advertisers and site owners together, enabling advertisers to place text ads on registered mobile web sites, similar to the way AdSense functions on the Internet. AdMob extends the functionality by giving advertisers a level of manual control so that they can target specific sites to run their ads on or ensure their ads are served only to mobile devices with particular characteristics - MIDP 2.0, Symbian or Polyphonic-capable, for example. Such flexibility ensures that advertisers - especially those selling personalization content, services or games - will receive click-through only from customers with devices capable of using the advertised service.

Omar Hamoui, founder and president of AdMob, says the site grew out of his frustrations with running fotochatter, an independent mobile- social-networking site he co-founded. "There actually are a lot of independent mobile sites out there, but there's no efficient market for monetizing them," Hamoui says, adding that many such sites remain unknown because they are outside the carrier ecosystem, even though they generate significant traffic. As mobile search makes these sites easier for users to find, advertising could bring the sites significant revenues.

According to Hamoui, one of the sites AdMob partners with is already delivering 10,000-15,000 click-throughs a day. "They're getting hundreds of thousands of page views," he says, "and there are a lot of sites out there like that."

Mobile sites looking for additional money through advertising may also resort to banner ads. Mobile marketing firm Enpocket offers a platform for serving targeted banner advertisements to mobile web users, and the product has been used to serve ads on Vodafone Japan's portal for five years.

Enpocket co-founder Jeremy Wright claims that mobile users have not been put off by the ads. "It's an accepted model in everyone's mind," Wright says. "If there's content and there's advertising within it, whether a banner or a link, that's fair play."

Banner ads and sponsored links do not suit all players in the ecosystem. "We make money from content and from calls, so it's not like the Internet," says Rachel Channing, a spokeswoman for UK operator 3. "We're not looking to copy an Internet model in terms of advertising over mobile at all."

Applications and services

In contrast with the mobile web, downloadable applications and subscription-based services offer more flexibility in the way advertising is integrated. They also offer greater potential value for the ad's viewers, who benefit from free or discounted access.

"Would I be willing to see a small banner ad or a splash-screen ad if it meant I got the service for free?" asks Ted Verani, senior vice president of business development at Trilibis Mobile. His answer is "yes," since monthly subscriptions for community sites cost US$2-5. As social-networking and dating sites expand from PC to mobile, they are already used to the advertising model, says Verani.

Another method of targeting ads is to build them carefully into the application itself. Zingy, a U.S. subsidiary of Japanese digital-content provider For-side.com, has done so for Visa, integrating information about the Visa Signature card into its Vindigo city-guide application. Zingy CEO Andy Volanakis explains that users perusing lists and restaurant reviews in the guide can also see which spots grant reward points for the Visa Signature card.

Vindigo requires a premium subscription fee from subscribers, and Volanakis says there are no plans to change that, even when incorporating advertising.

Mobile games

Like Zingy, U.S. firm InfoSpace Mobile has taken a tailored approached to advertising in its mobile offerings. The company signed deals with firms, such as Sony and Apple, to provide the prizes for players of its For Prizes games. "We want very relevant sponsors that we believe our community relates to and cares about," says Andy Riedel, InfoSpace's vice president of games development. "We're not asking them to do something. We're offering to give them something."

But direct advertising in mobile games is still in its infancy. Hawaiian games developer MauiGames was an early pioneer in the space, partnering with Enpocket in 2004 to place static and dynamic sponsorships and banners into its mobile games lineup. Maui appears to have been too early to market with its offering, since in-game advertising is only now gaining traction for console and PC platforms.

In-game advertising on console and PC games enables detailed and immersive ads within the game's virtual world, giving advertisers the flexibility necessary to fit the ads into their strategic campaigns. "The memory size and screen resolution for mobile means that when you do put an ad in there, it can't be a strategic campaign, because you can't read the wording," concedes Justin Townsend, European chief of in-game-advertising provider IGA Partners. "It's got to be a logo instead."

As handsets improve in the next 12-18 months, IGA Partners expects to be able conduct high-quality advertising within mobile games. "It's very much on our radar for next year," Townsend says.

An obstacle facing the in-game-advertising market - console, PC and mobile - is the sheer newness of it, which means advertising agencies are not ready to commit the resources necessary for creative execution, budgeting and project management in the space. "In a mature market, [such resources] would be down to the existing ad agencies," Townsend says. "The big ad agencies right now will pay lip service to the gaming space, but they won't put big bucks into it."

IGA Partners was forced to acquire a boutique ad agency, London's Hive Partners, to work around this resistance. "We work directly with clients through Hive," says Townsend. "If we were to work through agencies right now, we'd still be sitting here in three to four years with minimal budgets being allocated to the space."

Mobile video

One advertising format that ad agencies are already familiar with is the 30-second television spot. GroupM's Smith says that spot-based interruption advertising will likely be used with expensive-to-produce "destination" mobile content.

"We are seeing interest from all the big agencies, like Universal McCann and Starcom MediaVest," says Tom MacIsaac, president and CEO of U.S.-based Lightningcast, which provides technology that can insert ads into streaming media. The company offers a platform for ad insertion, trafficking, scheduling, auditing and reporting. Most of its business is in broadband video, but since launching its mobile product in May, Lightningcast has started trials with three carriers/infrastructure vendors in the U.S. and Europe.

Whether distributing via broadcast or on the data network, video is expensive, MacIsaac notes. That cost is being borne entirely by the consumer, and services are correspondingly expensive. MacIssac says that after data consumption and subscription fees, watching mobile video on U.S. carriers Sprint Nextel or Verizon Wireless can cost customers US$15-20 a month. Carriers will retain some subscription fee but will subsidize the consumers' total costs with advertising. "No one we're talking to is talking about a pure ad-supported model," he says, "but everyone we're talking to is talking about a hybrid model."

The hybrid model should soon be easier for European carriers to adopt. The European Union recently announced a proposal to update its TV without Frontiers Directive, easing regulations on advertising over new "TV-like services," such as mobile TV (see "EC settles," p. 2).

But 3 has already experimented with mobile video advertising. The company has struck a deal with Apple to bookend a music-video download on the network with ads for Apple's iPod (MM, 4 Nov, 2005).

Customers respond well when relevant advertisers supply them with appealing content, according to Enpocket's Wright. "The big opportunity for brands is to be the enabler of content people really like," he says.

The flip side is, if the consumer is already paying for it, why change the system? "There's just way too much customer willingness to pay for content in the mobile space, because it was handled so much better than the Internet," says Zingy's Volanakis.