Chuck Levine's Mobile Presentation

MOBILE The Dawning of ADVERTISING DEEPSPACE mobile

Mobile ads will become a big business. DEEPSPACE mobile

Experts have predicted that over the next 5 years , mobile advertising will become a $2 billion business . JupiterResearch, 2008 DEEPSPACE mobile

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008 Experts have predicted that over the next 5 years , mobile advertising will become a $2.3 billion business . LocalMobileSearch, a subsidiary of Opus Research DEEPSPACE mobile

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008 Experts have predicted that over the next 5 years, mobile advertising will become $2.3 billion business. LocalMobileSearch, a subsidiary of Opus Research Experts have predicted that over the next 4 years , mobile advertising will become a $6 billion business . eMarketer DEEPSPACE mobile

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008 Experts have predicted that over the next 5 years, mobile advertising will become $2.3 billion business. LocalMobileSearch, a subsidiary of Opus Research Experts have predicted that over the next 4 years, mobile advertising will become a $6 billion business. eMarketer Experts have predicted that over the next 5 years , mobile advertising will become a $6.5 billion business . Mobile Advertising: After the Growing Pains DEEPSPACE mobile

And everyone knows how accurate experts can be… DEEPSPACE mobile

And everyone knows how accurate experts can be…

“ There is a world market for maybe

five computers.” DEEPSPACE mobile

“ There is a world market for maybe

five computers.” Thomas Watson, chairman of IBM, 1943 DEEPSPACE mobile

“ There is no reason anyone would

want a computer in their home.” DEEPSPACE mobile

“ There is no reason anyone would

want a computer in their home.” Ken Olson, president, chairman, and founder of Digital Equipment Corp., 1977 DEEPSPACE mobile

“ No one,” he declared, “will ever

need more than 640K of RAM.” DEEPSPACE mobile

“ No one,” he declared, “will ever

need more than 640K of RAM.” Bill Gates, ~ 1982 DEEPSPACE mobile

“ I predict the Internet will soon go

spectacularly supernova, and in 1996 catastrophically collapse.” DEEPSPACE mobile

“ I predict the Internet will soon go

spectacularly supernova, and in 1996 catastrophically collapse.” Ethernet inventor and 3Com founder Bob Metcalfe, 1995 DEEPSPACE mobile

“ Everything that can be invented

has been invented.” DEEPSPACE mobile

“ Everything that can be invented

has been invented.” Charles H. Duell, Commissioner, U.S. Office of Patents, 1899 DEEPSPACE mobile

The mobile market is growing rapidly. Harris Interactive, 2008 40M Americans already browse on their phones. (but that’s less than 20% of users) 95M have internet access. DEEPSPACE mobile

But, mobile ad growth has been painfully slow. DEEPSPACE mobile

While some users have mobile web access, they don’t use it much. 6.4 sites per month vs. 100+ for fixed internet. Harris Interactive, 2008 DEEPSPACE mobile

And, users perceive mobile ads to be an intrusion Little or no perceived value. Perception that the user is paying for the ads. DEEPSPACE mobile

Few people claim to be interested in mobile ads. DEEPSPACE mobile

On the other hand… DEEPSPACE mobile

And, other studies show users are interested in mobile ads. 56% of teens. 37% of adults. Harris Interactive, 2008 DEEPSPACE mobile

But… they want to be compensated for viewing ads. DEEPSPACE mobile

But they want to be compensated for viewing ads. Teens want cash and freebies: Cash (80%) Downloads (61%) Music (57% ) Minutes (53%) Harris Interactive, 2008 DEEPSPACE mobile

But they want to be compensated for viewing ads. Adults want freebies and coupons: Free minutes (49%) Coupons (37%) Free entertainment (37%) Harris Interactive, 2008 DEEPSPACE mobile

The question for you is when to enter the fray, and how DEEPSPACE mobile

What will determine winners and losers? What role will the carriers play? Will the political environment play a role? DEEPSPACE mobile

How does our company invest intelligently? Should we lead or fast-follow? How do we offset the death of the mass market? How do we protect our brand? 18% of marketers are already experimenting. JupiterResearch, 2008 DEEPSPACE mobile

What are the keys to success in mobile advertising? DEEPSPACE mobile

Mobile ad growth has been painfully slow.. But why? DEEPSPACE mobile

Carriers are not risk-takers. Dependent upon recurring revenue Few are willing to risk being first • Churn is their biggest enemy DEEPSPACE mobile

Advertisers see little value. Most ads today are text/SMS Screens are typically small and resolution is poor Download speeds have been slow Video resolution has been poor • Little impact • But 69% of adults and 64% of teens claim to prefer text ads • Only 47% of teens and 35% of adults want images in ads • Acceptance of video ads dropped 10% this year Harris Interactive, 2008 DEEPSPACE mobile

Still, growth in the past 12 months has been 104%. From a small base, too. AdMob DEEPSPACE mobile

But, most users still do not have the right equipment. DEEPSPACE mobile

The growth is likely to accelerate, and technology is an ally. DEEPSPACE mobile

Mobile phones are improving. Screen quality Video capability Location capability • Matching people & places DEEPSPACE mobile

It began with the iPhone, but is rapidly expanding. DEEPSPACE mobile

The iPhone serves as a good case study. DEEPSPACE mobile

>30% of iPhone users compared to 4.6% of all users watched TV or videos – DEEPSPACE mobile

50% visited social networking sites compared to approx. 4% of all users Almost DEEPSPACE mobile

30% visited YouTube vs. 1% of all users Of those… DEEPSPACE mobile

59-85% of iPhone users search the web vs. 6.1% of all users DEEPSPACE mobile

74% listened to music vs. 6.7% of all users DEEPSPACE mobile

All of this was on a slow cellular network. DEEPSPACE mobile

That is shifting. DEEPSPACE mobile

Networks are improving. HSDPA/ HSUPA CDMA Rev-A WiFi WiMax LTE DEEPSPACE mobile

What began with the iPhone, is rapidly expanding. Samsung Instinct Blackberry 9000 Treo 800 OpenMoko Neo LG Voyager DEEPSPACE mobile

Carriers know a lot about their customers’ habits. DEEPSPACE mobile

New techniques are available. Interstitial advertising DEEPSPACE mobile

And there is $$$ to be made. Social networks/internet sites Ad agencies Ad placement companies Carriers Advertisers DEEPSPACE mobile

Carriers must differentiate or die. DEEPSPACE mobile

Majors are consolidating. Sprint / Nextel Verizon / Alltel AT&T / Cingular It’s still questionable whether all can survive. • Sprint & T-Mobile are most vulnerable DEEPSPACE mobile

MVNOs are consolidating or disappearing as fast as they appear. Helio is saved by Virgin Mobile Amp’d & Movida disappear DEEPSPACE mobile

Price has always been a primary differentiator. Few admit it. Verizon - The network Sprint - Sprint speed AT&T - Coverage (more bars in more places) DEEPSPACE mobile

Price has always been a primary differentiator. But everyone subsidizes phones. DEEPSPACE mobile

Price has always been a primary differentiator. A huge part of the spending is price-based ads. DEEPSPACE mobile

Price has always been a primary differentiator. Mobile ads may allow price differentiation. Likely the first reason for carriers to get excited. DEEPSPACE mobile

It’s happening in Europe. Blyk targets only the 16 to 24-year-old market. Profiled based on lifestyles and interests. DEEPSPACE mobile

It’s happening in Europe. Free voice and data. 43 voice minutes and 217 texts a month per month. Provided customers accept ads. DEEPSPACE mobile

It’s happening in Europe. Blyk claims 29% click-through. Down from the 43% they claimed last November. DEEPSPACE mobile

It’s happening in Europe. Over 100,000 customers in the first 7 months. DEEPSPACE mobile

Blyk claims to be cost-effective. Are people buying or just clicking? Source: E-consultancy, September 2007, trade estimates , February 2008. DEEPSPACE mobile Medium Avg. Response Rate (%) Cost/Response ($) Online Advertising 0.5 3.00 E-mail 2.5 4.00 Direct Mail 2.0 25.00 SMS Push 4.5 4.45 Blyk 29.0 1.06

Social trends will also drive mobile advertising. DEEPSPACE mobile

People want to be connected. Facebook, MySpace, and about a dozen copycats every month. All are testing mobility. DEEPSPACE mobile

Social trends will drive devices that are optimized for mobile advertisers. Driving more feature-rich phones • Picture phones • Video capability • Full keyboards and simplified text entry • Voice input DEEPSPACE mobile

Likely to drive some location-based service. DEEPSPACE mobile

All of this is likely to take 2-3 years to mature. DEEPSPACE mobile

Why will people want mobile advertising? DEEPSPACE mobile

May reduce the cost of phones / service. DEEPSPACE mobile

Location-aware Preference-aware Real-time comparison capability Advantage vs. any other media Or, if they believe it provides real value… and it can. • E.g., buying a big-screen TV DEEPSPACE mobile

How will people want mobile advertising? DEEPSPACE mobile

SMS/Text Still Picture Video Appearance DEEPSPACE mobile

Search-driven Location-based Method DEEPSPACE mobile

Interstitial vs. featured DEEPSPACE mobile

Mobile apps can be mobile advertising. DEEPSPACE mobile

Free sites may drive brand awareness. But users need a relevant reason to view the site, and space is at a premium. • Straight ads are unlikely to be effective DEEPSPACE mobile

Mobile apps can drive revenue. Used correctly, they can also drive your brand. But beware of backlash if the site is not perceived to be worthwhile. DEEPSPACE mobile

Privacy may be a “ black swan.” DEEPSPACE mobile

Privacy may be a “ black swan, or the elephant in the room.” DEEPSPACE mobile

Is privacy a real consumer issue? DEEPSPACE mobile

Is privacy a real consumer issue? How many passwords do you have? DEEPSPACE mobile

Is privacy a real consumer issue? How many passwords do you have? How many of those sites have written privacy policies? How many of them have you read? DEEPSPACE mobile

Or a political issue? DEEPSPACE mobile

The black swan is now surfacing, and will extend the debate into the political arena. • On August 1, 2008, the FCC sent a letter to cable companies. • Demanding information on use of customer profiles to tailor advertising. • Recipients included Comcast, Cox, AOL, AT&T, Yahoo!, Microsoft and 27 others. DEEPSPACE mobile

May delay broad adoption, but is unlikely to stop it. • Opt in/opt out But onerous restrictions could be imposed. The black swan is now surfacing, and will extend the debate into the political arena. DEEPSPACE mobile

Why begin spending today… … if the market will not really develop for several years? DEEPSPACE mobile

Why begin spending today? Define the key success factors before your competitors do • Make mistakes early • Radio to TV analogy Build a case for your ROI DEEPSPACE mobile

Can you test successfully? DEEPSPACE mobile