The right to ad value in the mobile space


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Will advertising fully leverage the unique attributes of mobile telecoms as a new media, and give consumers, advertisers and
mobile operators the “win, win, win” the industry hype suggests? A report from Nokia Siemens Networks.

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The right to ad value in the mobile space

  1. 1. Business transformation The right to “ad value” in the mobile space Will advertising fully leverage the unique attributes of mobile telecoms as a new media, and give consumers, advertisers and mobile operators the “win, win, win” the industry hype suggests? The jury is still out. We believe it unlikely unless the major players fundamentally change their approach. Here we look at where the mobile and advertising industries intersect and how operators can build on the opportunities. The past year has seen massive press 2007 saw mobile telco services with personal devices. interest in the alliances and solutions generate a global, annual revenue of • Mobile advertising offers new and surrounding mobile advertising. €575 billion. That same year, €340 unique ways of reaching consumers Despite this hype, we forecast that billion was spent on advertising. To date, wherever they may be. mobile advertising will only account for mobile operators have only seen • Ever smaller segments (in the “Long a mere 0.5–1.5% of mobile operator negligible revenues from advertisers. Tail”) are becoming increasingly revenues by 2011. This modest But, with access to 2.7 billion pairs of important for marketers, in targeting growth is explained by the length of consumer eyes, every day, this has highly specific groups. Mobile time our industry takes to adapt to been a huge and missed opportunity. operators with well organized data new business models. But these are In 2007, mobile content accounted for can give advertisers the ability to average numbers and huge rewards 10% of operator revenue but contrary target consumers based on the size await those innovators that set the to any other media, the part coming of their social networks or even the trend and pace. from advertising was trivial. places they shop. The evolving needs of advertisers Looked at this way, mobile operators and the sector financiers combined are in pole position to capitalize on this with consumer behavior, indicates high development. As Arun Sarin, CEO of demand for mobile advertising. Vodafone says “The simple fact that • Chief marketing officers are we have the customer and billing Solved. increasingly tasked with delivering relationship is a hugely powerful thing measurable results for marketing that nobody can take away from us... effectiveness. A study by Rex Briggs whoever comes into the marketplace and Greg Stuart in 2006 concluded is going to have to work through us.” that 37% of all advertising is (Financial Times, November 19, 2007.) Nokia Siemens Networks Consulting “wasted”. Mobile advertising allows Meanwhile, operators’ compliance with highly targeted campaigns and local regulators adds further structural ability to track. advantage to their position. • Consumers have started using media differently with the young, Inspired thinking, especially, pioneering new ways innovative solutions of using content and connectivity
  2. 2. “We are so busy listening to statistics that we forget we can create them.” Innovation in mobile advertising business models – Bill Bernbach, the advertising legend The ubiquitous nature of personal • Delivering financial services mobile communications will blur the Text-based advertising with traditional distinction between “Above” mobile payment systems mean and “Below-the-Line” advertising. that mobile operators in emerging • Leveraging consumer data and markets can offer basic banking interaction services to consumers with poor Consumer location and context or non-existent credit-ratings. data can be exploited to provide Promotional SMS messages advanced customer-specific could support micro-payments to services and target end-users with facilitate purchases or distribute highly specific advertising discounts. messages. Such services also • Operator alliances • Virtual operators allow consumers to try and buy – Operators, by agreeing to cooperate Megabrands can become mobile perhaps an item of clothing – and in a given geography, could form virtual network operators (MVNOs), then discuss it within their social formidably attractive channels for not simply to resell voice minutes or networks interactively, who might advertisers. In much the same way connectivity, but to enhance their further suggest accessories or that Star Alliance brings together brand’s relationship with consumers alternatives. These results can all airlines with hotels and travel- and press. For instance, a bank’s be captured in the end-user’s related services, operators could knowledge of individual credit and spend profile. Advertising revenues offer an ecosystem of shopping spending histories, together with here could be used to provide and entertainment-related partners location data, could greatly support incentives, discounts or referrals. to its membership. their customers. From: Relative distinction between roles and areas of expertise Marketing Strategic Media Media Media Effectiveness Marketing Strategy Planning Planning Buying Ownership Tracking Creative Services To: A network of pathways and alternate channels to the consumer Social Network Search Web Site Intermediary Brand or Local Product Mobile End User Marketer Operator Social Advertising Media Networking Agency Aggregator Agent Global or Regional Figure 1. Partial example of potential disintermediation Mobile Alliance in the traditional advertising value chain
  3. 3. “Ad value” is not guaranteed Although some operators have created mobile advertising models, few have substantially addressed the mind-set shifts needed to exploit mobile advertising’s full potential. intersect with other industries, such as Focus on customers’ concerns advertising. There are three significant Mobile devices are highly personal, internal barriers to commercial the threshold for intrusion is lower innovation in this space: than other advertising media. Early • Concerns over cannibalization. mistakes could hurt the adoption of Advertising can give things away for mobile as a new advertising media, Winning the battle of shifting free that usually have a price tag, for either through a consumer backlash value chains: co-opetition and the instance mobile content or minutes. or by restrictive legislation resulting formation of value networks • New ventures have a difficult life in from negative consumer response. Mobile advertising has the potential to most large organizations, where Based on international research by majorly disrupt the traditional value processes and co-ordination are Nokia Siemens Networks*, 64% of all chain in advertising, which is already designed for larger units. respondents were not interested in undergoing significant changes from • Many operators exhibit a near receiving mobile advertisements, search-based and online media fanatic obsession in understanding while 57% regularly receive mobile (see Figure 1). While mobile operators the intricate details of new advertising every month. Only 13% have many strengths, their perceived approaches taken by first movers of all respondents were interested, weaknesses, like the reach of their and replicating them, while they even when advertising was closely customer base for instance, may make may underinvest in understanding linked to a monetary benefit. Discounts them redundant to new marketers local circumstances. and entertainment were recorded as and their intermediaries. In addition, motivators for 59% and 22%, the entry of multiple new players in Developing marketing know-how: respectively, by all who expressed an “ad value ecosystem”, introduces thinking and behaving like interest. And 25% of those interested new ways to connect marketers with advertisers were motivated by the opportunity of end-users, potentially relegating the Almost without exception, operators personalized advertising. operator to the status of a marginalized have never had to be particularly or “bit pipe” carrier. sophisticated in the way they characterize and interact with their Overcoming the commercial customers. This is possibly because innovation dilemma their services have been perceived The telco industry is innovation-driven as commodities or, at best, utility, and has already fundamentally where price is the key determinant. changed the way that nearly half the With this mindset, segmentation has world’s population live their lives. been based upon an aggregate of The industry has, however, had limited age, wealth and simple demographics, success in creating new business with acquisition based on entry pricing models, particularly with those that and subsidies. *Quantitative study by Nokia Siemens Networks in ten markets across Europe, Asia and North America
  4. 4. Any major change takes time: operators need to start shifting their thinking now Based on the opportunities available and the critical shifts required to capitalize on them, we recommend operators consider four actions for their mobile advertising initiatives. Think “value networks” and incremental revenue, operators can One size does not fit all: build on participate in shaping new seek to partner with external specific local circumstances and ecosystems marketing and advertising companies opportunities To capture more value, operators will to improve the way in which they The maturity in both telco and need to appear more compelling and define and address markets advertising industries varies across integrated to marketers and end-users, themselves. This requires operators continents and markets. In Figure 2, as well as other potential players in to become more “co-opetitive”, we have simplified the world into a the mobile advertising “Ecosystem”. cooperating and competing with new two-by-two matrix to illustrate the Rather than view marketers and and established players, operating at initial steps for operators entering the advertisers simply as sources of different points in the value chain. mobile advertisement arena. Figure 2. Ideal up-front approach for external advertising services given local conditions per inhabitant and use of non-traditional channels High advertising spend • Establish a flexible set of • Establish a flexible set of partnerships partnerships • Run iterative series of campaigns • Run iterative series of campaigns Developed – to few 1,000 consumers each to few 1,000 consumers each State of advertising market • Heavy both on pull and push • Heavy both on pull and push through basic mobile channels through multiple mobile channels per inhabitant traditional • Try to form a winning alliance of • Establish a flexible set of Low advertising spend and use of channels partners, upfront partnerships • Run campaigns to several • Run campaigns to several Developing – thousand consumers at a time thousand consumers at a time • Heavy push with encouragement • Heavy both on pull and push of pull primary with SMS through multiple mobile channels Developing – Developed – Low fixed-line and mobile penetration High fixed-line and mobile penetration and limited access to the web with web always on State of telecom market
  5. 5. The results of these tentative first steps should let operators think about their role in this Investing in developing key by timely analysis of detailed customer competencies and technical interaction histories. Detailed analysis potentially massive and enablers of contribution and risk of churn – fuzzy mobile advertising To maximize their perceived value to for individual consumers – is no longer marketers, mobile operators must enough. Operators must be able to space. We believe demonstrate their suitability with the access and analyze customer these critical steps are markets those marketers wish to information in near-real-time. reach, in terms of scale and necessary to realize segmentation. They need to form an Ensuring that effort is truly significant returns and effective channel to reach target entrepreneurial and consumer- customers, segmented by specific centric are worthy of investment. need, and a greater understanding of Operators should see mobile the contexts in which they make their advertising as a new business model choices. rather than a bundle of new services. Operators must prove that every current A small cross-functional team should and planned end-user application and be established and given easy and service is “Ad-aware”. This means regular access to senior management ensuring personalized advertising for support and sparring. This team content can be seamlessly integrated should be allowed some freedom for with end-user services. And that those commercial experimentation, for same services can accept advertising example micro-campaigns for the related interaction and feedback from operator itself and to rapidly test the end-user (see Figure 3). hypotheses through market research. Ambitious operators need this to Accuracy of customer profiling and iterate their business plans and excel campaign targeting can be maximized in understanding dos and don’ts. Figure 3. Link between campaign capabilities and the associated technical enablers Advertising campaign process # Link between capabilities and enablers 1 2 3 4 5 6 9 Consumer Advertising Data Data 7 Distribution Tracking & Content Package insight design generation mining 8 Interaction feedback Service delivery framework Content / Service Provider “Ad-aware” End-to-end process Operations Support Systems (OSS) Business Support Systems (BSS) applications management 3 7 8 9 Value Chain 2 9 Applications Management Real-time, atomic “Ad-capacity- data analysis Business Flow and Capability Exposure aware” OSS 4 3 7 9 Network Common Location & Abstraction Services Low or zero-latency presence integration 2 7 3 9 Networks Devices
  6. 6. Meet the consultants Do you want to benefit from mobile advertising? Visit Copyright © 2008 Nokia Siemens Networks. All rights reserved. Nokia Siemens Networks and the wave logo are registered trademarks of Nokia Siemens Networks. Other company and product names mentioned herein may be trademarks or trade names of their respective owners. Products and solutions herein are subject to change without notice. Product code C401-00192-B-200801-1-EN – Indivisual/Libris