Mobile Advertising: Prospects And Risks

Among the major topics BMI discusses on a regular basis is the ability of telecoms operators to monetise the growing demand for network usage. The concept of a 'dumb pipe' is never far away from the strategic outlooks of some of the largest players in the telecoms markets. Mobile operators have unparalleled access to the habits of their users, data that will be useful to a number of different industries not least advertisers. BMI looks at the success of different companies' mobile advertising strategies.

The Market

Mobile advertising has garnered plenty of attention in 2013, not least because Facebook appears to have finally found a winning formula. The company's failure to cater to the shift to mobile usage was behind much of its stock price decline in 2012. However, the company announced in its Q213 results that 41% of its advertising income came from mobile, suggesting its new strategy is paying off. Google also has reported an improving performance for its cost-per-click (CPC) ratio - although it dropped again in Q213 - as its mobile advertising strategy starts to play out.

Operators Keen To Get Mobile Advertising Share
Global Mobile Advertising Spend (US$mn)

Among the major topics BMI discusses on a regular basis is the ability of telecoms operators to monetise the growing demand for network usage. The concept of a 'dumb pipe' is never far away from the strategic outlooks of some of the largest players in the telecoms markets. Mobile operators have unparalleled access to the habits of their users, data that will be useful to a number of different industries not least advertisers. BMI looks at the success of different companies' mobile advertising strategies.

The Market

Operators Keen To Get Mobile Advertising Share
Global Mobile Advertising Spend (US$mn)

Mobile advertising has garnered plenty of attention in 2013, not least because Facebook appears to have finally found a winning formula. The company's failure to cater to the shift to mobile usage was behind much of its stock price decline in 2012. However, the company announced in its Q213 results that 41% of its advertising income came from mobile, suggesting its new strategy is paying off. Google also has reported an improving performance for its cost-per-click (CPC) ratio - although it dropped again in Q213 - as its mobile advertising strategy starts to play out.

Mobile services have reached more people than the fixed telecoms network ever did and many consumers cannot imagine life without their mobile devices, creating a product with exclusive access to consumers' preferences, habits and location. However, while operators have subscribers numbering several millions, the majority of successes in mobile advertising are in the hands of companies other than the mobile operators providing the connections.

BMI writes often of the difficulties facing operators as third party content providers cut into their revenues and profits. It forms the basis of BMI's views on operator product launches, merger and acquisition activity and operator strategies. We believe operators that actively seek new revenue streams from non-traditional voice and messaging services will be successful in growing their revenues. However, in the mobile marketing arena, major digital advertising brands such as Google and Facebook still retain the edge.

Operators have a number of options on providing advertisers with access to their network subscribers. Here BMI considers the strategy pursued in developing markets.

Company Response To Changing Landscape

US mobile operator AT&T offers advertisers a route to its mobile subscribers through its mobile advertising Adworks unit. Adworks' routes to market include store finder, rich media and click-to-fill mobile advertising. With access to key demographic data on subscribers as well as device type, spending and usage AT&T is in a unique position to help advertisers target subscribers. Higher response rates to more targeted advertising make mobile advertising an appealing prospect to companies.

AT&T's strength lies in the detailed data it can gather on subscribers, allowing niche markets to be reached. AT&T's Mobile Blueprint service claims to offer more than 250 indicators to help an advertiser reach its market. Much of this data is only available to AT&T through its postpaid platform, on which it hosts 71.3mn subscriptions. The US mobile market is predominantly postpaid-based, which allows mobile operators access to a wealth of data that may not be available on prepaid subscriber usage, although plenty can be inferred from usage by prepaid subscribers.

The company's mobile advertising service also offers banner ads that sit at the bottom of a smartphone screen. With smartphone growth remaining strong and forming an increasing proportion of total handsets, there is considerable opportunity for carefully targeted advertising through mobile web portals and searches.

AT&T gives no indication on the income from its mobile advertising services and BMI believes it continues to be dwarfed by income from subscriber voice and data usage. Nevertheless, we believe operators cannot afford to miss out on gaining a slice of the mobile advertising market, which is forecast by eMarketer to total almost US$60bn by 2017, almost four times the projected global market value at the end of 2013.

Risks Ahead On Subscriber Data Usage

While mobile operators are able to provide access to a niche sector of the market for advertisers, the ongoing revelations of consumer data being made easily available to government agencies has the potential to dent the prospects of targeted mobile advertising. AT&T is careful to emphasise that its services can target users in a 'privacy compliant manner'; this is likely to be a key issue in the success of any product as use of subscribers habits and preferences offer powerful insight into individuals.

The targeted mobile advertising prospects fit into the wider trend of Big Data, using the highly focused information that telecoms operators have from their consumers. How this data is used, stored and sold to third parties remains fluid and changes from country to country. This lack of regulation and the potential abuse of data implicit in the depth of information available is the greatest threat to the mobile advertising market.

Read the full article

This article is tagged to:
Sector: Telecommunications
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.