An effective approach for any market: mobile advertising and specific regional features

What’s going on with mobile advertising? It would appear that the analysts’ rosy forecasts fell short of the mark. Around a year ago, Gartner predicted that the annual output for the mobile advertising market would hit $2.7 billion in 2008, and would exceed ten billion by 2011. Strategy Analysts went even further, predicting $14 billion for 2011.

The global economic slowdown had to send some of these numbers tumbling; marketing and advertising budgets everywhere experienced massive cuts. Mobile advertising enthusiasts, however, have remained unfazed. Forward-thinking marketing specialists (and they’re not the only ones) have been paying attention to the cheapness and effectiveness of mobile promotional channels. The squeeze of the economic crisis presents us with new opportunities! But for the time being they’re still just potential opportunities. The rosy forecasts are being moved back a bit; the 10 billion mark is now expected in 2013 (two years later than earlier predicted). Will these expectations be met? And what still needs to be fixed? Why is growth slower than it needs to be?

To begin with, the overwhelming majority of operators are still not prepared to implement more complicated business models. But there’s really only one way to turn advertising profits into a significant part of one’s business – to start providing advertising aggregators with the means to establish contact with their segmented client base. Meanwhile, the promising Telco 2.0 Initiative, which aims to determine ideal business models, is still being developed. The Vodafone Group, unquestionably a leader in the field, has just announced its new strategy: according to Vittorio Colao, Vodafone wants to become a “smart pipe provider.” This ambition is right in line with the Telco 2.0 Initiative and will certainly have a positive effect on Vodafone’s use of mobile advertising. However, how much time is the telecommunications giant going to need to put this strategy into operation?
Most of the other operators prefer to take the easy route for implementing mobile advertising, trying to minimize changes to their business model. Advertisers aren’t too pleased so far with the convenience and transparency levels of new advertising avenues. They don’t understand how to make use of a segmented client base and haven’t fully appreciated the effectiveness of contact.
The client audience also has yet to recognize the beauty of mobile advertising. Pragmatic users don’t understand the full range of what mobile advertising has to offer them. Polls and focus groups show that clients have a generally negative relationship towards mobile advertising. Advertising mass-mailings, which many operators have recently added to their repertoire, tend for the most part to diminish client loyalty rather than contribute to any significant extra revenue. And the image of mobile advertising pioneers is tarnished.

Of course, there is one revolutionary way to implement mobile advertising, applicable to narrow segments of the client base. For example, the well-known Blyk company enjoys mixed success. Most operators, however, prefer a more gradual route, one that involves a minimum of risky investments and makes maximal use of existing infrastructure, transports and systems. The clients in turn are supposed to be drawn into the advertising consumption process gradually. At the same time, business processes relating to cooperation with advertisers have to be brought up to date. These two requirements should be dealt with step-by-step. The first reasonable step could be mobile promotions for the operator’s own services. When clients have grasped the benefits of the mobile advertising model and the operator has set up the corresponding business processes, then it will be possible to move on to more complicated tasks and start to cooperate with outside advertising aggregators.

At first glance, mobile television would appear to be an ideal transport. By putting advertisements into a video stream, you can simply copy the business model for traditional television advertising. However, the fact that mobile television has yet to penetrate the market on any kind of large scale presents a powerful barrier. Sales of mobile advertising worldwide have already exceeded those of mobile TV services. Typical mobile TV service users are technological enthusiasts and early adaptors; even according to the most optimistic outlook, this service couldn’t possibly achieve more than 1-2% penetration in the next 1-2 years. For mobile advertising to develop successfully, you need a transport with great potential and, even more importantly, one that takes specific regional features into account.

Obviously, mature and developing markets are fundamentally different in terms of their requirements and their relationship to mobile advertising. The potential for mobile advertising is of course different in both of these markets, but nevertheless significant. According to data from Pyramid Research, mobile advertising will take up 30% of the advertising market for mature markets by 2013, and up to 12% for developing markets (to be fair, we should point out that this is the most optimistic prognosis; Analysys Mason, for instance, allows mobile advertising from 2 to 4% of the advertising market for 2012).

The operator working in a mature market should follow one fundamental principle: advertising messages should only be sent in response to the client!

Both mass-mailings and personal messages are completely inappropriate when initiated by the operator. A more appropriate approach could be sending information concerning the client’s balance following a call, short message or USSD request from the client. This method has proven to be one of the most effective!
Another successful advertising transport is RBT, which sends an advertising message following a client’s call. Both ordinary and incoming RBT can be used for advertising purposes. In the former case, advertising targets those clients who have made calls to their service provider. In the latter case, advertising targets the service provider itself. In a mature market, the use of RBT as a transport for mobile advertising must necessarily be combined with discounted rate plans and bonuses, both for the service provider and its clients. It should be noted that RBT has not yet become widespread in developed countries (for instance, in Western Europe). The use of the model described above will help pragmatic consumers realize their own potential benefits. In other words, mobile advertising can aid in the spread and popularization of RBT.

RBT is harder to put into practice in developing markets, although as a service it has been more widely implemented there. Due to the prevailing mentality in developing countries, RBT tends to be of greater social than mercantile significance. By installing a certain melody on their mobile, subscribers express their individuality as well as their adherence to one or another social group (often these goals are met simultaneously). They don’t want to dilute this social signal with advertising, even if it could benefit them personally. When choosing advertising transports for developing markets, the fundamental emphasis has to be on user-friendliness. A simple menu is particularly important. Viewing and/or responding to an advertising message, subscription and CCC for services (information channels) should be designed according to the “one-click” principle.
On the other hand, the arrival of an advertising message from the advertiser is much more acceptable from the developing-market client’s point of view. This, however, still doesn’t cancel out the need for careful media-planning (including the choice of broadcast time and region for each message, as well as the frequency and quantity of messages for each target segment). Transports like ordinary SMS, Interactive Cell Broadcast, etc. are quite effective in developing markets.

And now let’s highlight the key factors for successful implementation of mobile advertising:
- Gradual implementation, beginning with mobile promotions of the operator’s own services.
- Careful selection of transports with attention to specific regional features.
Following these principles will guarantee the realization of mobile advertising’s ever-increasing market potential.

Oleg Prikhodko
Strategic Product Development Director