The future of mobile advertising

The upcoming advent of 3G will bring about better video quality and faster Internet access that will also enable the easy viewing of advertisements, short ad clippings and jingles all three of which have till now been restricted to television and the Internet. By Manjari Juneja

Mobile advertising has emerged as an integral part of any brand’s marketing campaign today. It has become an important engagement tool for brands, and aims to fulfill the gap that traditional media has been unable to bridge. With the increasing popularity of the Mobile Internet, this form of marketing is soon poised to achieve a significant reach. More than 500 million people in India now own mobile phones, and there are ample opportunities for content and service providers to generate mobile value added services (mVAS) revenues from this nascent market.

With the advent of 3G, mvAS including mobile advertising will receive a boost. In the Indian market, since mobile proliferation is much higher than PC penetration, 3G is expected to drive the convergence between mobile and Internet platforms. There has been a dramatic increase in online distribution and consumption of user generated content. The popularity of applications such as Twitter, Facebook and YouTube is proof of this. As greater bandwidth is made available with the advent of 3G and technological innovations in networks, platforms and end user devices stimulate further demand, this trend will also be witnessed in the mobile space.

Dr. Vasudevan, CEO, Flytxt, said, “There are at least 20 million 3G-enabled phones in India, which means that India already has five times Singapore's population as a potential 3G market. India is tipped to have a 3G subscriber base of over 100 million by 2012-2013. It will bring in new value added products with higher visual impact to drive new revenue streams for operators from different customer segments like the youth. The improved user experience of 3G will also make the mobile Internet more popular, thereby increasing the potential for mobile advertising.”

Sudarshan Dharmapuri, Vice President, Product Management, IMImobile, added, “With 3G, the future of mobile advertising will become brighter. 3G will provide the bandwidth that is required for a rich end user experience. The mobile phone will transform into a new personalized channel to receive advertisements on.”

The market today

The global mobile marketing industry is expected to grow to $24 billion by 2013. According to industry reports, mobile advertising in India currently stands at around $25 million and growing.

According to an IAMAI report, revenues from mVAS such as music downloads, mobile gaming and social networking on mobiles, are slated to reach Rs. 16,520 crores by June 2010.

A recent study by Nokia and TNS India put forth some startling facts as to why mobile advertising is destined to flourish in India. The report states that 18% of subscribers view mobile banner ads and, of those, 56% seek more information on the ads viewed. Further, 49% people opined that they did not mind viewing ads on their mobile phones. The 3G roll out in India will drive the use of content-rich applications, which will further drive the growth of mobile advertising.

G V Kumar, Managing Director & CEO, XIUS-bcgi, said, “It is forecasted that 22% of companies are expected to increase their mobile advertising spend this year compared to 15% last year. Telecom and FMCG sectors are investing around Rs 20-35 crores on this medium to communicate their product messages in rural areas. The digital advertising space is expected to grow to Rs 5,390 crores in 2011. Advertisements through WAP would be about 30%, while opt-in SMS would contribute 10% of the mobile ad market.”

As per a CII-Ernst & Young report, 100 million of the next 250 million Indian mobile users are likely to be from the hinterland by 2012 and the rural market will account for over 60% of the overall telecom subscriber base by then.

Current trends

• WAP banners continue to be the focus, working effectively in engaging the consumer and generating leads for brands
• Brands have also started fan club communities and sponsoring sections of mobile Internet portals
• In-game advertising is increasing
• Pre–call ad inserts, ad caller ring-back tones (CRBT) as well as video ads on the mobile phone are gaining traction

New services

3G and 3.5G telecom services are among the most hyped and talked about in the field of mobile telecommunications using which a mobile phone user can experience seamless data transfer of up to 2-8 Mbps. The higher bit rate capabilities of these technologies will bring about the development of bandwidth-intensive applications.

3G users will avail high-speed mobile broadband access at a much higher speed. Therefore, the average revenue per user from 3G subscribers will be more than that of 2G or 2.5G mobile subscribers. The services would enable video downloads and other critical functions.

Once the 3G services are activated, users owning a handset that supports 3G and video calling would be able to make video calls to a compatible device without the hassle of using a Webcam and being glued to a laptop or computer screen.

Chandan Mendiratta, Vice President, Service Provider - System Engineering, Cisco India & SAARC, said, “Consumers will be able to download streaming video content on to their mobile devices and enjoy music videos, full length movies and even live cricket matches, while on the move. Further, 3G will drive the adoption of mobile broadband with the availability of inexpensive USB dongles for Internet connectivity. This will provide for personal mobility and drive the next phase of broadband penetration in the country.”

Additionally, 3G will also bring considerable changes for consumers on the home entertainment front. It will drive the increased adoption of digital media, a technology that can bring services such as on-demand video and music, where the content is stored on the network and streamed to the device. A digital media platform would be able to deliver the integration of video streaming with conferencing capabilities, and interactive TV applications, which will provide users with a much richer and more immersive experience than they have today.

Viewers would be able to avail 3G services like:

• Faster data connectivity / high-speed wireless Internet access
• Exchange of heavy pictures and videos
• Uninterrupted video streaming on mobile phones
• Live TV
• Increased call volumes and support for multimedia data applications

Atul Madan, VP, Mobile Advertising, Comviva, said, “With 3G, rich media advertising like video ads, will become a viable proposition and gain popularity among a critical mass of mobile users. The possibilities for ad placements are just as vast in the mobile space as they are on TV. If a company wants to advertise a blender, an ad could pop up when the user searches for a café, or users could receive a coupon for use at a café that uses the blender, or they could receive an SMS to enter a recipe contest. Depending on the operator’s existing business model (for e.g. quad play service provider) and the chosen mobile advertisement model, multi-channel capabilities could extend to multiple networks.”

It is believed that most ad delivery opportunities that the mobile provides, whether it is WAP advertising or SMS advertising, would be enhanced by 3G networks. 3G allows users to go beyond the traditional mobile advertising modes like SMS, WAP and USSD. With high data usage and the enablement of innovative services like live video based and MMS based advertising, offering post call advertisements using these services will create a differentiation for all those involved in the advertising ecosystem. Traditional mobile Internet-based advertisements using GPRS will be more acceptable when viewed using high speed 3G connections. Rich content embedded ads would be practical.

Prerequisites

The primary requirement is that operators should roll out their 3G networks. Millions of subscribers already have 3G enabled handsets. To avail of 3G services subscribers need a 3G enabled SIM (USIM) and a 3G handset. Operators and service providers will need to create and offer media rich services such as video and interactive games. In addition operators are likely to take steps to push a substantial part of voice usage in congested areas on to the 3G network. Premium customers may be provided special offers to avail of 3G services, relieving congestion as well as providing newer services to premium subscribers. Of course this will also result in incremental revenues to the operators. Targeted marketing and contextual offer management will significantly aid in this process.

Advertisers would need a system in which they can easily define a campaign for the targeted demographics and push content in real-time. The system needs to clearly define rules for confining campaign duration in a particular segment, tools that would give the advertisers a sense how the end user behaves during a campaign, a tool to keep track of the available time slots to execute a campaign and a metric tool to calculate ROI. From a Mobile Network Operator’s point of view, the technology requirements would be more in terms of the infrastructure that is readily available to enable mobile advertising. Most importantly, the mobile operator needs to have the data aggregation of the target segment along with the requisite infrastructure to deliver ads. As there are multiple stakeholders involved in the ecosystem, the operator needs to have a mechanism in place for revenue settlement as well as a content or ad aggregation platform that would deliver targeted ads to its subscribers.

Value proposition for telcos

For mobile advertisement companies, the advent of 3G will further the growth of digital advertising. This medium has several advantages vis-à-vis traditional marketing channels. It is a measurable medium, which provides real time ROI, and has minimum waste in terms of reach. Advertising campaigns can be tweaked mid-way depending on the response received from users, to gain maximum leverage. Also, the unique array of interactive elements offered by this medium allows brands to engage with users making it ideal for selective and contextual targeting.

With declining Average revenue per user (ARPUs) and increasing competition in the Indian telecom market, VAS services are expected to be a big contributor to operator revenues in the future. Since 3G will enable better quality of data/video services, telecom operators will benefit immensely. Further, 3G is expected to revolutionize social and economic development in the country and bridge the urban-rural digital divide with e-Government, Telemedicine and e-Education projects getting a fillip. This will also contribute to the growth of the telecom industry in India.

Hemant Joshi, Leader – Telecom Practise, Deloitte India, said, “Advertisers would benefit as advertisements can be directed at a targeted audience. Profiling and targeting customers will become much easier. Users will be able to access information that they want as per their likes and dislikes free of cost or at minimal rates. Telecom companies can leverage on VAS services to increase their revenues and use these services to push their premium customers to 3G to unclog their 2G networks.”

Added Satish Kejriwal, COO, Buongiorno Digital Innovation India Ltd., “Mobile advertising is a win-win proposition for all the stakeholders including consumers, brands and telcos. Customers can avail of some great opportunities, discounts, prizes and much more. It is not only cost-effective, but advertisers can be sure that their ads are not missed by the consumer, which is not the case with TV or print. Mobile marketing campaigns also reap high revenues for telcos and VAS providers.”

Benefits

• Consumers: 3G will enhance the user experience through high quality value added services and increased voice quality. 3G technology will enable video broadcast and data-intensive services such as interactive games, learning applications and latency-sensitive transaction applications such as stock trading. The superior user experience will lead to a host of services, such as updates on news, sports, the stock market, music and entertainment, ring back tones, games, m-advertising and m-commerce, that are expected to become popular as consumers increasingly subscribe to affordable 3G services.
• Operators: The 3G rollout will help operators offer rich content services providing opportunities to operators to maximize subscriber value as well as reduce churn through relevant offerings. The enhanced voice quality and capacity offered by 3G will help operators in the Indian market improve service quality in general. With appropriate offers and targeted marketing, operators can increase customer satisfaction and generate incremental revenues.
• Mobile advertisement companies: The experience from around the world suggests that mobile advertising will become more acceptable with 3G. With 3G the mobile channel will offer the same media qualities as the Internet or television with the added uniquely mobile capabilities of immediacy, intimacy and track-ability for immediate ROI measurements. This potent combination will lead to a surge in mobile advertising with the application of appropriate mobile marketing technologies. Mobile ad spends will significantly increase with the spread of 3G services.

Price as an important factor

India is predominantly a price-sensitive market and there is no doubt that the pricing of 3G-enabled services will have an impact on the penetration and usage of such services.

B Vamshi Krishna Reddy, Director, Corporate Strategy and Business Development, Apalya Technologies, said, “Price will play a key role, given that 90% of the Indian market is on pre-paid. Initially the services will not be economical for the consumer, but a hybrid model of clubbing advertising with subscription would make this affordable for the end user.”

3G services are expected to cost 20-30% more than prevailing GPRS or EDGE services. Flat rate data services have driven usage in many parts of the world whereas some markets in South East Asia have thrived on usage-based pricing. Given the diverse customer base in India a combination of these models would be desirable, with flat rate pricing driving the initial growth and usage-based pricing driving penetration. The cost of 3G handsets will also be a factor in driving adoption, pretty much like the impact that the affordability of 2/2.5G handsets had in driving penetration.

Growing consumer adoption of mobile advertising services and heightened brand engagement with mobile services will be reflected in a sharp increase in the expenditure on mobile advertising. Major players in the value chain, from copyright owners to content aggregators to content marketers, are going to benefit from this market. As far as mobile operators are concerned they are moving away from exclusively relying on content as a revenue driver.

Time for market maturity

In order to make mobile advertising popular among Indian audiences, the following aspects need to be borne in mind before large-scale mobile advertising is undertaken.

• The cultural and personal mindset will take some time to change and it needs a concerted effort to convince the audience that the mobile can offer far greater services than the ones currently being used i.e. voice and SMS. Mobile banking, mobile payments and targeted and personalized mobile marketing can also go a long way in creating a positive shift towards mobile advertising
• Enterprises should focus on targeted and non-intrusive mobile marketing. Operators should consider acting as marketers and advertising publishers while using their discretion in order to control what goes to customers, at what time and what location
• However if operators need to move up the value chain and do customer data driven targeted, contextual, permission-based mobile marketing and advertising, they need to overcome technical challenges, including data silos, manual processes and open loop marketing, which hinder the ability to track the campaign responses

Mobile Advertising can reach a higher level of penetration than any other service in the telecom industry, if a subscriber-focused solution is offered. In countries like India it can grow at a faster pace as operators here are ARPU sensitive. They are many challenges faced by this industry from a carrier perspective as they are facing issues to convince the brands about this new medium of advertising. It is perceived that there are a small number of actual users for this medium; there is a lack of understanding of how the mobile can be an effective branding mechanism; it is also felt that the brand recall is not on par with television and constraints exist on measuring the ad exposures. Many advertisers are looking at mobile advertising as Internet-based advertising, which it should not be clubbed with in an ideal situation. In other media such as print and TV, advertisement viewing is calculated based on exposures, but in the case of mobile advertising presently the calculation is done more like an outdoor billboard with unlimited exposures at a cost. Ideally this calculation needs to be determined based on activities and the actual number of transactions being realized.

Challenges

There is still a vast gap in the deployment of such mobile marketing services in the Indian telecom industry. Internationally the audience has undergone a major transition in terms of VAS consumption patterns. However, we are far from the stage where these new forms of marketing will have picked up in the Indian market. With tele-calling being restricted due to the norms of the ‘Do Not Call’ registry and the overuse of SMS and MMS for mobile marketing, going forward, more novel forms are expected to evolve. With the introduction of 3G, the mobile advertising industry is expected to boom with a superior mobile experience and more innovations in this sector.

While many companies are betting big on 3G, managing the increased demand for high-speed data and video traffic along with existing voice traffic will be an enormous challenge for service providers. To conform to the growing consumer demand, they need to transform from traditional providers of access-based services into all-inclusive ‘experience providers’ offering voice, video, data, and mobility services anywhere, anytime. They need to scale-up their network capabilities tremendously and look at adopting a new approach to building mobile networks. The days of delivering voice, video, and data services as distinct offerings with each delivered over its own network, accessed using its own device, and billed as a separate subscription are over.

However, while upgrading the network infrastructure, it is imperative for service providers to keep their costs low in order to optimize profits. Adding separate networks for voice, video, data to handle the expanding data/video traffic, will complicate the infrastructure and maintaining quality will become a nightmare for operators. What is needed is a single network infrastructure which can be scaled up to meet the demands of the consumers and at the same time maintain cost efficiency. The key here is to move to an all IP-based network where voice, video and data are converged onto a single system, reducing the CAPEX for service providers.

There will be three primary challenges in the deployment of mobile Value Added Services. India is a price sensitive market hence determining the right pricing for the services will be extremely important. The other challenge for the operators will be to collaborate effectively with the ecosystem of content developers, content creators and IT vendors to deliver an immersive experience to consumers. This will be especially important for providing video services since video is complex, with many networks, formats, and standards, working together to produce high quality visual data. Further, networks need to be ready for distributing content efficiently. Since broadband in India is going to be mostly mobility driven, we feel that the networks have to be ready for IPv6.

manjari.juneja@expressindia.com