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Issue Date: June 2007

Mobile advertising: will there be a consumer backlash?

21 June 2007
Michael Stanley, senior consultant for Ericsson's Market Unit sub-Saharan Africa

The mobile phone is the fastest growing and potentially the most effective advertising medium ever developed, but the danger of mismanaging this medium risks alienating consumers and damaging the reputations of major brands and mobile operators.
Mobile advertising has been a topic of discussion for mobile operator management teams for many years, but it was the recent moves by both Yahoo and Google to focus on the revenue opportunities presented by mobile advertising that has all in the mobile industry scurrying to develop a viable and sustainable business model that will generate additional revenues in the face of fierce competition and falling per subscriber voice revenues.
For those companies who have taken the early initiative, the ability to interact personally and intelligently with consumers via a mobile device is delivering recall and response rates not seen in advertising in a long while. Reports by NetInformer, a provider of wireless media and mobile marketing services, quote typical response rates of 15%, which is 10 times higher than traditional direct response advertising. Such successes should have advertisers and advertising agencies very excited as they currently struggle to reach consumers effectively with traditional media channels.
Today, advertising on mobile devices is still very much in its infancy, with an estimated $385 million being spent globally on mobile advertising in 2006. This is expected to increase to $1,6 billion by 2010 (Strategy Analytics, Mobile Advertising: MoCo Panacea or Just More Hype, 2006). Mobile advertising inserted in services such as messaging, mobile TV, video on demand, Internet browsing, gaming and music has the potential to boost revenue opportunities for all parties involved in the value chain.
So does this now mean that it is open season for advertisers to use, and operators to sell, mobile advertising on a variety of services? Definitely not! Many subscribers are unwilling to be inconvenienced by the intrusion of this new medium. In a 2005 Yankee Group Study (A Test for New Carrier Business Models) it was found that only one third of all consumers were receptive to mobile advertising. In addition, there were provisos to the advertising being delivered to their mobile devices, including the messages being relevant, that there is tangible benefit for the recipient and that there was initial consent with an option to opt-out at any stage. These are significant prerequisites as consumers try and protect themselves from the evils of spam messaging and an invasion of their privacy via their always-on cellphones.
How then do operators harness the medium's obvious opportunities without alienating their loyal subscribers, and how do advertisers harness the new medium without negatively affecting their brand values and associations? This is not easily answered, however these questions need to be considered within a very structured and well-planned process, acknowledging and respecting the customer's attitudinal barriers towards the intrusiveness of mobile advertising. The risks associated with an incorrect strategy and services rollout are massive, potentially killing mobile advertising at birth.
If managed correctly, however, the potential benefits of mobile advertising far outweigh the possible downside for all parties. There is a definite increase and growing consumer awareness of mobile advertising and many subscribers expect it to be only a matter of time before advertising on their mobile devices becomes an accepted norm. In addition, there are many vehicles that can ensure greater subscriber acceptance, including incentives such as free minutes, credits on operator portals, etc, in exchange for the receipt of advertising. The key to subscriber buy in, even with incentives, will be in delivering content that is of interest and of use to the consumer. This could include location-based services or adverts delivered that are relevant to the viewer's age, interests and lifestyle. In light of this, some telecommunications players such as Ericsson have developed a range of services and business models, including managed advertising platforms, for operators to integrate their advertising clients and protect their subscribers.
As content becomes more available and as consumers become more comfortable with data and Internet experiences, so more opportunities will present themselves for mobile advertising. However, a poor exploitation of presently loyal customers may result in a backlash whose negative effects will filter down through to the bottom line. Long-term success in mobile advertising depends crucially on the mobile and advertising industries working together in a structured manner in order to harness the power of this potent new medium.
For more information contact Annabel Cele, Ericsson Market Unit sub-Saharan Africa, +27 (0)11 844 2070,

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