Mobile Advertising White Paper

7/31/2019 Mobile Advertising White Paper

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Today, the mobile phone can be used for doing many more things than just the voice calls.SMS, internet, games, content download and many other things are possible on the mobile phonewhich gives marketers the opportunity to connect with consumers beyond traditional and digitalmedia. Mobile advertising is in its infancy but is still catching the imagination of the marketers.Most of the organizations have increased the outlay for digital media and it is expected to lead

other forms of advertising in terms of growth.

Size of Mobile Advertising

There are many estimates on the current size of mobile advertising and they vary a lot due todifferences in definition and methodology. Similarly the forecasts also differ substantially but allthe analysts have the same conclusionthe growth in mobile advertising is huge and is likely toexceed any other form of advertising. Recently, Juniper Research estimated that in 2009, themarket size for mobile advertising globally was $1.4 billion and is expected to cross $6 billionby 2014. Strategy Analytics expects the mobile advertising to reach $10 billion by 2012 from $1billion in 2008. Gartner estimates that it would exceed $12 billion by 2011. Wow this is getting

bigger and bigger!!!

Kelsey forecasts that the US mobile advertising would increase from $160 million in 2008 to$3.1 billion by 2013.

Benefits of Mobile Advertising

Mobile phones are personal devices and have managed to add so many features that it offersmany advantages over traditional advertising:

1. User base There are over 4 billion mobile phone users across the world compared to only 1billion internet users and 1.5 billion PC owners. It is likely that on a few years time there would

be more users of internet on the mobile than on the PC. The high penetration of mobile phones

is an opportunity that most of the marketers cannot afford to ignore.

2. Targeted Mobile phones have typically one user per phone and hence the advertisements canbe personalized. Studies have shown that the personalized advertising is more effective. Carriers

have a lot of data on the user including his usage pattern and that is very handy when it comes

to advertising.

3. Locally relevant advertising Mobile phones have the ability to provide information on locationusing GPS or Cell-id. This enables targeting users in a specific locality. Local shopkeepers can give

ads in a very cost effective way to a selected audience.

4. Viral Advertising Mobile phones users can easily share content with friends and family and ifan ad is catchy, it is possible to trigger viral marketing. We have already seen the impact of viral

messaging in various countries where revolutions have taken place against dictators by viralmessaging

5. Ubiquitous user carries his mobile phone at all times and he also reads everything that comeson the mobile. This means that the ad would at least be read and hence there is a more

likelihood of action on it.

6. Interactive - This is one significant feature that mobile phones bring to marketers. They areinteractive devices and their users will invariably use them to receive and originate


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communications. Marketers therefore do not have to battle to get their audience to respond

and interact as in traditional forms of media.

7. Permission based advertising it is possible to take user permission for the advertisement. Theadvertisements in this case become more targeted and highly actionable.

8. Multiple Forms of Advertising Mobile phones have various features like SMS, MMS, gaming,etc. and hence the opportunities to advertise are also many times more.

Forms of Mobile Advertising

Mobile phones provide various opportunities to interact with the user and hence an opportunityfor advertising. A few forms of mobile advertising are listed below:

1. SMS/MMS Based2. In-Game3. In-Application4. Display on Web5. Search6. Bluecasting7. Mobile Coupon8. In-Maps

As per Strategy Analytics, Search, In-Game and In-Application form of advertising has themaximum potential as they are non-intrusive and pull based and hence there are no privacyissues in it. The figure below gives the split of mobile advertising across various forms.

Mobile Advertising Ecosystem
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The mobile advertising ecosystem is a complex ecosystem with varied entities. The role of theoperator is the most critical in the user experience but the role of handset vendor cannot beignored. The value chain and the ecosystem entities are depicted in the figure below.

There are multiple handset types (basic, enhanced and Smartphone) with multiple features thatmake the permutation and combination tough to deliver the mobile advertisement consistently. Aadvertising agency might decide to send a MMS ad without realizing that only 25% handsetshave MMS capability or the banner ad may be seen differently depending on the screen size.Hence it is critical that the advertisers, advertising agency, handset vendors and operators workin tandem. The ad network is in the middle of the value chain and hence assumes higherresponsibility in managing this complex relationship.

Measurement Metrics

There are a few measurement metrics that mobile advertising has directly borrowed from theonline advertising and then there are a few measurements that are still in the development stage.A few established measures are:

CPM (Cost per Thousand Impressions) - Each time an advertisement loads onto a users screen,the ad server counts that loading as one impression. CPM is the cost of thousand such

impressions. In other words, if CPM is $2, then for every thousand times the ad is viewed, the

advertiser has to pay $2

CPC (Cost per Click) In this method, the advertiser pays only when the advertisement isclicked. Most of the advertisers are unsure if they would be able to get visitors only by way of

impressions and hence are interested in paying only when a consumer clicks on the ad and

reaches its site. In such a scenario, the ad platform may decide to quote a CPC rate based on the
http://www.telecomcircle.com/wp-content/uploads/2009/11/Mobile-Advertising-Ecosystem.PNG


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performance it expects from the ad placement. The ad agency/platform calculates the CTR

(Click-Through Rate) by dividing the number of users who clicked on an ad by the number of

times the ad was delivered (impressions) and then quote the rate on CPC basis. E.g., for a CPM

of $2 and expected CTR of 1% (i.e. one out of 100 people who saw the ad would click on the ad),

out of 1000 ad impressions, 10 people would click on the ad. To recover $2 CPM, the CPC based

rate should be $0.2. However, this is only an indicative way of determining CPC rate and there

are two primary models for determining cost per click: flat-rate and bid-based.

CPA (Click per Action) This is method in which the advertiser pays for each specified action (apurchase, a form submission, and so on) linked to the advertisement.

Other measurements that are still under development are branding measurements (ad recall,purchase intent, etc.), reach and frequency and the viral impact.

Future Drivers of Mobile Advertising

1. Better feature handsets Smartphones2. Evolution of local search3. Faster networks 3G/EVDO/LTE4. Flat Data Plans5. Better Web Browsers xHTML6. Better location capabilities GPS7. Highly Localized Communication WiFi/Bluetooth

Mobile Advertising Ecosystem

The mobile advertising ecosystem is a complex ecosystem with varied entities. The role of the

operator is the most critical in the user experience but the role of handset vendor cannot be

ignored. The value chain and the ecosystem entities are depicted in the figure below.


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There are multiple handset types (basic, enhanced and Smartphone) with multiple features that

make the permutation and combination tough to deliver the mobile advertisement consistently. A

advertising agency might decide to send a MMS ad without realizing that only 25% handsets

have MMS capability or the banner ad may be seen differently depending on the screen size.

Hence it is critical that the advertisers, advertising agency, handset vendors and operators work

in tandem. The ad network is in the middle of the value chain and hence assumes higher

responsibility in managing this complex relationship.

Measurement Metrics

There are a few measurement metrics that mobile advertising has directly borrowed from the

online advertising and then there are a few measurements that are still in the development stage.

A few established measures are:

CPM (Cost per Thousand Impressions) - Each time an advertisement loads onto ausers screen, the ad server counts that loading as one impression. CPM is the cost of

thousand such impressions. In other words, if CPM is $2, then for every thousand timesthe ad is viewed, the advertiser has to pay $2

CPC (Cost per Click)In this method, the advertiser pays only when the advertisementis clicked. Most of the advertisers are unsure if they would be able to get visitors only byway of impressions and hence are interested in paying only when a consumer clicks onthe ad and reaches its site. In such a scenario, the ad platform may decide to quote a CPCrate based on the performance it expects from the ad placement. The ad agency/platformcalculates the CTR (Click-Through Rate) by dividing the number of users who clicked
http://www.telecomcircle.com/wp-content/uploads/2009/11/Mobile-Advertising-Ecosystem.PNGhttp://www.telecomcircle.com/wp-content/uploads/2009/11/Mobile-Advertising-Ecosystem.PNG


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on an ad by the number of times the ad was delivered (impressions) and then quote therate on CPC basis. E.g., for a CPM of $2 and expected CTR of 1% (i.e. one out of 100people who saw the ad would click on the ad), out of 1000 ad impressions, 10 peoplewould click on the ad. To recover $2 CPM, the CPC based rate should be $0.2. However,this is only an indicative way of determining CPC rate and there are two primary models

for determining cost per click: flat-rate and bid-based. CPA (Click per Action)This is method in which the advertiser pays for each specified

action (a purchase, a form submission, and so on) linked to the advertisement.

Other measurements that are still under development are branding measurements (ad recall,

purchase intent, etc.), reach and frequency and the viral impact.

Future Drivers of Mobile Advertising

1. Better feature handsetsSmartphones2. Evolution of local search3. Faster networks3G/EVDO/LTE4. Flat Data Plans5. Better Web BrowsersxHTML6. Better location capabilitiesGPS7. Highly Localized CommunicationWiFi/Bluetooth

Issues that need Urgent attention

Despite the clear advantages, mobile advertising revenues are still small. There is a distinct need

to address a number of key areas if mobile advertising is to truly take off and gain credibilityamong its marketing counterparts, as well as securing a sustainable business model. Below are afew areas for consideration:

1. Privacy issues Users do not want to be disturbed which means the operators would need tostrike balance between revenues from mobile advertising and respecting the privacy of its

subscribers. Consumers place their trust in their operator and they cannot afford to abuse this

trust by delivering irrelevant or unwanted content to their mobile device. At the same time, they

must drive wider user acceptance and illustrate the tangible benefits of mobile advertising from

an end-user perspective. The only way they can balance these two requirements is by providing

the option for the consumer to easily opt-in/opt-out and by ensuring that the content that is

delivered to them is relevant, by enabling subscriber control of the advertising experiencethrough Ad Exposure Management. The legislation on privacy is also weak around the world

2. Ecosystem The players in the mobile advertising ecosystem are from different industries andbackgrounds. The operators need to engage with different entities to be able to effectively

secure the revenues. With the opening up of the mobile ecosystem, the influence of operators is

diminishing. New entities are appearing in the mobile ecosystem that now have an enhanced

stake in the mobile revenues. The operators still have inherent advantage of having more data

about its subscribers and hence they can make the ads more targeted. However, the operators


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would need to understand that they cannot do everything and would need to let go of the

advertisement platform development.

3. Measurement - Informa also recently revealed that Proctor & Gamble, the worlds largestadvertiser, spent approximately $6 billion on advertising in 2008, of which $10 million

(approximately 0.17% of its total advertising budget) was allocated to mobile advertising. From

both perspectives, the difficulty of effectively measuring the success of a mobile advertising

campaign is often cited as one of the main reasons why this channel remains unproven by the

advertising industry. The industry is still working on CPM model as it still does not have the

capability to measure CPA and CPC forms. Similarly, clarity is needed on how to price and

measure ads on maps.

4. Technical Challenges - The mobile audience is fragmented across multiple platforms, withmultiple sellers, multiple carrier networks, multiple devices, and multiple business models, all of

which hinder consistency of execution. In such a highly fragmented landscape, identification of a

user, user session, browser, or device can pose a significant problem, hindering the ability to

deliver the right ad to the right user at the right time. We need to find a solution to this.

Documents

Mobile Advertising White Paper