As advertisers and operators seek out the best business model, 2006 will be a year of experimentation for the emerging mobile advertising market, according to a report from VisionGain. The next five years will see a shift by major brands from simple SMS mobile marketing to more sophisticated multimedia advertising. By 2007, brands will know what works, and mobile advertising will become mainstream by 2008.
From 2005, when the nascent market garnered $255 million in Europe and the U.S., mobile marketing and advertising in these two geographical areas will grow to exceed $1 billion in 2009, according to VisionGain.
The increasing availability of multimedia content is creating a large opportunity for sophisticated forms of mobile advertising. As content that already incorporates advertising - like live TV programming - makes its way to mobile handsets, brands and entertainment content, providers are beginning to see the value of presenting full multimedia ads with programs.
Players across the value chain are developing their strategies and positioning themselves in this space. Operators in the U.S. and Western Europe are currently testing various forms of advertising with 3G services or are allowing ads to be served on their portals. A number of multimedia companies will launch advertising in 2006 within their multimedia offering. Furthermore, the entry of large online search engines into the mobile world opens up new advertising opportunities in the shape of context-based mobile search.
"The mobile phone is a very personal device that most people carry with them 24 hours a day. It affords advertisers an opportunity to present very targeted and time-sensitive information that is of interest to the user. That is a key advantage. With customer permission, advertisers can collect valuable demographic and behavioral information to hone the marketing message," says analyst and lead author Marcia Kaplan.
"3G technology enables the delivery of richer content to mobile phone users, but there is a limit to how many additional charges and subscriptions mobile phone users will accept. At some point, content will have to be sponsored or partially subsidized by advertising. We are also seeing the emergence of ad-subsidized MVNOs, which plan to offer free airtime in exchange for targeted advertising to subscribers," adds Kaplan.
The report notes that certain elements need to fall into place before mobile advertising can establish itself as a viable medium. Issues to be resolved include business models and revenue share, the type, length and frequency of ads, consumer attitudes and many others.
Operators will have to walk a fine line between maximizing the revenue potential of advertising, while at the same time not risk alienating subscribers and increasing churn by doing so.