Wireless Federation

Nielsen Mobile reports 2007 saw a 198 percent increase in mobile video revenue, and a 155 percent increase in mobile video subscribers. While impressive, the company also reports that this is only a 3.6 percent share of the entire mobile market. eMarketer projects mobile television subscribers alone will number 462 million by 2012. With better video delivery platforms, faster connections, and flat-rate mobile video plans, are we finally ready for mobile video?

To adequately answer this question, it’s imperative to investigate what’s required for a pleasant mobile video experience.

Mobile devices are everywhere; they’re in pockets and purses across the world. But when a user is experiencing downtime (en route, on-hold, waiting in line) it becomes obvious that cell phones are simply not entertaining. No one ever casually scrolls through their contacts to kill time, or changes their display settings when they have nothing better to do. That’s not entertainment. This downtime is when mobile video can easily fit into peoples’ lives.

Both long and short lulls must be addressed, but to start capitalizing on these entertainment gaps we should first focus on the shorter intervals. Mobile content should be short and sweet, and provide users with the option of continuing the clip if time permits (i.e. if their doctor’s running late or they hit traffic during a cab ride). I foresee mobile video content being between :30 and 3:00 in length.

Advertisers should take note of the need for short video as it’s a digression from the lengthy content on the Web and television. Marketers shouldn’t assume they can use 30 seconds of a 3 minute clip for their message.

Another reason short mobile videos will be the preferred format is the back cramp you get when watching movies on your iPod. I spend more time attempting to focus on such a small screen than I actually do watching the movie. The same applies to mobile platforms. It isn’t comfortable to be hunched over a cell phone, squinting in an attempt to focus on moving images. I favor short videos. Not to mention the face phone batteries will last a great deal longer if long streaming video clips aren’t downloaded too often. Current cell phone technical capabilities of also favor professionally produced video. On small screens, blurry, user-generated videos only look worse.

Taken together, this means that to be most effective, mobile video content must be high in quality and short in length. Right now, news outlets are best equipped to handle these inherent constraints. News content (including sports, business and politics) can easily be produced on a professional level. TV stations are well-versed in creating succinct, relevant messages.

On the mobile advertising front, in-stream ads won’t work well on mobile platforms due to size restraints. Pre-roll video ads will have to be extremely short, :05-:10 maximum, in order to have a place in mobile advertising. As mentioned above, users won’t take kindly to an ad that’s almost as long as the clip itself. One avenue that does have potential to work in conjunction with mobile video is a post-roll follow-up. Utilizing text messaging, advertisers can send viewers a text ad related to the video content they just viewed.

As we’ve seen with online video advertisements, marketers need to retool their advertisements for each advertising channel. Better yet, ads should be created with a format in mind to ensure the length, content, and audiences are taken into account. We have the technology in place to make the move to mobile video, but producers and advertisers alike must be thoughtful about how they execute their mobile video plans.

Right now, mobile video is an untapped resource that holds the potential to reach users everywhere. Used correctly, mobile video can become another way for users to interact with their favorite forms of entertainment, sans laptop or TV.

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Mobile television and video is a “market that has been puttering along for several years,” Mark Donovan, senior analyst at M:Metrics Inc. said in a morning presentation here at NATPE Mobile++.

The conference has enticed content producers and others in the TV and film industries who want to learn more about the growing space and how they might find a seat at the table.

M:Metrics’ latest statistics show that mobile video is penetrating the market at a rate of 4%, indicating 9.2 million people watched some type of mobile video in the United States in November 2007. And that number represents a 60% increase over January 2007, he added.

“We’re starting to get an audience that gets interesting for programmers and gets interesting for producers,” Donovan said.

Video has long been “hampered with really poor quality,” but the adoption and buildout of 3G networks has improved quality tremendously, he said.

Approximately 4 million wireless subscribers are watching programmed video on their mobile device, 3 million consumers are watching on-demand video and at least 1.7 million subscribers are watching broadcast services, Donovan said.

Still, real growth is in the offing.

“Most people in the United States still haven’t seen or experienced someone watching video on their phone,” Donovan said. “To the extent that advertising can become a subsidizing mechanism here, we’ll see this market grow.”

Users surveyed by M:Metrics frequently cite cost as a major barrier to adoption. The firm expects mobile advertising to hit full stride around 2010. “It is still the Wild West out there in the world of mobile advertising,” Donovan added.

According to M:Metrics’ data, the top 10 mobile video and TV genres (ranked highest to lowest) are movie trailers, music videos, sports action or news, comedy, weather, entertainment or celebrity news, news, full-length television or film, TV highlights and animation or cartoons.

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According to Wireless Federation, mobile marketing and advertising here comes a great promise - it combines the expanded reach of television with the power of direct marketing and the tracking potential of the Internet. Mobile marketing campaigns using SMS, and the most new in-thing i.e. MMS, which has helped to open up the eyes of the media world to the power of the mobile channel. Interactive TV and radio, product promotions using coupons and contests, even charitable giving, have exploited this medium. But things are looking up to change as Internet style advertising, in the shape of display advertising (banner ads) and search, and even TV-style advertising, come to mobile.

Consequently, the opportunities for marketers to reach out and engage with consumers through this medium will grow even more.

Now, more than ever before, marketers are looking for the other ways to reach out the consumers. Traditional channels for advertising, like TV, radio and print, are becoming old fashion and giving less effective because consumers now consume information and entertainment in a much different way than in the past, due largely to the digitization of information and the increase and ease of access to the Internet. This is especially true of the highly coveted “youth” demographic - the 18 to 34 year olds with high disposable income, high brand awareness, and short attention spans.

According to a recent study published by The Shosteck Group, mobile marketing and advertising is going to play as an important driver in the growth for mobile operators too. This would be due to its strong influence on the future development of the mobile Internet and the subsequent growth in demand for mobile content.

“Without a robust mobile marketing and advertising market, the prospects for the mobile Internet and in particular, mobile content - a potentially significant source of revenue for mobile operators - will be limited,” according to Jane Zweig, Chief Executive of The Shosteck Group, an international telecommunications consultancy based in Silver Spring, Maryland (USA). “A robust mobile advertising market could subsidize many mobile services (as advertising supports many TV and online services today), encouraging take-up and usage of mobile Internet services such as games, music, video and even TV. It should also attract important content

Amobee Media Systems and Target Broadcast Sales Inc. announced today a new partnership through which Target Broadcast will represent the sales channel for select mobile advertising inventory managed by Amobee. Advertisers eager to reach the Canadian market can now take advantage of new opportunities in mobile advertising. Amobee is the world leader in advertising solutions for mobile operators. Target Broadcast Sales Inc. is Canada’s only independently owned national media sales organization.

“We anticipate mobile advertising becoming an increasingly important medium and are eager to work with a wide range of Canadian brands and media buyers. Target Broadcast can now help advertisers maximize the marketing opportunities mobile advertising creates,” said Stephen Sienko, president of Target Broadcast Sales, Inc. “Amobee provides an excellent fit for our clients since it is the only ad serving technology capable of inserting advertising impressions in all forms of content: WAP Browsing, Video & Music, SMS, MMS, and Games.”

Target Broadcast maintains five sales offices throughout Canada and will sell mobile inventory and develop relationships with major advertising agencies representing media buyers. Target Broadcast will benefit from Amobee’s existing relationships and expertise in the mobile advertising industry and its strong connection to top Canadian carriers.

“With this agreement, Amobee has continued its strategy of partnering with trusted names in ad-selling. This approach enables us to focus on our core expertise – developing the best ad-serving solutions available,” said Zohar Levkovitz, Chief Executive Officer of Amobee Media Systems. “The partnership approach to ad-selling has been highly effective for us.”

Mobile advertising presents an unprecedented potential to increase reach for advertisers. According to Pyramid Research, by 2010 1 billion new mobile subscribers will join the current base of 2.8 billion. Further, Informa projects worldwide mobile brand advertising will rise to $11 billion by 2011.

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When David Kenny decided in the early 1990s to throw himself into the Internet, he came to Paris to learn from the master - the Minitel, at that time the only successful national digital network for commerce.

Now, Kenny, the chief executive of the digital advertising agency Digitas, comes to Paris to learn from another master: Maurice Lévy, the chairman of Publicis, which bought Kenny’s company for $1.3 billion a year ago.

For Lévy, who runs one of the world’s biggest advertising conglomerates, mobile phones are the next big thing in advertising.

At a press meeting in Paris this week with Kenny, he said Publicis was exploring investments in Asia and the United States to build its mobile ad expertise. That would come on top of Lévy’s acquisition of Phonevalley, a French start-up, in September.

Mobile phones have four main attributes that make it what will soon be “probably the most important medium” for advertisers, Lévy said: They are global, personal and immediate, and there are billions of them.

“We already have close to three billion subscribers around the world,” he said. “It is already the largest medium in China, with 600 million phones. And if you want to target someone individually, we will know how to get access to that person.”

While the notion of commercials interrupting phone conversations and inserting themselves into text messages may be alarming to many consumers, Lévy was reassuring.

“If we look at mobile phones, it will not be so much advertising,” he said. “It will be much more ‘marketing services,’ ” a gentler way of combining what the seller and the buyer want at a particular time.

“This is money that is mostly going elsewhere now and which will be channeled to a new medium, and with a measurement that will be immediate.”

But as with Internet advertising, he said, those metrics need to be better. That is why Lévy is joining with Google, the Internet search company, to inject some of its programming rigor into how ads are targeted.

“There are some limitations in the development of online and mobile advertising due to the difficulty of some of our clients to understand how exactly to get to the right audience, the right measurement and the best return on their investment,” Lévy said.

Eric Schmidt, the chief executive of Google, joined Lévy in Paris to explain their cooperation. The two said they would develop an approach to digital advertising that was both creative and technologically savvy, a combination they said was lacking in the business world today.

Some of the real-world experience, though minimal so far, appears to support the experts’ contentions.

BuzzCity, a Singapore company that operates a mobile phone social networking site with two million members in several countries, found in a recent survey of its users that 35 percent have made a purchase over the phone. Rich media content - games, ring tones, wallpaper images, etc. - are the most popular.

Of all the factors influencing mobile purchases, a “special offer” from a merchant persuaded most of the members. Other influences were need (10 percent), friends (9 percent) and direct ads (7 percent).

Despite consumer resistance, there is another growing need for advertising on phones: Some mobile operators are relying on ads to increase their “rich media” content offerings beyond ring tones.

Vodafone’s mobile video service, which it began in Italy this week following rollouts in Spain, Greece and the Czech Republic, is advertising-funded, for example, allowing it to be free for its customers. Vodafone has also started ad-funded texting and games services.

With an increasing need for mobile ads targeted to different countries, carriers and customers, the technical measurements need to keep up.

“We all carry around the notion that advertising is a television ad or a print,” Schmidt said. “But in fact, there are millions of ads distributed in very sophisticated ways. Maurice’s message is, ‘Eric, you’re missing the opportunity in mobile. You have to get an integrated mobile strategy so we can give a mobile offer to our advertisers.’ ”

Digitas, for example, has “clients with 3,000 campaigns going on at the same time in the digital marketplace,” Kenny said.

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China is so keen to keep foreign investment flowing that it probably will let private web sites work around strict new rules limiting video-sharing to state-controlled companies, analysts say.

China-based web sites already need a government license that only companies majority-owned by Chinese nationals can get, and managers of private sites based in China say they already excise “inappropriate” content.

But the new regulations, issued December 29 and scheduled to take effect January 31, also require that the state have a controlling interest in any video entertainment web site.

“It’s a very clear message these Chinese film governing authorities have decided to send, that they’re taking this stuff seriously and they’re going to regulate it,” said Jeremy Goldkorn, editor-in-chief of Danwei.org, a web site that covers Chinese media issues.

But Goldkorn said Beijing won’t shutter private video sharing web sites because that might spook foreign investors to desert the world’s second-largest internet community.

Youku.com, one of China’s major video sharing sites, said it had raised $40 million in American and Chinese venture capital as of November. Overall, China’s internet video sharing market is still small, but it’s growing.

Video sharing web sites brought in just 40 million yuan ($5.5 million), in revenue in 2006, a figure the internet Society of China expects to grow to more than fivefold by 2009.

Youku.com founder Victor Koo remains hopeful that he can work within the new rules.

“It is not currently clear how big the impact is to the online video space, as this will depend on the interpretation and the implementation of such policy guidelines,” he said in an emai, adding that Youku’s legal advisers are in touch with the government.

One way to get past the new rules would be for private sites inside China to partner with TV stations or newspapers, which in China all are state-owned, said Dick Wei, a Hong Kong-based technology analyst for investment bank J.P. Morgan.

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Carriers definitely should have a place at the mobile advertising table. But maybe not too much of a place.

Mobile network operators and their content partners increasingly are looking to advertising dollars to help support flagging mobile data services. While $15-per-month mobile video services and $3 over-the-air song downloads have failed to gain steam, the world of mobile banner ads, SMS campaigns and wireless coupons has gained more attention than a Britney Spears court appearance.

Carriers, of course, are salivating over the potential of the mobile ad industry, which could play a major role in their efforts to recoup billion-dollar investments in their networks. But when it comes to building an ecosystem, the operators should defer to longtime advertising industry types, said John Hadl, managing director of BrandinHand.

“The carriers have a role,” Hadl said during a Q&A at yesterday’s Mobile Entertainment Live event that focused on mobile advertising and marketing. “The problem is when they try to regulate an industry they do not now anything about. I think it’s worth bypassing them if you can.”

Which is not to say that operators should be disintermediated entirely, fellow panelist Courtney Jane Acuff was quick to point out. Acuff, who heads a division of Publicis Group called denuo, said wireless service providers are evolving in how they view mobile ads and the revenues they can bring.

“In the end, the entire ecosystem would benefit from everyone having a seat at the table,” said Acuff. “There are certain things, I think, that the carriers are beginning to understand.”

And the most effective way to deliver those ads is by using them as part of a cross-platform campaign, Acuff said. While mobile-only campaigns may fail to attract mainstream uses, savvy marketers will use wireless to support broader efforts across the Internet, television and other channels.

“Mobile is absolutely best when it is integrated into a larger communications strategy,” Acuff said. “Making it tie to a larger communications goal on the Internet will help a consumer interact” with the brand.

But the wireless industry could take a cue from cable and satellite television, Hadl countered. Operators have done a good job building networks and subscriber bases, but shouldn’t try to determine who gets how much of the pie.

“Think about television; cable,” said Hadl as the session came to a close. “Cable guys lay pipes, they pay content providers, they get you to start watching shows” and let the content providers keep the ad revenues. “In the mobile model, the carriers lay the pipes, they get subscribers, yet not only do they not pay the content providers,” they want to control the ad-revenue splits.

“I’m not looking for the guy who sold me my phone to sell me advertising opportunities,” Hadl said. “It continues to shock me.”

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Welcome another edition of Take 5, my regular feature where I ask an industry insider five questions about their company and the mobile business market as a whole. For this issue I sat down with Neeraj Choubey, Vice President with venture capital firm Venrock. Our topic today: Top trends in mobility.

Over The Air (OTA): Hello Neeraj, thank you for joining me today. First, could you tell us a little about your background and the fund you’re working on for Venrock.

Neeraj Choubey (NC): Venrock raised its fifth fund earlier this year in the amount of $600 million. A substantial portion of that will be targeted at entrepreneurs in the mobile sector – from core technologies like chips to content and applications.

In terms of my role – I’m an electrical engineer by training and focus on digital media and wireless investments at Venrock. Earlier in my career, I built mobile search for Yahoo and worked in the CDMA infrastructure division at Motorola (NYSE: MOT). I studied electrical engineering in undergrad at Cornell University and went to business school at MIT.

OTA: What, your opinion, are the top 3 trends in the mobile space?

NC: 1. Fixed mobile convergence and the trend of users wanting to have one device that works both home and in the enterprise for both voice and data.

2. Mobile advertising which is changing the way that business can build and offer mobile applications and content both on deck and off deck.

3. Mobile video will be very important in the future. Given the opportunity to watch pixilated long tail content vs. crystal clear broadcast video, I believe that users will choose the higher quality content if only to save their eyes. MediaFLO is introducing new approaches to mobile video. As technology matures for mobile video, you’ll see a high quality experience. So, there will be a change in how customers use mobile video today versus three years from now. We’re seeing early signs on what’s to come in Asia for example; there is a big commuting culture using mobile video. There is an opportunity to reach these groups in a widespread fashion with brief clips like news, sports, etc. There are attractive economics for all involved.

OTA: Where’s innovation in the wireless industry happening — in hardware or software?

NC: If you look at the evolution of the space, the semiconductors have been a key enabling technology. Further innovation then always takes place on top of that. The application developer creating a mobile application is taking advantage of the work done before that at the semiconductor level. So, it isn’t the chips vs. the software — hardware and software have a symbiotic relationship.

OTA: Google  vs. the carriers — who wins?

NC: Google is a disrupting force, driving innovation in the market. They can wake up the carriers but they have to work with the carriers to a certain extent. The existing carrier eco-system has too many friction points to make it easy for startups to succeed. There is a lot of money and infrastructure behind the old way of living but Google is bringing change and innovation to the ecosystem and that is good for young companies.

OTA: What is exciting about business mobility in 2008?

NC: 1. Location technology and enablement — location is a feature, not a product. All mobile applications can benefit from a bit of lat and long.

2. Seamless mobility of digital media. Consume your content where you want it, when you want it, and how you want it.

3. Rich media. With the introduction of the iPhone and other advanced phones, look for rich media to proliferate on mobile platforms, even those in the business mobility market.

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Handset technology provider Ericsson on Thursday unveiled a platform for building mass-market multimedia devices.
The U335 WCDMA mobile platform combines high-speed uplink data and multimedia functionality for handling services such as mobile TV and mobile video.

It’s based on High-Speed Downlink Packet Access (HSDPA), a third-generation high-speed digital data service provided by cellular carriers worldwide. HSDPA users typically experience downstream data rates up to 1 Mbps.

The U335 is different from Ericsson’s previously announced HSDPA platforms, which focus mostly on network access for PC-cards and high-end feature phones, according to the company.

“The U335 is the first platform to enable mass-market production of true multimedia devices. By enabling mobile TV through MBMS [Multimedia Broadcast Multicast Service], DVB-H [Digital Video Broadcasting - Handheld], and Unicast, together with outstanding imaging, video and music capabilities in a cost-efficient package, we expect to see many consumer models built on this platform,” said Robert Puskaric, head of Ericsson’s mobile platforms’ unit, in a statement.

Devices built based on the U335 platform are expected to be available in the second half of 2008.

Earlier this week, Ericsson announced a deal with Uruguay’s Movistar to provide the mobile phone operator with a 3G network. Under the deal, Ericsson will be the sole supplier and network integrator for Movistar’s new WCDMA/HSPA core and radio network.

Ericsson claims its HSPA technology allows for download speeds of up to 14.4 Mbps and upload speeds of 1.4 Mbps in frequency bands, ranging from 850MHz to 2.6GHz. Future versions of the technology are expected to increase the HSPA download speed to 42 Mbps and the upload speed to 12 Mbps, Ericsson said.

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Spirent Communications plc (NYSE: SPM - message board; London: SPT) has sold wireless video test business SwissQual Holding AG for a fraction of the price it paid for the business just 18 months ago, the company announced today. (See Spirent Sells Unit.)

In January 2006 Spirent bought SwissQual for 62.5 million Swiss francs ($51.3 million), with additional payments of up to CHF28 million ($23 million) to be made if certain financial and technical milestones were achieved. Now, though, Spirent has offloaded the business to unidentified “private investors” for just $3 million in cash. (See Spirent Buys Wireless Test Firm.)
While Spirent noted last January that SwissQual was “a profitable and fast growing business” that was expected to enhance earnings in 2006, it now says the wireless test unit “has been operating unprofitably, with losses continuing through the first half of 2007.” (See Spirent to Buy SwissQual.)

Spirent reported goodwill impairments against the SwissQual business in its 2006 financial report, and noted today that it would “record a loss on disposal” of about £5.5 million ($7.5 million) this year as a result of the divestment.

The sale is part of new chairman Edward Bramson’s strategy to boost Spirent’s profits. Bramson, who took control of the company late last year and ousted the CEO, is already implementing a new restructuring program, and is currently formulating a “Strategic Review” that focuses on “balance sheet structure and other matters.” (See Spirent Makes Deeper Cuts , Spirent Suffers Boardroom Coup , and Spirent Spikes CEO .)

In a prepared statement, Bramson noted: “The sale of SwissQual releases resources for use in Spirent’s core businesses and it provides continuity for the customers and employees of SwissQual.” (See Siemens Tests Mobile Quality and O2 Tests With Spirent.)

Spirent executives were unavailable for comment, so it’s unclear whether the sale means the test vendor no longer has mobile video quality test capabilities, or whether the APEX Wireless Multimedia Analyzer product announced in February this year was developed separately and is not part of the sale. (See Spirent Evaluates Mobile Video.)

Spirent is the subject of much speculation in the test sector, with many believing the new board is preparing the company for a sale, though the company’s president and COO, Rob Piconi, told Light Reading recently that isn’t the strategy. (See Spirent: We’re Not Prepping for Sale.)

Spirent’s share price edged up 1.6 percent today to 77.5 pence on the London Stock Exchange , just more than double the share price (37 pence) a year ago.

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