Mobile Advertising Worth $10 Billion By 2010

For marketers, mobile marketing and advertising has great promise – it combines the wide reach of television with the precision of direct marketing and the tracking potential of the Internet. Mobile marketing campaigns using SMS, and more recently MMS, have already 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 competitions, even charitable giving, have exploited this medium. But things are set 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 and engage with consumers through this medium will expand even further.

Now, more than ever, marketers are looking for alternative ways to reach customers. Traditional channels for advertising, like TV, radio and print, are becoming less effective because consumers now consume information and entertainment very differently than in the past, due largely to the digitization of content and the increasing 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 new study published by The Shosteck Group, mobile marketing and advertising could be an important driver of 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 providers.”

The firm analyzes this emerging market in its most recent study, and concludes that there is potential for this market to grow rapidly over the next five years. The study predicts that under the most optimistic scenario, the global market could grow to US$9.6 billion by 2010. However, the study demonstrates that the market may not generate huge revenues directly for mobile operators – less than US$2 billion by 2010 – but could facilitate the development of a much healthier mobile Internet, from which mobile operators can benefit.

“We believe that mobile advertising will be a necessary driver for the development and commercialization of the mobile Internet, just as online advertising has been for the ‘fixed’ Internet to-date,” said John Darnbrough, Senior Associate of The Shosteck Group. “It is our view that the two – mobile advertising and mobile content – are inextricably linked. The success of one will enable the success of the other and vice versa,” he continued.

But, the study argues, mobile operators must act now to ensure that the mobile marketing and advertising market prospers, and that they can fully exploit the opportunities it affords them. It warns that the robust and profitable development of this market will only be possible if the major players – operators, handset vendors, content providers, advertisers and Internet portals – collaborate effectively. It also predicts that the extent of this collaboration may be limited, as the motivations and objectives of some of the key players will inevitably conflict.

“Given the immaturity of this market, the fickleness and impatience of consumers, and the complexities and politics of the telecoms industry, we believe the next two years will be critical as other technology and market trends could prove to be barriers to the anticipated growth of this market,” said Mr. Darnbrough. “For example, a damaging consumer backlash against intrusive and unsolicited mobile marketing could occur if over zealous marketers fail to respect consumers’ right to privacy and inundate them with unwanted and irrelevant mobile marketing messages.”

The study concludes with concrete action items and recommendations for how mobile operators might profit from the emerging mobile advertising model. Additionally, it provides warnings for those along the value chain, that significant commitments and investments by major brands might not materialize, due to uncertainty regarding timing of key technology developments, such as the availability of ubiquitous, low cost and high speed mobile access; mobile broadcast TV; alternative DRM; and mobile payment systems.

“For sure, the hype is building but the mobile advertising market is still in its very early stages. There is little consensus on how long it might take for the market to reach the ‘tipping point,’ i.e. when, and indeed if, it reaches critical mass to become a mainstream mobile market in its own right,” said Ms Zweig. “The rewards are there but the question remains as to who benefits from them.”