Mobile Advertising Growth Stunted by Mobile Carriers

Successfully targeted and privacy-centric mobile advertising, while inevitable, could very well be another 18 to 24 months away. Because mobile carriers are the keepers of subscriber information and behavioral data, it falls on the carriers to provide publishers and advertisers with information that enables users to be targeted in the most effective and nonintrusive way. In addition to the targeting data hurdle, publishers and advertisers must not think of mobile as merely an extension of Internet advertising (just as Internet is not merely an extension of print or video an extension of television).

Though the sizes of mobile screens may be getting larger, interactions on mobile devices remain brief and the opportunities to deliver nonintrusive ads may seem scarce. But the inherent long-term opportunities make it imperative that advertisers and publishers explore mobile media beyond the mobile web.

Tom Burgess, founder and CEO of Third Screen Media, (acquired last year by AOL Platform-A) dedicated to enabling advertising on mobile devices, always knew advertising would make its way to the mobile medium. “If you look at every other medium -- be it print, video, broadcast, Internet -- the fact is those media generate 50 percent of revenue from subscriber fees but the other 50 percent of the revenue comes from advertising,” says Burgess.

Mobile carriers had originally found the concept of mobile advertising absurd, Burgess acknowledges. In 2004, the beginning stages of Third Screen Media, mobile carriers were hesitant to participate. Burgess’ initial strategy was to make arrangements with carriers but they literally laughed at the prospect.

“My thesis at the time was that the wireless industry was 100 percent subscriber-based and it was inevitable, based on history, if there’s content on a device and the users are accessing it, advertising is going to make its way in and eventually it’s going to be a 50/50 format. We were starting in an industry that was 100 percent subscriber-based and the other side hadn’t been built,” says Burgess.

Burgess then targeted established mobile publishers such as MTV, ESPNand the Weather Channel, who immediately became interested. After acquiring deals with approximately 90 percent of the mobile carriers’ publishers, the carriers were more interested. This was four years ago but the carriers are still hesitant even today to collaborate with the rest of the mobile advertising industry. Targeting data will allow publishers and mobile customers the optimal advertising experience by allowing advertisers to deliver ads to the consumers they most want to reach and for consumers to be targeted by the publishers and advertisers that are most relevant. However, as it stands today, targeting data is scarce. Because of family plans, corporate plans and prepaid plans, mobile carriers actually can identify and target only about 30 percent of their subscribers, according to Burgess.

Also, advertising is currently targeted only to mobile subscribers with a data plan, which is only about 20 percent of users. So while carriers may be boasting the fact that tracking and cookies will be added to the mobile web, Burgess cautions against the hype, saying that if cookies are only launched in the mobile web and can track 50 percent of devices, it will only apply to approximately 5 to 10 percent of all mobile subscribers, since only 20 percent are accessing the mobile web in the first place.

Mobile carriers need to look beyond cookies and the mobile web and explore the other media within mobile, which include the idle screen, video and the two forms of messaging – MMS and SMS. Burgess finds the idle screen particularly interesting and important because it is something that can reach every mobile phone user. While only a small percentage of users access the mobile web, watch video or message, everyone has an idle screen. Companies such as Mobile Posse and Digital Sidebar are pioneering the business of idle screen advertising. But it’s a slow process and Burgess mentions that any progress made by wireless carriers takes a long time. He estimates that within 18 months, the availability of targeting data will increase dramatically and as much as 80 to 90 percent of data plan users will be targetable.