News In Brief: In-depth reporting reveals Google & Yahoo grant operators a more favorable rev-share. But white label providers warn operators could be exchanging long-term success for short-term gains.

Regular readers will know I am a frequent contributor to Mobile Media (MM), a subscription-only publication published by Informa Telecoms & Media that provides in-depth market intelligence on mobile content and apps. It’s an excellent publication that has sharpened its focus on mobile search and now tops my list of must-read newsletters – and that’s not just because I write for it. It has consistently reported the news the others have not – and the most recent issue is a prime example.

The front-page story from my esteemed colleague Guillermo Escofet has confirmed the comeback of white label mobile search. Not that white label search was every really in decline. Still, the buzz around branded search – amplified by the recent string of operator wins – did shed some doubt on the sustainability of the white label value proposition.

Indeed, this week’s issue of MM cuts through the hype to tell us why branded has gained traction. In a word: money. More specifically, the rev share operators get from a tie-up with the likes of Google and Yahoo is “more generous than that from white label providers.” The article also quotes Dan Olschwang, CEO of white label search and advertising provider JumpTap, who admits: “They [branded providers] give more aggressive revenue shares.”

But common sense tells us every bargain has its price and Dan warns that operators could pay dearly for this perk. Google & Co. may be mobile search providers, but they are also content portals. They may offer operators a good deal – even going so far as to offer a minimum guarantee on advertising revenue – but their agenda is to “do their utmost to drive the traffic away from the operators.”

The article goes on to quote a source at another white label provider who summarizes the downside of the deal – and what can happen when branded search providers offer operators more favorable terms in exchange for exclusive placement of their search box in a prime location on the operator portal. “These near-term revenue-sharing deals are no doubt tactics to clear the marketplace of white label alternatives and to teach subscribers to use Google and Yahoo services, bypassing the operator portals, and ultimately removing the need to share anything with the operators.”

A welcome and expert voice in the piece is Miika Mantyvaara, ex-Medio exec and now founder of the consulting firm Avanto. Drawing from his experience at a white label search provider he offers some fascinating insights into why the revenue share is what it is and why operators should seek to have more control over the information a search engine delivers. (I promised Guillermo I wouldn’t divulge everything in his article – so this is where I will stop.)

The article confirms a lot of what I hear in my discussions with senior execs and hints that mobile operators are waking up to what’s at stake. However, in all fairness, we must admit a huge part of the motivation for operators to join with branded search is the quality of the results. (At least until the ability to deliver more contextually-relevant mobile search results is table stakes…)

I recently raised this topic with Brendan Benzing, VP Product and Marketing, at Motricity. He pointed out that mobile operators can have it all – including their lucrative ties with branded search providers – if they properly manage the mobile search experience and maintain control over the results page – the single most important piece of real estate operators own. He also thinks carriers should offer consumers choice and focus on being “inclusive” and not “exclusive” by enabling the consumers to choose the search engines that get integrated into the carrier environment, similar to how Microsoft does for the browser.

In the short-term, a tie-up with a branded search provider has “a certain halo effect” that will likely play in the operator’s favor. But Brendan points out these benefits will fade with time as users learn new search habits and associate the branded search provider’s name – and not that of the mobile operator – with mobile search. “Also, search providers increasingly offer personalization services on their home page, decreasing the value of the carrier’s portal.”

But this is not to say mobile operators should not collaborate with branded search providers. “Mobile operators should merely not limit themselves – or their users – to the results provided by these search engines alone.”

The takeaway: Branded search providers may offer better terms than white label, but smart operators shouldn’t be distracted by short-term gains. The end-game is about deploying a comprehensive mobile search solution – and this could come to encompass branded and white label. Such an approach not only guarantees operators avoid the slippery slope to becoming “just a pipe”; it potentially allows them to deliver users a broader choice in search results, inspiring them to explore all the content and applications available.

This entry was posted on Wednesday, January 23rd, 2008 at 10:54 am and is filed under Mobile Advertising, Mobile Search. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.