The recent wave of M&A in the mobile advertising space marks the start of more than a just another industry land grab; it should be read as a validation of mobile marketing and a confirmation of its true potential. Indeed, the two milestone acquisitions — Google’s purchase of AdMob for $750 million in stock in November 2009 and the news that Apple had followed the search giant’s lead in January 2010, snapping up mobile ad network Quattro Wireless for $270 million – push the value of the mobile advertising industry passed the $1 billion mark, strengthening the business case for mobile and heralding a pivotal year for mobile advertising everywhere.

These acquisitions—Google’s purchase of AdMob in particular — also confirm what companies including Blyk have known from the start. Mobile is a different market with a huge potential for advertising. According to market research firm Gartner, worldwide mobile advertising spend will reach $13 billion in 2013.

Mobile is also a different media. As Tomi Ahonen, independent consultant and mobile industry expert, points out in his newly released book, Mobile as 7th of the Mass Media: Cellphone, Cameraphone, iPhone, Smartphone, mobile is the 7th of the mass media. It follows print from the 1500s, recording from the 1900s, cinema from the 1910s, radio from the 1920s, TV from the 1950s, and Internet from the 1990s.

The power of mobile begins with its reach. There are twice as many mobile devices as TV sets, three times as many mobile subscribers as Internet users, and four times as many mobile phones as PCs. Mobile is also very versatile as a media channel if we consider that it is digital, multimedia-capable, personal and interactive.

Clearly, the capabilities of the mobile phone are uniquely suited to generate massive new mobile advertising opportunities.

But there’s a catch. A very big catch.

Mobile is a personal, interactive and effective medium. More importantly, I believe the impact of mobile on our lives forces companies across the value chain to re-think advertising. From media planning and buying to creatives and production, mobile changes all the rules, which is one major reason why it’s not possible to simply transfer what we know about advertising in the other media to mobile.

Getting (truly) personal

Companies up and down the TV and print value chains, for example, have long worked out the ecosystems, models and rules of engagement that allow them to wring business value out of advertising. They are mature industries and several, such as print, are in decline.

In contrast, mobile advertising is a new market full of opportunities.

It’s also a market that is crowding fast as Web giants extend their reach to mobile advertising, pursuing expansion strategies that clash head-on with the interests and influence of mobile operators. No wonder industry observers refer to mobile advertising as the next big battlefield for online players and telecom companies.

Fortunately, there are many approaches to advertising in mobile. They go far beyond the paid search schemes that allowed Google and other search engine providers to dominate the online space and displace ISPs (Internet Service Providers) in the value chain.

Indeed, mobile advertising, like the mobile medium itself, is personal, rich and engaging. Different approaches satisfy different advertising needs.

While the advance of touch screen devices and the recent buzz about the iPad may have created heightened interest in ‘new’ ways to deliver advertising (via in-application ads or video overlays in Augmented Reality (AR) campaigns), the money and the excitement is elsewhere.

The money is in advertising that (literally) speaks to the interests and passions of the consumers, engaging them in a dialogue about what matters most to them. This conversation can be direct, connecting consumers with brands they consider important to their daily lives. But it can also be a more subtle, involving so-called branded utilities – for example, weather information sponsored by makers of cold medicine — that deliver consumers a value they truly appreciate.

No matter what the advertising message is, it’s all about messaging.

You text me, I text you and brands text us.

Messaging is at the heart of the most basic and effective form of communication we know. The special appeal of messaging stems from its perfect fit with what advertising is all about: creating a conversation. More importantly, messaging – particularly when combined with rich profile data, time of day and other deep audience insights – brings context, meaning and relevancy to the conversation.

Thus, messaging lays the groundwork for an ongoing and genuine dialogue between the advertiser and the consumer. It also yields significantly higher response rates.

One reason for this lies in human nature and how we prefer to communicate. While one-to-many display banner ads that blast their branding pitch to people may achieve marketing objectives on a PC, their user experience (UX) shortcomings show through on mobile. Beyond their small size, simplistic messages (“download this here” or “buy me”) and intrusive nature, analysts suggest that much of the interaction between consumers and display ads could simply be out of error. (Perhaps because our fingers are too big?) We at Blyk miss analysis of the difference between messaging and display and will examine this topic in more depth in this series.

In the meantime, it suffices to say that messaging has – more than any other mobile advertising format – ticks all the boxes for a good user experience and even better results.

The industry is certainly convinced. A raft of recent industry surveys and reports reveal that – out of the five leading mobile advertising approaches (search, display, content, applications and messaging) – messaging is by far the largest segment. In fact, market research firm eMarketer reports that messaging accounts for over half of mobile ad spend.

Ready to rumble

Google, the hands-down winner in online advertising, is hardly the market leader in mobile. To the contrary, Google’s AdSense, which it launched for mobile in June 2009, is all about landing display ads from online advertisers on mobile phones. However, a one-size-fits all broadcast approach patently ignores the unique requirements and characteristics of mobile I outlined earlier. This could be one reason why Google has tied up with AdMob, a company that can place advertising where Google can’t, namely in apps and across mobile websites.

The move by Google tells us that the race for a top-notch spot in this new market has begun. To date Google is not in the pole position. But that could change. The AdMob purchase allows Google to plug some important gaps in its mobile advertising strategy, paving the way for the delivery of mobile advertising everywhere– including on the Android platform.

What does this mean for other companies across the mobile advertising ecosystem, specifically the mobile operators?

In my view, they appear to have some catching up to do. They also appear to be unaware of the vast arsenal of competitive capabilities at their disposal, such as deep customer insight and superior customer analytics, that more than level the playing field.

Value ad(d)

Put another way, mobile operators have the ace in their hand.

Messaging is not only the dominant channel in the mobile advertising mix. Managing communication via SMS at all levels is core to a mobile operator’s DNA. It also represents the wisest use of mobile operator know-how and network assets.

We may like to think that the Internet like the ‘Cloud’ is limitless. But the bandwidth that makes browsing, downloading and streaming all possible is quite clearly a limited resource. The Federal Communications Commission (FCC) predicts that developments, such as the meteoric rise in mobile browsing, mobile video consumption and other bandwidth-hungry applications, will likely result in a “spectrum crisis” and a 30-fold increase in wireless traffic. Since it took more than five years to increase wireless spectrum by a multiple of three, the FCC is understandably concerned that it could take 50 years (!) to accommodate the current rate of wireless data growth.

Clearly, mobile advertising approaches built on messaging avoid this issue.

And let’s not forget another advantage messaging has over all other forms of mobile advertising: it is the universal no-brainer. Everyone everywhere on the planet can send and receive text messages, and all mobile devices support it.

Indeed, the advantages of messaging are many, and all of them play in the favor of the mobile operator.

This is why Blyk has chosen to focus on messaging, spearheading its use across a wide variety of mobile advertising campaigns. But the power of messaging is not limited to the way advertisers and mobile operators can use it to kick off an ongoing conversation with consumers. Clever companies also harness messaging to initiate an exchange that links to a mobile Internet site, drives traffic to a specific offering, asks (politely) for personal data or simply rewards the consumer with downloadable content or apps.

Mission critical

Blyk has evolved its strategic approach to mobile advertising over time and through experience, first as an MVNO catering to the youth demographic and today as a partner with mobile operators such as Orange in the U.K. and Vodafone in The Netherlands. Additional partnerships with mobile operators outside Europe are also due to be announced in the near future.

As a result, Blyk has become a mobile media company, specializing in the end-to-end capabilities and strategies necessary to deliver relevant and targeted mobile advertising to empowered consumers on their terms. (Quite frankly, that’s really the only way to deliver advertising; any other approach is spam.)

Blueprint for impact

Blyk works in close partnership with mobile operators, sharing its valuable insights, intellectual capital, best practice and proven approaches to customer segmentation and social media marketing.

Blyk’s New Business Model: Partnering with Operators — Source: Blyk, 2009

This approach allows Blyk to address the mobile operator’s core business needs (namely, increase ARPU, decrease churn and encourage services uptake), while providing them a springboard to new models and new revenue streams driven by mobile advertising.

Blyk also brings key learnings to the operator relationship that benefit their brand and advertising customers. As a mobile media company Blyk understands the importance of targeting and relevancy and works with operators to deliver advertisers immediate and direct access to the ‘Blyk media audience,’ an audience built in partnership with operators that is 100-percent profiled and 100-percent opted-in to receiving brand messages.

To be clear, success is not about on creating huge databases of ‘opt-ins’ (customers who specifically agree to accept advertising messages on their mobile phones). It’s about wielding that customer permission and the data these consumers freely volunteer to create a unique media opportunity.

Having worked with both sides – the brands that want to connect with consumers who want to hear their message and the mobile operators that want to facilitate this conversation – Blyk has identified seven basic rules for effective mobile advertising .

1. Permission, please: An opt-in audience is a must and operators must get customer permission before delivering any advertising.
2. Relevancy rules: Advertising messages must be relevant – period. The best advertising is delivered in tune with consumer context.
3. Timing is everything: The frequency and timing of advertising is different in the mobile environment, and there are limits depending on the time of day or day of the week.
4. Value is king: Consumers must feel – at all times – that they are getting value from the advertising.
5. It takes two: Mobile advertising is not just about delivering ads; it’s about two-way communication.
6. Numbers add up: Measurement and tracking are essential.
7. Keep it simple: Everything needs to be simple – for the advertisers and for the consumers.

Moving forward, mobile messaging will be much more than an effective way to deliver targeted and relevant advertising. It will evolve to become the centerpiece of all conversations about everything, allowing the mobile operators who facilitate this exchange to become mobile media powerhouses.

Want to let people know you have a mobile website or encourage consumers to check out your new app? Or are you a physical store out to clinch a virtual sale? It’s a tall order. Reports and surveys show mobile search has more than its share of shortcomings (stemming from the fact that most search engines have been poorly retrofitted for mobile) and content discovery also falls short. A message to the right audience – that is, one profiled, opted-in and open to your message — may be the best way to drive traffic, boost sales and rise above the noise.

Antti is the Co-Founder of Blyk, the messaging media that works with mobile operators to link young people with brands and other stuff they like. He has over 25 years experience as a senior manager in branded goods, retail and wholesale, TV& film and advertising industries. Antti is also founder of Contra Advertising Group, today part of Touch Worldwide. He serves as Chairman of Contra China, an advertising agency specializing in mobile and social media marketing based in Beijing. In addition, Antti is a Fellow at the RSA (Royal Society for the encouragement of Art, Manufactures and Commerce) in the U.K. and a regular speaker at lectures on innovative business strategies and brand issues worldwide. For more information about Blyk, check out the company profile and explore the collection of customer case studies.

Disclaimer: Blyk is an MSG supporter. This is the first in a series of columns by Blyk examining mobile advertising strategies and business models.

This entry was posted on Monday, February 8th, 2010 at 5:54 pm and is filed under Guest Columns, Mobile Advertising, Mobile Research, Personalization. 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.