Regular readers will recall that MSG was commissioned to conduct Mobile Advertising UK, a research project research endorsed by the Interactive Advertising Bureau (IAB) and the Mobile Marketing Association (MMA), to expertly document the state of the mobile advertising industry in the U.K. and identify growth opportunities in the emerging mobile advertising marketplace. The report – which combines valuable consumer insights gathered by ÆNEAS Strategy Consulting and Management (coordinated by my esteemed colleagues Tarik Fawzi and Atva van Zanten) and qualitative research based on 20+ interviews with operators, enablers, agencies, and brands contributed by MSG – will be formally released in July.

Pricing is GBP 2,999 ($4,866) for the report. 500 GBP discount for MMA and IAB members, and people who attended the event. For more information, click here. And while we’re at it: A huge around of applause for James, long-time MSG friend and supporter, whose Camerjam Events company successfully brought together 130+ professionals and pundits at this inaugural event sure to spread to other countries soon!

In the meantime, allow me to share some of the key findings and data points based on an online survey of 1,000+ UK mobile users. (And please follow along in the complete presentation below via SlideShare, and listen in to this audio interview (supported by the iPhone blogging app Audio Boo) via The Really Mobile Project, where I put some of the stats into perspective.)

At a glance:

• Today the mobile advertising market in the U.K. totals nearly GBP 30 million ($48 million).
• Mobile advertising accounts for only 0.16 percent of the total advertising market – which is where Internet advertising was in 1998.
• ÆNEAS Strategy forecasts that mobile advertising will see accelerated growth in four years and so account for a significant portion of advertising spending. Drivers include: A calculated growth rate of 99 percent in 2008 vs. 2007; the overall shift towards digital advertising; and increased demand for targeting, reach, and a medium that -like no other – allows advertisers to identify and track unique visitors. (For more on this unique capability and the benefits I encourage you to read my own road test of mobile analytics solutions.)
• Only 32 percent of those surveyed have a positive attitude about receiving advertising on their mobile phone. However, 64 percent said they would accept advertising is they are properly incentivized, and 70 percent said they would accept mobile advertising if they are incentivized AND in control.
• The majority of those surveyed felt 5 advertising messages per day was the limit of what they would accept.

Unsurprisingly, youth are most familiar with mobile advertising channels (specifically rich media such as MMS and in-game advertising (approaches we know from the likes of Unkasoft). What’s more a whopping 84 percent of youth surveyed has a positive attitude toward mobile advertising if incentivized. The bottom line: Acceptance of mobile advertising is right up there with TV and other more traditional media IF we can get our head around what incentives to offer and develop the mechanisms that put people in control.

No clue on the right incentives, but it’s not a given that companies need to offer cash to capture people’s attention. In the fireside chat I recorded with Rory Sutherland, Ogilvy UK Vice Chairman, we discuss the value of branded utilities and life-simplifying services. Will people accept advertising if the pay-off is less stress/more convenience? It sure looks that way!

Expert interviews:

So we know mobile advertising will be big. But what do we do in the interim, and where should we channel our investments/efforts so we can move fast when the market picks up?

No easy answers, but my interviews with companies up and down the emerging mobile advertising value chain speak volumes. Companies – in no special order – included: Orange, Vodafone, 3UK, Alcatel Lucent, Ogilvy, 4th Screen, InsideMobile, Adfortel, MMA, AdMob, IAB UK, RGA, Mobixell, Comverse, T-Mobile, 3, Sponge, Bango, and a slew of brands that wish to remain anonymous.

The bottom line: Text rules! There’s plenty of mileage left in simple SMS, and it represents a hassle-free way to start an ongoing conversation with people on their terms (remember from the findings above, people want to be in control of their advertising experiences).

There are also opportunities in location-based marketing (but not the Starbucks example, please!), mobile coupons, cross-media advertising plays with mobile at their core, and the avalanche of app stores coming online.

I can’t divulge all the results here, but I can share some thought-provoking quotes that highlight where the growth is (and isn’t), and identify the obstacles that stand in the way.

BRANDS

“If measurement was aligned with what we know from the Web or TV, it would help a lot to build confidence.”

Road ahead:

“Just between the two of us, our spend for search is by far not in the digits yet, so therefore it would be not realistic to say we would spend more on mobile advertising than for search.  That’s where we are with digital advertising, so it would totally unrealistic to say that in 2009 or 2010 we make it into the single digit share.  But it’s growing, clearly growing.”

OPERATORS

“I think there’s other opportunities such as advertising actually embedded within a widget. You could have some sort of utility widget, such as one providing weather forecasts, and there’s no reason why certain companies may not wish to have some advertising embedded within that.”

Road ahead:

“As a general principle, operators are in a particularly good position in that we can offer a variety of ways to reach the audience.  If brands want to reach a customer base, we can offer banners and messaging. We also have a fixed line web presence so we can offer traditional web advertising, in addition to magazines and billings (mailings) that we can offer. We are in a position to use mobile not only as a media property, but also as an enabler.”

AGENCIES

“I don’t think there are any real obstacles. I think it’s laziness on behalf of anyone that would suggest it’s difficult to buy. You have 5 buying points and you can hit 80 percent of the market. Call us, Yahoo, Microsoft, Orange, and AdMob. That’s it – and you’ve got the market covered. 80 percent of the inventory covered in five phone calls.”

Road ahead:

“There are a number of studies out there that show exposure to multi-channel advertising gives you exponential impact in terms of response rate and brands awareness. So the opportunity is in mobile, but also in the other channels that evolve with it.”

APPLICATIONS PROVIDERS

“The big opportunity in every country to make mobile advertising really work is to have media sales bureaus or agencies who sit in between the owners of the inventory and the advertisers. It’s in an early stage of development, and it’s also something we are going to focus on as we set up a dedicated mobile sales agency to connect the inventory to the advertising agencies.”

Road ahead:

“There are some great examples of interaction with your phone and a poster, or with your phone and TV, but that will always be a small piece of a bigger advertising picture. Core to mobile advertising is mobile messaging. Mobile is capable of delivering a message and allowing us to interact with the message. There is an interesting opportunity for advertisers to interact via messaging linked to a certain location or time, and that will develop.”

INFRASTRUCTURE COMPANIES

“Currently, we’ve got a plethora of people offering mobile advertising in the market. But when it starts to become mass-market and reaches volume, then many of those players [ad serving companies] now will not be able to translate into that volume. So, you’re going to start seeing those players just sort of die away because when mobile advertising is serious business, then you’re talking about millions of adverts and not just a few hundred thousand.”

Road ahead

“It only starts to become interesting for a carrier when the revenue they can envisage starts off at 2 percent over their overall revenue with an opportunity to grow to 10 percent. That’s the revenue that will make them sit up and listen and we’re not there yet.”

Rory Sutherland audio interview

A highlight for both me and the audience was the entertaining and educational fireside chat with Rory, whose interest in -well – us and the finer points of behavioral psychology brought much-needed balance and big-picture vision to the discussion. As he points out in this recent opinion column in New Media Age: The job at hand is to use ideas to turn human understanding into business advantage. During our interview he made it clear that mobile is a medium perfectly suited to achieve just this goal. (Listen to the audio interview here. It’s 28:40 – but time flies when you’re having fun – and this sheer genius!

A few excerpts that made us think:

YES WE CAN!: Mobile can change people’s behavior – primarily because it takes the heavy-lifting out of doing things we might not do otherwise. Case in point: Charity. A moment of “epiphany” for Rory was the huge response to SMS campaigns asking for donations, although we have assumed that youth is not a demographic to give so generously. As he put it: “If this technology can change behavior that significantly, then who cares how good it is at advertising. Advertising is about changing opinions as a half-way house to changing their behavior.” The bottom line: If you can change people’s behavior from the get-go with mobile, then it deserves a top-notch spot in our campaigns.

LIFE-SIMPLYING: Rory’s message: Don’t dismiss branded utility because it’s unglamorous. Being brandedly useful is key. (And here is an example from Rory’s Twitter feed that illustrates this approach. The IBM Scout is a branded app that helps people get the most out of the Wimbledon 2009 Championships, providing live coverage of just about everything.

COUCH POTATOES: Let’s face it – many of us are. Rory figured this out when he was watching a line of cars at a drive-in ordering fast-food. Not one got out of the car to order at the counter – even though it was empty. Connect the dots, and it’s clear we are all a bit lazy. Apply this observation on basic human behavior to mobile and you have a powerful combination indeed! We will likely reach to the medium at hand (the personal device we have with us at all times) because it’s more convenient. “Channel preference almost trumps brand preference.” Some people may prefer Pizza Hut, but if they can order from Dominos by text, then they will likely switch for this reason. The bottom line: “Modality and modal preferences seem in a weird way to trump other things.”

WHAT’S THE POINT?: We have lost sight of what mobile can do. (A point that also came out in the research I conducted.) We’re hung up on old models and enamored of new technology, and we are missing some big opportunities. Imagine using text campaigns to encourage impulse savings instead of impulse buying. Or how about a brand that simply harnesses mobile to improve listening? As Rory pointed out: “Advertising is talking and listening. That’s a perfectly reasonable form of marketing, and mobile brilliant and you can do it in real-time.”

METRICS: We have become prisoners of our own metrics. To show us how ridiculous our obsession has become, Rory compares media buyers to alcoholics. “Alcoholics buy booze on a single metric: How much alcohol do I get per pound (GBP), and this is how media buyers buy media.”

MOBILE MATTERS:  “Mobile has been the medium of first resort and dangerous to neglect it which is probably why Google has been scared. Search has been the first place you go on the Web and mobile preempts this in some respects.”

I’ll explore mobile search in a post tomorrow, which will recount some highlights of the event, let you in on the results of a new MSG white paper,  and detail my own Mobile Search Masterclass on June 30^th in London.

By way of background, Rory’s bio:

Born in Usk, Monmouthshire in 1965, Rory read Classics at Christ’s College, Cambridge, before joining Ogilvy as a Graduate Trainee in 1988. After 18 months spent as the world’s worst account handler (as a desperate remedial measure he was once booked onto a time management course, but got the date wrong) Rory became a copywriter in June 1990. He has worked on Amex, BT, Compaq, Microsoft, IBM, BUPA, easyJet, Unilever, winning a few awards along the way. He was appointed Creative Director of OgilvyOne in 1997 and ECD in 1998. In 2005 he was appointed Vice Chairman on the Ogilvy Group in the UK in recognition of his improved timekeeping.

By an amazing stroke of luck (his brother is an academic) Rory first used the Internet in 1987. Hence he had the advantage in 1994 of knowing what it was and what it might do a few years ahead of many colleagues. Most people would have combined this knowledge of marketing and technology to make a fortune; not Rory. Instead he became the first Briton to have his credit card details stolen online, thereby losing £22.45.

In his spare time, Rory collects self-aggrandizing job titles. He was President of the Direct Jury at Cannes in 2007, and was elected President of the Institute of Practitioners in Advertising in 2009. He is also the Technology Correspondent of the Spectator, the world’s oldest English language magazine. At quiet moments in the proceedings over the next few days you may like to pay a furtive visit to his blog at http://snipr.com/da9bq

Rory is married with twin daughters of 7 (Hetty and Millie) and lives in the former home of Napoleon III in Brasted in Kent. Unfortunately in the attic.

I am pleased to report this work has also sparked interest at Eyefor Travel Research, a business intelligence firm known as the “leading voice of online travel.” Andrew Merrie, research analyst and Headmaster of the School for Mobile (the firm’s initiative for educating the travel and tourism industries on opportunities in mobile), reached out to me earlier today to collaborate on the firm’s series of free reports (which are essential reads chock-full of case studies, key statistics, and best practice) focused on mobile technology and solutions.

There is a special emphasis on mobile search (which we agree is the linchpin of a range of effective strategies to deliver mobile advertising, commerce, and CRM). By way of background, the Eyefor Travel report series consists of Vol.1 Mobile Technology in  Travel: The Introduction, and  Vol 2,  Mobile Technology in Travel Report: The Detail. Vol 3  Mobile Technology in Travel Report: Consumer Insight is work in progress, but you can sign up here for an alert when it is released later in June.

A trend that stands out is the new popularity of SMS search schemes as a sure-fire way to reach a mass market. As Andrew puts it: “SMS search is a tool that 99 percent of customers know how to use. In a consumer-focused industry such as ours, it [SMS search] represents a good first step in how companies need to move forward.” Another advantage beyond intuitive usability: Proven monetization models around the delivery of related text links and advertising.

This point came through loud and clear in this week’s AdAge article, which outlines the advantages of SMS search, and takes a look at the companies (notably 4INFO, which MSG profiled here, and ChaCha) cashing in on its newfound popularity among users and advertisers.

Rita Chang, who wrote the piece, contacted me for the article, and has since arranged a follow-up call to discuss the mobile search competitive landscape. The intention is to write a comprehensive feature on the models and companies I think set the bar. I gladly support her in this work, and welcome other journalists to reach out to me for comments or just a few company contacts.

The increasing excitement around SMS search isn’t limited to the U.S. (the focus of Rita’s AdAge article). It’s also going full-steam in Asia, where Mobile Content Networks (MCN) – a provider of mobile search and revenue solutions that deliver people connections to content, not links to content, on their mobile phones – has chalked up an impressive list of operator customers for its SMS search, which emphasizes content discovery instead of answers to specific search queries.

Today marks the company’s official launch of Smart Search (aptly named) in partnership with Smart Communications, the Philippines’ leading mobile operator with 36.9 million subscribers. The MCN-powered search service (an SMS triggered search service that lets people use a shortcode to text queries for their favorite downloadable music) complements MCN’s WAP search solution for the SMART Music Store, which launched in 2008 and offers subscribers real-time access to a growing catalog of ringtones and music tracks from local content providers.

Stephen Burke, MCN SVP Sales and Marketing, who pre-briefed me on the news announcement yesterday, also kindly agreed to a spontaneous Skype chat interview to connect the dots in MCN’s evolving search strategy. I produce an excerpt of it below, and will circle back for a more in-depth discussion once MCN formally announces a key customer win later in the summer.

Q: The news is Smart Search. What else is in the pipeline?

A: We will also be adding new WAP and SMS content channels with Smart this month and next, and are seeing steady and healthy traffic growth.

Q: What can you share about traffic and usage?

A: For the Smart WAP Music search, we have seen page views and queries double in the second quarter calendar. We add [the content categories] Games in mid-June and Video in late June, which is projected to increase traffic about 3x.

Q: SMS activity?

A: SMS Search [is] reaching all the non-WAP users in the world’s most active SMS market.We will be ramping advertising in Q3. In emerging markets, the first step is to help build the Mobile Ad ecosystem, which is happening now.

Q: Do they [Smart mobile operator] use allwords [MCN's own PPC mobile content promotion program]?

A: No, not yet. The Philippines’ carrier revshare/ecosystem issues aren’t quite in place yet.

Q: And what can you report elsewhere across your partners/customers?

A: AIS in Thailand, FYI has also tripled traffic as they’ve added our Search to almost every page on the portal in their preparations to launch 3G services. These “emerging markets” are catching fire. Basically, we are seeing growth in all markets (Scandinavia, Turkey, Thailand, Philippines, Japan, etc).

Q: SMS search is certainly on the upswing.

A: In markets where WAP penetration/3G penetration is still lower (than Europe or U.S. or Japan), a transaction oriented, content and personalization oriented SMS service is an important addition. And it’s [SMS search] being specced into RFPs we are seeing elsewhere in S. Asia and Latin America.

My take: SMS search is a case of been-there-done-that? No way! It may be a rather un-sexy category of mobile search, but there is nothing unexciting about the demand for it across markets (and the increasing interest among advertisers). Indeed, comScore reports that SMS ads average a 16 percent response rate, outperforming typical 1-3 percent click-through rates for mobile display ads. While we may be enamored of the iPhone and the pivotal role this device has played in shifting mobile models (and the complete mobile business ecosystem) in the direction of mobile computing (as opposed to mobile communications), we should remember that the mobile device is about connecting us to the people and stuff (information, answers, content, and advertising – because it is content) that matters to us most. What works is what works. As Alex Meisl – Chairman of Sponge, a mobile marketing agency, and Co-Chair of the Mobile Marketing Association – pointed out in a phone interview yesterday, he is not bullish about bells and whistles in mobile. Most of his company’s campaigns harness text and messaging mechanisms people understand. Another advantage of text is the dialog it encourages between people and brands. This level of interaction can also bring a new dimension to mobile search, turning a search query into much more of a search conversation we can all understand.

Disclaimer: ChaCha has sponsored an MSG white paper; MCN has been an MSG supporter.