Mobile advertising’s contribution to ARPU - take 2
Rating: a sense of perspective
I’ve just read Russell Buckley’s blog on Mobile Advertising’s Contribution to ARPU (http://mobhappy.com/blog1/2007/08/21/mobile-advertisings-contribution-to-arpu/). Interesting.
To borrow from Russell, for anyone who’s not from round here, he’s AdMob’s guru on this side of the Atlantic and an all round good egg. In this instance, he examines figures provided by STL Partners, which go like this:
Roughly speaking, the telecoms market (fixed and mobile) is worth USD 2,000bn. Total global advertising spend is USD 500bn. Digital advertising (including mobile) is worth about USD 40bn, although the mobile element is small because it’s so new, if growing like Topsy. For the sake of simplicity, let’s estimate USD 5bn from mobile.
From here on in, though, I have some reservations about Russell’s argument.
He reasons that if all advertising spend were magically to migrate to mobile overnight, it would only equate to a quarter of total telecoms revenues (actually, surely that would be 20% of the new pie – ie 5bn = 20% of 2,500bn?).
He adds, “If 100% of current mobile advertising revenues [that is, USD 5bn being generous] went to operators (don’t forget that large slices of revenues go to mobile publishers and a significant slug goes off-portal), it would still only contribute to 0.25% of their total turnover.
Still, it’s a lot better than a smack in the gob and seems to ignore that total market being worth USD 2,500bn is revenue, not profit, which is an entirely different matter: look at almost any operator’s annual report.
However, I concur with the next bit, which also reveals Mr Buckley’s jolly nature:
Looking at this from the glass-half-full perspective though, billion dollar revenues in any industry certainly can’t be sniffed at and it’s hardly surprising that most operators are examining this sector with real interest. But it’s unlikely that advertising is going to save the traditional operator business model as we know it today, along with the healthy margins beloved by investors.Of course, that doesn’t mean to say that a Skype-esque disruptive model couldn’t be developed by someone with a lower cost base, which accepted lower margins and where advertising revenues make a significant contribution. But it’s not going to be easy.
Since when did easy have anything to do with anything, though?
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