Mobile Advertising Conference: the search for an effective mobile advertising business model

There was an aboslutely cracking panel discussion at the Mobile Advertising & Marketing Awards conference, on “searching for an effective mobile advertising business model”. This talk drew together some real heavyweights from the mobile industry. The main subjects of the panel were what the big challenges facing mobile advertising are, traditional vs. “futurist” mobile advertising and what consumers want/are willing to pay for.

Moderator:
Ian Mullins, CEO, Yamgo – mobile TV and video experts

Panelists:
Renault Ménérat – Co-Founder, User Adgents – mobile media agency specialising in advertising and search
Dr. Alexander Trommen – CMO, United Mobile AG – an MVNO that deals with voice and data roaming
Scott Lyons – Director, International Business Development, Motorola – searches for new apps across all domains for mobile devices
Jonathan MacDonald – MD, JMA – mobile advertising guru

Mod – what do you see as the big challenges for mobile advertising?

RM – it depends on who you’re advertising for. We deal mostly with content providers, which is quite easy. They have a clear idea of what mobile marketing can offer them. These companies are ready to spend a lot of money, and they are familiar with the territory. As a result, the challenge is to find the appropriate approach to their audience. There are a lot of different channels for mobile advertising, and you have to be very careful to choose the right one to reach your clients intended audience.

AT – The challenge facing mobile advertising is twofold. First, there is the problem of reach – mobile is still a very small medium. Selling 400 ringtones might be great for a small company, but it’s useless for big brands. Second, there are no standards! When you have a company like Microsoft creating it’s own barcoding standard, when there is proven, reliable tech like Kaywa around, you have a problem. This market seems incapable of creating standards. So when you combine the two problems of small reach and very diverse and complicated technology, it makes it ridiculously expensive to achieve reach. I wouldn’t regard mobile as the first place to go to for marketing. We need to educate standards – reach will take care of itself.

SL – The problem with standards is a good point. From a manufactuers perspective, I’m consatantly challenged by operators. We would love to embed advertising on the native apps and services on mobile devices. We will be providing a “premium” media player on future devices, for which we won’t charge the consumer – we’ll be using advertising to pay for it. There is a lot of concern around advertising on mobile in terms of standards: what kind of ads are you getting, where do they go, who shares the revenue? If advertising is ON the device, and PART of the experience, it will be much better. “Spotify” is a good example, even if it’s web based – but we would like to have advertising running in the background, non-invasively.

JM – We tend to wish that we’ll get great mobile advertising that is somehow unobtrusive as well – but maybe we’re looking at this from the wrong angle. I suspect we’re trying to apply old traditions to a new market. We’re approaching this as a TECHNICAL challenge, rather than as a personal channel. We need a psychological change, not a technical one. Traditional types of advertising tend not to work on mobile. Take display advertising, which we’ve just taken wholesale from the on-line web. Display ads have a 99% fail rate on-line, so why push it to a media that isn’t designed for it? This device has the potential to reach 4 billion people – we need to abandon traditional advertising plans and apply a new one.

Mod – What business models are you using, are you making money, and how do you think they’ll evolve?

JM – The model I would like is to help brands create armies of fanatics that they can converse WITH. That has significant revenues.

SL – Motorola is not making money from mobile advertising yet, but the opportunity to make money is there.

AT – Great campaigns only come along once or twice a year – it’s hard for a small company to make a splash. I’ve been trying to get away from display advertising for years. A German TV station refused to use a measurable advertising system like shortcodes, because the metrics would give too much away. After years of making huge amounts of money in vague areas, they didn’t want to become transparent. Many traditional advertising bodies are afraid of change, and so they’re not adapting to the changes that are happening anyway.

SL – And that is a problem of the advertising industry as a whole. People are comfortable using the methods that made them rich in the 70′s and 80′s. Because of that behaviour,  there’s a lot of culling going on right now. The problem with revenue sharing is that there’s so many small slices of pie that none of them are worth anything. I would rather forego revenue share and see some innovation.

Mod – one of the key areas to drive mobile is entertainment, and one of key things about the iPhone is that consumers are actually willing to pay for a good app. So which is a better model: ad-funded content or pay per view?

SL – We’ve seen some good ad-funded apps. We’ve also seen some good apps that ARE adverts – Guinness did an excellent advertising app where you drink a virtual pint on your iPhone. In terms of music or video, I think consumers would be willing to tolerate advertising in order to get it cheap or free. I really think it’s possible.

JM – The problem is that companies like AdMob sell 40 trillion ads per day. The advertising method seems to be to put as many ads in as possible, with a philosophy of “where can we slip ads in where they’ll be tolerated?” It’s making us look like sleazy car salesmen. We can talk about this kind of advertising to each other all day, but we speak an alien language compared to the people on the street – this kind of thinking can’t continue.

Mod to JM – So what do you think people want?

JM – the same things they’ve wanted throughout history. The freedom to choose; to protect their privacy; to access their own info; for experiences to suit them and their friends; and to access concierge-style services that help them tailor their experience. I’ve been called a “futurist” but these are all ancient human drives and wants.

There followed a great exchange between SL and JM, which really highlighted the differences between good user-experience and the need to make a profit:

SL – Let’s look at the reality here. If you’re serving up entertainment content, that content needs to be PAID for.

JM -  you’re justifiying advertising?

SL – I’m not justifying it, but it’s about serving up premium content in an affordable way – we have to use ads to make this content free to the end-user. But we also have to use advertising that doesn’t trouble the end user.

JM – Why? If you treat people like friends, then great things happen. If you treat them like strangers, nothing good happens. Current advertising is like walking into a private dinner party and shouting at people. The only way to be inside a private dinner party is to be invited.

SL – That’s a very nice idea, but unfortunately we don’t live in that world. Good content needs to be paid for somewhere along the line.

Audience question – why isn’t the Blyk model of subsidising voice minutes and text more popular?

JM – I know of at least 17 operators in emerging markets that are looking at this model. This is a model where you have interest-based, relevance-based discussion between providers and consumers, and it’s going to become more and more popular.