Download An overview of Mobile Advertising

An overview of Mobile Advertising
Karl Mikael Henriksson
Helsinki University of Technology
Otakaari 20 B 19, 02150 Espoo, Finland
Email: [email protected]
Abstract
3.1 What is mobile advertising?
This paper aims to define a general overview of mobile
advertising and to present a business case of Blyk. In
depth, this paper analyzes the methods of mobile
advertising and the challenges for the commercial
success of mobile Internet. The strategic advantage of
Blyk is also briefly analyzed.
Key Words
mobile, advertising, Blyk, Internet, marketing, business
1. Introduction
Bamforth et al (2006) suggests that the challenge of
modern marketing is that there are many sources of
information and entertainment that has led to fickle
audiences with short attention spans. The greater the
amount information sources available, consumers
become more fragmented. Thus marketing to a single
customer group is difficult. Mobile advertising offers a
broad reach and the opportunity of instant response
(Bamforth et al 2006).
The definition of mobile advertising has not yet been
commonly agreed upon, and some of the definitions are
rather vague. The aim of this paper is to define mobile
advertising and make an overview of mobile
advertising. Also, a business case of Blyk is included.
Mobile advertising can be extended to any mobile
device, such as GPS devices and laptops (Hein 2006).
This paper will however focus on mobile advertising on
mobile devices such as mobile phones and PDAs. The
impact of advertising to mobile Internet will also be
touched in this report.
2. Methodology
The results and findings of this paper come from two
interviews made in March 2008 and on assessment of
literature material as well as various sources found on
the Internet. The interviews were based on material
found from the Internet sources. The results from the
interview of Jari Anttonen, CEO of Add2Phone
contributed to the interview of Timo Ahopelto from
Blyk. The Blyk case was constructed based upon the
interview as well as several Internet sources.
3. Findings
Kotler and Keller (2006) define advertising as “any paid
form of nonpersonal presentation and promotion of
ideas, goods, or services by an identified sponsor”.
Haghirian and Madlberger (2005) found in their
research paper that there are several different synonyms
for mobile advertising: Wireless advertising, mobile
marketing and mobile advertising are used in various
literatures, yet they define the same phenomenon. In
neither of Kotlers works that he had written (2005,
2006) is mobile advertising defined. The dotMobi
Advisory Group (2007) describes mobile advertising as
“the usage of mobile devices such as cell phones and
mobile web browsers to deliver promotional messages”,
which follows the definition of advertising. For the
purpose of this paper, the dotMobi Advisory Group
(2007) definition for mobile advertising is sufficient.
Bamforth et al (2006) found that “Mobile phone
penetration is very high and many people are
comfortable with using voice and messaging services”.
From a marketing perspective, the mobile channel has a
far wider reach than for example the Internet, or TV and
radio.
The user rarely leaves home without the mobile phone.
It is also the most personal electronic device most
consumers own. A mobile phone has typically only one
unique user, thus it is a precise targeted communication
channel (Mobile Marketing Association 2007). It offers
not only broad reach, but also potentially frequent and
close contact due to its personal and portable nature
(Bamforth et al 2006). Effectively, the mobile channel
delivers excellent effectiveness for marketing
campaigns (Mobile Marketing Association 2007).
In the simplest form, mobile advertising is
advertisements in the form of text messages. However,
as of late the third generation mobile data networks
coupled with the advanced mobile Web browsers have
enabled a wide range of other advertising possibilities.
3.2 Mobile advertising methods
There is more to marketing than just promoting and
selling a good. In mobile advertising, there are four
distinct methods for creating more revenue through
marketing (Anttonen 2008).
3.2.1 Customer marketing
Customer marketing is marketing directed to existing
customers. The purpose of this type of marketing is
mainly to improve and keep up the customer
relationship. Typically operators use these in the form
of SMS and MMS notifications and updates.
3.2.2 Selling ad space
Operators can sell ad space to advertisers. Currently
SMS ad space is mostly used, but MMS is also
growing. Highly anticipated revenue for ad space is the
mobile Internet. The Mobile Marketing Association has
created guidelines for how advertising banners should
look on the Mobile Web (Mobile Marketing
Association 2007).
3.2.3 Part of a larger marketing campaign
Mobile advertising can be a part of a larger marketing
campaign based in some other media. Typically it is the
return channel for e.g. TV-advertisements. Mobile
advertising provides the method for tracking the success
of traditional marketing channels. Measuring the
success of traditional marketing channels has been
difficult. With mobile advertising as the return channel
for customers applying, the advertiser can directly
measure the success of the advertisement based on the
results gotten from the return channel.
3.2.4 Collection of customer profiles
Collecting customer profiles for creating specific
offerings to advertisers is a way to increase the offer
value for them. Matching the advertisement with the
right customers increases the response rate. By
identifying the advertisers target audience, an operator
can make a unique offer to the advertisers that use a
target marketing approach (Kotler 2006). Blyk uses this
approach through e.g. offering a target audience that is
interested in hearing about the concerts that the
partnership artists organize (Ahopelto 2008, Blyk
2007). The value to the end-users is increased as the
advertisements are more relevant to them.
According to Anttonen (2008) the typical methods used
are customer marketing and mobile marketing as part of
a larger marketing campaign. Both of these methods are
currently in wide use. Examples of the former could be
a notification that your car has been repaired and is
ready, and examples of the latter are participating in
contest through the mobile phone. In the future,
Anttonen believes that selling ad space will increase
dramatically. Several players such as Add2Phone and
DoubleClick have been pioneering this area (Anttonen
2008). Google wasn’t at all interested in mobile
advertising until the market for ad space started to
appear (Levy 2007, Anttonen 2008). In general terms,
many analyst companies expect that mobile advertising
will increase dramatically over the next few years (Brad
2007).
To reach the target segment can prove to be difficult.
However, whenever a marketing is directed to a mobile
user in form of MMS or advertisements on a mobile
web page, the marketer knows at minimum the phone
number, the phone model, the operator and what
country. If the marketer has not gathered information in
beforehand, he can still cross-reference with
demographic data. Ad space whether on the Internet or
SMS messages are often priced according to the
outcome. (Anttonen 2008)
3.3 Mobile advertising value chain
According to Vatanparast and Asil (2007), it is critical
to understand that the American mobile advertising
differs from the European model. In America, mobile
advertising as the focus of research consists mainly of
wireless Internet-based advertising, whereas in Europe
mobile advertising is understood as message-based
communication (Enpocket Research Report 2002).
Likewise Sgriccia stresses the point in his research
paper that the value chain differs between Asian
countries, which implies that there is no single clear
value chain (Sgriccia 2007).
Three distinct industries are taking part in the mobile
advertising industry: the advertising industry, the
content industry and the telecommunications industry
(dotMobi Advisory Group 2007). According to
Leppäniemi et al (2004) the mobile advertising value
chain is fragmented.
The mobile advertising value chain is the structure in
which stakeholders transfer value while creating,
providing, delivering and maintaining products and
services (Sgriccia 2007). According to Leppäniemi et al
(2004) these members include the advertisers, the
mobile advertising companies, the media owners, the
traditional advertising agencies, the network operators,
the technology providers and the customers.
Leppäniemi et al (2004) suggests that it is important to
notice, that the value-chain always commences with the
advertisers. The revenue that flows through the value
chain is mainly based on payments from the advertisers
to the mobile advertising companies for implementation
of the mobile advertising campaigns. In the case of
Europe, the media owners play a key role, as they own
the database of permission-based mobile phone
numbers. The permissions given by users are a
prerequisite for delivering mobile advertising in the
European Union. The network operators are needed for
controlling the distribution channel. The technology
used is innovative in the sense that it was not fully
specified and implemented some years ago, and thus it
is a critical component. Finally, the customers’
acceptance is the main factor. “Without consumers’
willingness to receipt the messages, m-advertising will
not survive.” (Leppäniemi et al 2004)
The dotMobi Advisory Group (2007) has a different
view: the advertisers, the advertising networks, the
content providers, the mobile services are the primary
players. The advertising agencies, the advertising
servers and content enablers are the supporting players
in this value chain (Johnson et al 2005, dotMobi
Advisory Group 2007).
Both the Leppäniemi et al (2004) value chain and the
dotMobi Advisory Group (2007) value chain work in
accordance with the traditional approach to viewing the
mobile marketing ecosystem, as presented and cited by
Becker (2005). In the light of this paper, both are viable.
3.4 The mobile Internet aspect
Internet penetration is high, and companies are looking
for ways to move some of the Internet experience to the
mobile domain (Bamforth et al 2006). Edwards (2006)
argues in his white paper that in order to understand the
challenge of the mobile Internet the differences to the
PC-based Internet must be analyzed. The ecosystem of
the PC-based Internet is open to all in such a way that
anybody can create content that anybody can access.
There is virtually no barrier of entry. Through making
use of the available technology, content providers have
been able to create businesses wherever they see a
customer need or a potential business opportunity.
Likewise, the evolution of the Internet has led it to a
point where no single entity owns the Internet, nor can
any company single-handedly decide the course.
Effectively the consumers are aware of how an open
system works, and thus are less tolerant of organizations
that try to control the given market.
The economic success of the PC-based Internet has
failed to replicate in the relatively closed mobile
environment. The operator challenge according to
Edwards (2006) is in “deciding whether to open up to
the mobile Internet in the same way, and how to do so
in a way that ensures the level of user experience is
maintained and customer value increased”.
2007). NTT DoCoMo’s internet enabling platform imode was launched in 1999 and has been a major
success in Japan. I-mode is a portal where any content
provider can create sites on, and they are ranked within
their categories according to their popularities. The
content providers get 86-91% of their revenue (Edwards
2006). Phones need to be specifically made for i-mode
to work. Many practical additions to business models
have been based on the utilization of i-mode as a
marketing channel. In this sense, Japan has been the
forerunner in leading the way into the wireless future
concerning mobile phones and their development into
practical business models (Ferris 2007). NTT DoCoMo
works together with the content providers to create a
win-win relationship for both parties. Content providers
collect up to 91% of the revenue, and NTT DoCoMo
does not have to pay for the content (Mennecke 2002).
The technical difficulties raised by the vast diversified
range of mobile phones available create barriers to a
seamless mobile Internet user-experience. Users are not
sure whether the site they are about to browse is
optimized for mobiles (Edwards 2006). In order to
overcome these difficulties, the Mobile Marketing
Association (2007) has developed guidelines for mobile
web advertising. These guidelines are meant for
producing more tailored mobile browsing experiences.
The dotMobi is a top-level domain designed to let
consumers know that a site will work on their mobile
phone (dotMobi 2008).
Despite the relatively closed mobile Internet, the main
challenge for mobile Internet and mobile advertising are
people’s attitudes (Anttonen 2008, Haghirian &
Madlberger 2005, Vatanparast & Asil 2007). In the
western countries, people are used to large screens and
high quality. In the third world rate of adoption of
mobile Internet is much greater than the adoption of
PC-based Internet (Anttonen 2008). Especially
concerned the relatively low price of a phone and the
high price of a laptop. The laptop is expensive
compared to the flexible phone. There, the value
perceived by the consumers is much larger as their
attitudes derived from living standards are lower
(Anttonen 2008, Vatanparast & Asil 2007).
3.5 Blyk
The mobile Internet can be expected to be the Internet
used primarily in the future (Ewing 2008, Ferris 2007,
ABI Research 2008). This is especially true in Asian
and African countries, where for many the mobile
Internet device is the first Internet device they’ll come
in touch with. However the adoption of mobile Internet
has been slow, mainly due to expensive flat rate pricing
of operators (Anttonen 2008).
The mobile Internet has proven to be a convenient way
to quickly access information. As users look more often
for information and services, the mobile Internet
provides for a new potentially vast resource for ad
revenue (Levy 2007). The main driver for mobile
Internet is the potential for mobile commerce (Sgriccia
This material is based on the interview of Ahopelto
(2008) except as differently mentioned. Blyk is an
invitation-only mobile virtual network operator
(MVNO) that links young people with brands they like
and gives them free text messages and voice minutes
every month. The mobile network is funded by
advertising. Blyk rents the network capacity from
established mobile network operators. Blyks business
model innovation concerns adding the advertisers to the
operator business. The revenues are collected from
advertisers instead of subscribers paying mobile phone
minutes (Ostenwalder 2007).
Blyk was co-founded by Pekka Ala-Pietilä and Antti
Öhrling. The Blyk business in the UK was launched 24
September 2007, and is at the time of writing the only
market Blyk is in. Currently Blyk has announced its
expansion to the Dutch market, and will later expand
Pan-European in 2008. Blyk has a target of a customer
base of 100.000 members after one year of operation.
3.5.1 Blyks unique offerings
Blyk has recognized what young people want and need,
and has built a service around that. Blyk offers free
communication, ease of use and relevant messages from
brands (about.blyk.com 2007). At the sign-up process
the customer has to discern information about himself,
in order for Blyk to be able to make their advertising
relevant to the customer. The sign-up process is quite
thorough. This way, Blyk has developed its offer by
finding out what Blyks members’ value most. In return
for receiving ads, Blyks members get each month 43
minutes voice and 217 SMS messages.
Blyks target customer group are young people 16-24
years old. Blyk has targeted this niche segment as it is
difficult to reach through traditional marketing methods
and -channels. Blyk utilizes three different channels for
acquiring new members:
In the member-get-member program a satisfied member
can invite his friends to the network. There is no extra
bonus for members that invite friends, only the friends
get value through being in the network.
Blyk uses also online advertising for growing the
customer base, as well as street teams that actively
promote and sign up new customers.
As an extra value for the young and hip, Blyk has
initiated partnerships with artists. Fans of these artists
may join Blyk and receive tour information and
exclusive offers from them (Blyk 2007). This increases
the response rate dramatically for the artists.
For the advertisers, Blyk offers a unique new media
channel. Through the offer, Blyk provides direct access
to the young and the hip. The competitive edge Blyk
has compared to traditional marketing channels is the
high response rate in proportion to the low cost of
advertising. In traditional marketing channels the
typical response rate is around 2%. Blyks response rate
and cost is summarized in Table 1:
Table 1: Blyk response rate and cost
Class/Value
Response rate
Cost (£)
SMS advertisement
41%
0,07
MMS advertisement
22%
0,22
Blyks response rate is exceptionally high due to the
relevancy of the advertisements. Blyk targets the
advertising to members based on demographic data on
the members, the members’ lifestyle and interests,
social networks they are in and usage patterns of the
members. Social networks are analyzed based on the
members’ calling and messaging habits; the usage
patterns is simply the time of the day when the
members use their phones. By linking the contents of
the advertisements to the members interests Blyk
ensures the relevancy of the advertising.
3.5.2 Strategic analysis
In practice, there are no competitors who can offer the
same response rate in proportion to cost excellence as
Blyk does. Effectively with a combined response rate of
29%, Blyk has a monopolistic position and the first
move advantage. The barriers of entry are the
technology which took Blyk 24 months to set up, the
brand and user experience Blyk has gathered and the
present advertiser relationships. As nobody else is
currently imitating in the same market, Blyk has a
significant advantage being able to form the necessary
relationships and accumulate brand and user experience.
The most important business aspect to Blyk is
maintaining the unique offerings. Through ensuring the
relevance of all advertising to members Blyk provides
superior value to their subscribers, while at the same
time ensuring the quality of the installed base via e.g.
strict authentication and cutting off inactive members.
Thus subscribers receive advertisements they are
interested in and advertisers get high response rates as
the installed base is clean.
Although an MVNO, Blyk has positioned itself as a
media company and thus competes with other media
channels such as magazines. Marketers targeting the 16
to 24 year old group typically place advertisements in
magazines such as “Loaded” and “She”. Their monthly
circulation is around 115000 and 169000 respectively
(IPC Advertising, National Magazine Company 2007).
Should Blyk achieve its target customer base, it will
become a clear strong new entrant in this niche.
However due to Blyks exceptional offering, in
competitive terms Blyk does not consider itself to
compete with either MVNOs nor media companies.
4. Conclusion and final words
This paper succeeded in finding a definition for mobile
advertising to use in the context of the report, despite
the fact that there is no definition commonly agreed
upon. Different ways for marketing through mobile
advertising were presented. Two different value chains
were presented and were both similar. The correct
definition of the mobile advertising value chain was not
in the scope of this paper, and thus both were presented
as viable mobile marketing value chains. The status of
the mobile Internet evolution was touched upon and the
commercial value of mobile advertising through mobile
Internet portals was briefly evaluated. However
challenges need to be overcome for mobile Internet
before it can become a commercial success. The main
driver for mobile Internet is the potential for mobile
commerce including marketing. A case of Blyk was
presented in the paper.
Further analysis concerning mobile advertising business
in the western countries could be conducted through
making a case of Mosh Mobile, an advertising funded
operator in the United States (MOSH mobile
Incorporated 2008).
5. Acknowledgement
Thanks to Timo Ahopelto and Blyk for the interview
concerning Blyk.
Thanks to Jari Anttonen, CEO of Add2Phone for the
interview concerning mobile advertising.
Thanks to Alexander Ostenwalder for his permission to
use his slide in the presentation.
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