An overview of Mobile Advertising
Karl Mikael HenrikssonHelsinki University of Technology Otakaari 20 B 19, 02150 Espoo, Finland
Email: mikael.henriksson@tkk.fi
Abstract
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
3.1 What is mobile advertising?
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”.
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
2007). NTT DoCoMo’s internet enabling platform i-mode 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
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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