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Analyst Angle: For mobile advertising, orchestrate don’t dominate

<![CDATA[Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Is mobile advertising broken? Or is it just early days?
The jury is still out on that one. But there is no ignoring the gap between the amount of effort companies invest in mobile advertising campaigns and the actual results they produce.
Granted, some well-executed (translated: targeted) campaigns report an average response rate of 25%, (I’m thinking here of Blyk, the world’s first ad-funded MVNO turned media company that has purposely focused on the 16-24 year-old demographic, one that has expressed a keen interest in hearing what brands such as Coca-Cola and L’Oreal have to say). But these are the exception to the rule.
Do the math and click-through rates (CTRs) on mobile ads are generally between 1-3%. The good news: It’s more than the 0.05% CTRs brands get from online banner campaigns. The bad news: It still represents a 97-99% fail rate. Would you build a business model on a medium that fails to satisfy over 90% of customers? Not likely.
This disconnect is a growing cause for concern. Predictably, the lack of real mobile marketing success stories reduces the enthusiasm of major brands to invest in mobile advertising in the first place. And around we go.
But it’s more than a Catch-22 for advertisers and carriers. It’s a vicious cycle that threatens the health of the global mobile business ecosystem if we consider that the vast majority of content companies, app store developers and mobile carriers have already bet the farm on the uptake of mobile services increasingly subsidized by mobile advertising.
The pressure is on to make mobile advertising deliver. But so far it misses the mark.
Ironically, the solution and the problem may be identical. This was the eye-opener during an invitation-only mobile advertising workshop I attended during Mobile World Congress (MWC). The event – hosted by Ogilvy, a global advertising agency – brought together companies from all parts of the evolving mobile advertising ecosystem (brands, agencies, mobile operators, enablers and technology companies) to discuss the current inertia and identify the catalyst for action.
Their conclusion: Communications – or more specifically a lack of it – is the reason why mobile advertising – despite the promise of significant revenues – remains in its infancy.
What is missing is a way to bridge the marketing and telecoms worlds.
Acision, a company providing messaging and charging services to more than 300 network operators and service providers worldwide, provides us a valuable blueprint. In February 2008, the company quietly and cleverly joined forces with OgilvyOne Worldwide, an interactive marketing company belonging to Ogilvy, to form a mobile marketing alliance. The alliance combines OgilvyOne’s mobile marketing prowess and Acision’s mobile messaging capability to potentially deliver creative and effective mobile advertising campaigns that harness scale (big networks) and deliver reach (big audiences).
Prior to the announcement, I had a briefing with Steven van Zanen, Acision VP of product marketing, responsible for the development of the company’s next generation messaging portfolio. His observations on the need for a common language are more pertinent than ever.
Recounting the initial meetings between OgilvyOne and Acision, Van Zanen used a few striking analogies from Star Trek to drive the point home. “It was as if one side was speaking English and the other side Klingon,” he told me. Agencies and brands talked metrics, and mobile operators and technology companies – true to their heritage – answered in multiplexers, milliseconds and messaging. Today van Zanen tells me the marketing alliance is well past this stage and well on its way to announcing some major news involving major brands.
Clearly, the industry has made significant and encouraging progress toward improving communications between operators and advertisers. Now the challenge is to bring together the four major parts of an effective advertising ecosystem – campaign creation, planning, distribution and result measurement (mobile analytics) – in a more joined up approach to mobile advertising.
Ochre – an ambitious and vendor agnostic digital advertising solution launched by Gigafone, a mobile marketing services group with offices in Russia, Asia-Pacific and Europe – shows that the best approach may be one that provides brands, agencies and mobile operators with a more holistic view of the value chain.
Ochre launched at MWC with nine partners from across the value chain, with more set to follow in the coming months. Companies include: AditOn, a company that delivers relevant content to the mobile phone idle screen; Icom Group, a media company developing products for mobile and Web focused on events promotion; Liquid Air, a company that has developed its own ad network specialized in podcast and in-game advertising; OwnSkin, an online theme creator that allows users to personalize their mobile phones; Palringo, a dynamic Instant Messaging service that includes location functionality; Sponge Group, a U.K. based mobile marketing agency whose clients include Warner Bros., Coca-Cola, Bacardi, and mobile operators Vodafone and Telefonica O2; Vizimo, a company specialized in and discovery technology to help users navigate content on TV, the web and mobile; Xtract, a company that profiles consumers by refining social interaction, behavior and demographic data; and Yodel Digital, an independent mobile advertising planning and buying agency.

Connect the dots and it’s easy to imagine opt-in mobile advertising campaigns that are matched to TV viewing (Vizimo), events (Icom), IM exchanges and location (Palringo) or in synch with our social graph (Xtract). And the list goes on.

Indeed, the Ochre ad platform covers the bases to benefit advertisers, carriers, and many of the other companies taking their place in the emerging business ecosystem. First out of the gates is E-Plus, Germany’s number three mobile operator. It has teamed up with Gigafone to trial mobile services supported by opt-in, permission-based, full-screen mobile advertising.

Brands are also on board for the German trial. More than 20 advertisers – representing industries such as electronics, fashion, automotive, and media – will be part of the Gigafone mobile service for launch. And Andrew Grill, Gigafone’s head of business development, tells me more European operators are lining up.

The takeaway
Mobile advertising is at a critical juncture. Fortunately, the industry recognizes the need to speak the same language. Now it must begin to tackle the channel fragmentation, which stifles the development of effective campaigns, and prevents agencies and brands from achieving and demonstrating return on investment (ROI). Gigafone’s approach shows that the industry not only needs to simplify the mobile advertising value chain; it underlines the preeminent importance of partnership. The end-game is about providing the planning and profiling capabilities that will allow advertisers to harness mobile to deliver the right ad to the right user and reduce wastage generated by blanket campaigns. Companies that form broad business ecosystems will most likely make it to the winner’s circle.
Peggy Anne Salz is the chief analyst and publisher of MSearchGroove (www.msearchgroove.com), an online source of analysis and commentary on mobile search, mobile advertising, social media, and all things at the intersection of content and context. Her drive to spark debate about issues impacting the industry at all levels has won her international recognition as a brave new voice in the mobile content market. She has established a successful consulting career based on vision, insight, versatility, and over 15 years of industry experience.

Contact Peggy at peggy
@msearchgroove.com. Contact RCR Wireless at rcrwebhelp@crain.com.
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