Analyst Angle: Mobile advertising gains traction around the globe

Editor’s Note:This article is an excerpt from RCR Wireless News’ March Special Edition, “The Perfect Storm – A Focus on Mobile Messaging, Marketing, Content and Apps.” The 80-page special edition is now available at RCRWireless.com.

In recent years, mobile advertising has gained good traction in markets outside of North America, such as Europe, Africa-Middle East, Asia-Pacific, and Latin America, with the emergence of many new players and new business models. Here is a quick overview of the states of the mobile advertising space in those markets based on discussions with various executives at the Mobile Marketing Association (MMA).

1. Asia Pacific: Advertising market dominated by SMS-based campaigns. Japan, Korea and Australia are out in front.

According to an MMA’s official in this region, SMS-based campaigns are still leading the way in the APAC region. In fact, according to the MMA, 60% of the mobile ad campaigns are SMS-based in APAC; the remaining 40% are WAP-based campaigns. Today, Japan, Korea and Australia are the most advanced countries in this region when it comes to mobile advertising

But countries like India, China, Hong Kong, and Singapore are set to become key mobile advertising markets based on the strong wireless growth and growing appetite for mobile solutions in those countries. We would also point out that in a country like Indonesia, mobile advertising adoption is skyrocketing. In fact, some research is showing that in this country, 620 WAP pages are being viewed per customer per month vs. only 250-270 WAP pages viewed on average in the U.S.

Moving forward, mobile social networking is set to be a key driver in the APAC region. In fact, today many mobile ad companies are trying to leverage the growing popularity of mobile social networking sites (Facebook, Twitter) in order to drive the adoption of mobile advertising. Leading mobile advertising companies include companies like The Hyperfactory, Madhouse, InMobi, BuzzCity, Mobile2Win, Affle, Buongiorno, Hunjama Digital Media, BlueBlade, WolfPac Mobile, ValueFirst, Velti, Zad Mobile, and MonsterMob, among others.

In order to drive the mobile advertising adoption in Asia Pacific, it will be critical to increase mobile Web and smartphone adoption in order to fuel the adoption of more advanced mobile ad formats (WAP banner ads, ad-funded mobile apps, pre-roll video ads, etc.). Making the content more appealing and localized will also be key here.

2. Latin America: Brazil leading the way.

Not surprisingly, Brazil, the biggest wireless market in South America with 170 million+ subs and an 85%+ wireless penetration rate, appears to be leading the way in the mobile advertising space in the Latin American region. Like in the APAC region, most mobile ad campaigns are for the most part SMS-based campaigns (e.g. short codes-based campaigns, etc.).

According to the MMA, in 2009, 30 major mobile ad campaigns sponsored by leading brands like Pepsi, Coca-Cola and Nestle ran in Brazil. Of note, the MMA expects this number to double in 2010. Not surprisingly, today mobile Internet-based mobile ad campaigns (WAP banner ad campaigns) are essentially out of reach for the large majority of low-income prepaid customers, which captures 80% of the Brazilian mobile market. In fact, the adoption of Mobile Internet-based campaigns like WAP banner ads remains low due to the low mobile internet adoption (10 Million+ mobile Internet users vs. 43 million broadband users in Brazil, according to the MMA).

This year, we should start to see more mobile coupon-type campaigns in Brazil. In 2010, free ad-supported text alerts are also likely to become a popular mobile advertising approach. Concretely, customers will be able to sign up to receive free text alerts (e.g. news, goals) about their favorite soccer teams. According to the MMA, in first-quarter 2010, we should also start to see the emergence of the first cross carrier SMS-based campaigns in Brazil. Later on, in 2011, as the mobile Web adoption starts to gain good traction and carriers start offering more flexible and affordable all you can eat data plans for prepaid users, mobile Internet-based mobile ad campaigns (WAP banner ads) should start to gain good traction. In fact, according to an MMA’s official, leading Brazilian carriers Vivo and TIM are currently testing a new billing platform that will allow customers to download content at no additional cost.

Of note, TIM is currently offering free navigation to its customers at night. I expect Brazilian carriers to introduce similar types of rich ad-supported mobile apps in 2010 and beyond. Lastly, it is worth pointing out that, according to the MMA, Brazilian ad agencies plan to allocate anywhere between 10% and 50% of their budget toward mobile ad campaigns in 2010. This clearly demonstrates the growing appetite for mobile advertising in this country.

3. EMEA region: One size does not fit all in the mobile advertising space.

One thing appears to be quite clear when it comes to the mobile advertising space in the EMEA region. There are various mobile advertising approaches depending on the region and country.

For instance, in Turkey, ad-supported ringback tones have gained significant traction there. Turkcell’s ad supported ringback tone service, powered by 4play, reached 200,000 users in early 2009. On the other hand, in African countries like Nigeria, South Africa or Egypt, “Please call me” services have become the most popular type of mobile advertising services. Of note, please call me services can be defined as USSD messages used to advertise, and are typically used by mobile users who are running low on airtime. Concretely, the message is sponsored by advertising and users can send a free SMS; the receiver getting an advert with the message.

This year’s World Cup, scheduled to take place in South Africa, should see the emergence of new ad-funded services as it presents a unique opportunity for mobile engagement between the teams, their fans and the brands. For instance, I expect to see free ad-supported text alerts being rolled out during the World Cup that soccer fans can sign up to to receive free feeds (e.g. goals, news, etc.) about their favorite soccer teams.

Of note, the South African market is one of the most mature and advanced mobile advertising markets in Africa as the associated response rates for mobile ad campaigns (10% to 25%) are much higher than the associated rates (1-2%) for traditional online advertising campaigns. In Western Europe, Blyk is probably one of the most successful ad-funded commercial based models. Through Blyk, mobile users can receive free airtime and send text messages in exchange for receiving ads.

Today, the service is exclusively available through Orange UK, and has been embraced by 1 million users in the UK. Another very successful campaign was the one launched by Coca-Cola Europe for Fanta. Concretely, Coca-Coca Europe targeted tech-savvy consumers in their 20s with two new mobile applications created to push its Fanta soft drink. One of those apps was The Fanta Stealth Sound System, which uses high-pitched frequencies that are audible only to young consumers who can hear them better than people over the age of 20.

The goal here was to allow young people to communicate with each other without adults hearing. Of note, in the UK, leading mobile advertising companies include companies like AdMob/Google, Amobee, and AdPhonic, among others. Generally speaking, in the EMEA region, I expect ad-supported ringback tones, in-game advertising, and branded apps to gain good traction in the years to come.

Bottom line: While it appears that Japan and Korea are currently out in front, followed by Europe and the U.S., other countries of the world like China, India, Hong Kong or regions like Latin America are set to close the gap in the coming years.

Today the growing popularity of smartphones at the world level is clearly playing in favor of mobile advertising companies that can now push mobile advertising campaigns going beyond SMS-based campaigns. As Mike Wehrs, former CEO of the Mobile Marketing Association, pointed out to me, 2009 has been the best year ever for the mobile advertising industry, with two to four times more activity than in previous years. According to Wehrs, there is also a shift in advertising spent from digital to mobile, with a 20% yaer-over-year decrease in digital advertising spending vs. a 20% year-over-year increase in mobile advertising spending. 2010 is set to be another terrific year for the mobile advertising market driven by developed markets like the U.S. and Western Europe, Japan, Korea, as well as emerging markets like Africa, the Middle East, China, India and Brazil.

Julien Blin is principal Analyst and CEO of JBB Research.