Wireless carriers reluctant to embrace mobile advertising

Telecommunications service providers see new business models as the primary drivers of growth in the future, but they are currently reluctant to embrace new approaches such as mobile advertising, according to a study from IBM Corp. The study indicates that service providers, particularly wireless operators, are able to capitalize on the mobile advertising trend because of the tremendous amount of customer data and insight they have. Carriers know when, where, and why consumers are using the network, and this can be leveraged for advertising purposes. But to date, providers have to do this in large numbers. But Bill Battino, managing partner, communications sector, global business services at IBM, says telcos' success in leveraging an advertising model will rely on permission-based marketing. Without this, he adds, consumers will simply turn off mobile advertising. Stuart McIntosh, a partner in IBM's strategy and change practice, explains that mobile advertising failed previously in the Scandinavian countries because the ads weren't relevant to the user and didn't fit with the experience they were seeking. He says times have changed, though, and lessons have been learned. "I think now there is a much stronger appreciation of the fact that if you're going to put advertising into somebody's media it has to fit in with the way that customers are actually using the medium, they are getting information which is very relevant to them," he tells Report on Wireless. "So even if it is intrusive, they say it's worth putting up with that intrusion because getting something out of it." They are already some examples of mobile advertising in North America, notably Virgin Mobile's Sugar Mama initiative which allows subscribers to gain free airtime minutes in exchange for listening to ads. Advertising in the mobile space is likely to grow beyond this type of barter system, particularly with the likes of Google and Yahoo playing a bigger role in the wireless sector. Battino says that Google has had a fundamental impact on the overall media landscape, and according to the advertising agencies, advertisers, broadcasters and the cable companies ad spends are about to make a dramatic shift. "They are predicting in five years, the platform companies - the Googles, the Yahoos, the MSNs - take approximately 30% of the current ad spend that we see today," he states. This shift in advertising dollars is forcing the carriers to decide whether to work through the platform aggregators, the advertising agencies or provision advertising themselves. Verizon Wireless, for example, is going to open its handsets and has already thrown its support behind Google's Android wireless handset software. McIntosh says carriers in Europe are also moving in this direction, partnering with Google. "They are actually opening up the device, opening up their networks to work fairly intimately with a company like Google in order to capitalize on their market positioning and expertise," he explains. With movement on this front in Europe and now starting in the United States, it stands to reason that Canada isn't far behind. To date, however, Canadian wireless operators have been reluctant to talk about their plans for mobile advertising. That may change come summer time after the upcoming spectrum auction is completed and new entrants begin talking about plans for their newly acquired bandwidth.

Wireless carriers reluctant to embrace mobile advertising

News | January 4, 2008

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