Mobile advertising has been around for some years, largely in the form of SMS and MMS-based advertising. Its potential as a way of targeting customers has long been recognised. UK network operators, O2 and Orange in particular, have been keen to get a slice of the action as a means to offset declining voice and text revenues.
But finding a way to target customers efficiently and without alienating them in the process hasn’t been so easy. Until recently, growth has been steady, if unspectacular. But all that is now changing, according to Carsten Frien, CEO and founder of Madvertise, the market leader in mobile advertising in Germany. The timely increase in mobile advertising has allowed Madvertise to expand aggressively and it has recently set up offices in London, Barcelona, Madrid and Milan.
Frien says: ‘Why have we moved into the UK? Because the UK is one of the world’s largest mobile advertising markets. According to the Internet Advertising Bureau it grew 116% between 2009 and 2010 to £83m, and the market is expected to double between 2010 and 2011.’
He reports that Madvertise is already seeing healthy revenues in the first five months of 2011. ‘The market is growing extremely quickly – faster than social media or online gaming.’
Smartphones driving growth
The huge market penetration of smartphones in the UK (around 41%) is, of course, one of the key drivers behind the growth in mobile advertising. The wider availability of smartphones has allowed more sophisticated forms of advertising to take off.
‘In the past it was MMS and SMS-based advertising,’ says Frien. ‘But in the last couple of quarters of 2011 we have seen the market develop very rapidly. You used to get a lot of standard banner advertising, but this year we have seen more interactive and rich media formats.’
Frien points to the use of full screen adverts, expandable adverts and mobile video adverts. And sometimes advertisers are even using an entire application. ‘You click on the banner and it opens up,’ explains Frien. ‘It is an app itself and it gives you the chance to do 360 product descriptions using little movies.’
Previously it was difficult to target a wide audience of mobile phone users, as media rich adverts had to be tailored to a particular mobile operating system such as Apple’s iOS. But that problem has now been overcome, according to Frien.
‘There are exceptions, but in general it is pretty standardised now, so you can run cross-channel and cross-standard campaigns,’ he says. ‘The Mobile Marketing Association has established creative standards that enable you to look at a mobile creative on a BlackBerry, Symbian, Apple or Android operating system.’
What really excites Frien about mobile phones is the opportunity they provide for location-based advertising. ‘Why is it so interesting and important?’ he asks. ‘It’s because it gives offline advertisers, who represent the majority of the mobile spending budget, the opportunity to geo-fence their location. If you only want ads within five miles of a physical outlet, you can very precisely target ads to customers who are close to a physical shop.
‘You cannot do that with fixed internet advertising,’ points out Frien. ‘Location-based advertising pinpoints a physical location and cuts out wastage. So you could just target one of the five London airports or the 800 Tube stations in London, or Liverpool. It provides an entirely new way of thinking about how to target consumers on the go.’
Network operators may want to find a way to use mobile advertising to establish an alternative revenue stream, but Frien says that some are using Madvertise to promote their businesses and boost customer loyalty.
‘We are running campaigns for all four German network operators: KPN, O2, Vodafone and T-Mobile,’ he says. ‘They are using Madvertise as a sales channel to sign up new customers.’
He reports that something similar is happening in the UK. ‘We have had a lot of briefs from O2, Vodafone, Samsung, Nokia and HTC, as they see the mobile channel as a sales channel.’
But the networks are keen to generate revenue for themselves from mobile advertising. Frien says that UK networks such as O2 and Orange are trying to monetise it via text messaging and banner ads, but competition is stiff.
‘If you look at the rankings for the high traffic portals, two years ago Vodafone, Orange and O2 were high up, but now it is the likes of Facebook and the BBC. Yes, mobile operators’ portals are growing, but in relative terms they have gone down the ranking over the last two years,’ says Frien.
What the newer portals have provided is increased choice for advertisers. New brands are emerging in the shape of smaller niche players, such as specialist gossip and sports applications. The result is that the big online providers are not necessarily the ones winning in the mobile space. So what can operators do to grab a larger share of the mobile advertising market?
Frien says: ‘If I was in the operators’ shoes I would use the data on my customers to precisely target the end users for advertisers. The operators hold a large amount of data on their users, so that is a real asset. They may know a bit about their financial status: are they high tariff users, for example, rather than pay-as-you-go; they know if they are male or female. They can really use that end customer data to differentiate themselves from other sites.’
The challenge of ensuring the adverts are relevant to the end user is still there, however. ‘You need a relevant ad for the end user or else he will get bored or see it as spam,’ argues Frien. ‘But that can be done on mobiles because we know so much more about him or her; where he is; what apps he has on his phone and so on. If a person has 10 sports apps on his mobile, it follows you might send him a sports ad. If he always walks by a Starbucks every morning, he might be interested in a 50% discount voucher for Starbucks.’
On the other hand, advertisers and networks need to keep a close eye on data protection law, as legislation is changing rapidly. The key is to ensure the end user is not identified personally. Alternatively, getting the end user to opt-in to being sent mobile advertising is the safest bet.
Unsurprisingly, Frien is convinced that mobile advertising is the way to go and Madvertise is planning to double its workforce every 12 months – it will reach a total of 70 employees by the end of 2011.
Frien says: ‘I think the entire industry – Google, Apple and Microsoft – all agree the market will grow by 100-150% a year. There has been a significant shift in the way people are consuming media now. They are gaming, reading, texting and emailing. Offline and online advertising is shifting to the mobile environment. Analysts are predicting a £1bn market in the UK, Germany, USA and the Nordics in the next three or four years.’