Mobile Operators Are At War
Mobile operators are trying to decide who’s most important – their ad sales guys or their content teams.
As those walled gardens start coming down, carriers are being faced with a dilemma: do they sell banner advertising to rival content providers or decline their cheques for fear that their own download revenues will be cannibalised.
This tug-of-war quandary came to public light at last month’s MEM event in Cannes when Lee Fenton, the recently departed COO of Jamba, told delegates that he’d like to do more mobile advertising if only more operators would permit it.
It’s a problem that is made more acute by the effectiveness of mobile internet ads, which work because they route consumers straight through to a WAP site; there’s no need to text a shortcode or click a WAP push link, both of which put users off.
Mark Curtis, CEO of UK mobile social network Flirtomatic, said: “Mobile is 250 times more effective than ads in the press or radio. And when you take into account ROI on mobile versus web users, it’s six times as effective as online advertising.”
There is some sympathy for operators. After all, many brands on the web don’t let competitors advertise on their sites. The difference here is that operators control so much of the inventory and traffic in mobile – and content providers so much of the demand.
It comes down to the old question of what kind of company operators want to be.
Stephen Upstone, managing director of European business at mobile ad agency AdInfuse, said: “Operators need to decide whether they’re media companies or not. They need to examine the business case comparing ad revenues against content – and then re-structure accordingly.”
The need to re-structure goes to the heart of the issue. One operator told ME: “As long as portals are run by category managers whose KPIs are based on own-brand content sold, then ad business will be turned away. The other challenge is that some operators count on-portal revenue as gross, but off-portal net. This means that off-portal revenues typically need to be three times higher than on-portal to generate the same amount of revenue.”
Against this, Upstone said one operator did a test in which it removed restrictions and found that ad revenues grew by up to 80 per cent, while content revenue fell by between 10 per cent and 15 per cent.
If this reflects the general drift of the market, then operators will need to think hard about their strategies.
One UK network exec admitted: “Ad targets are growing while downloads are falling, so we’re mindful that we have to embrace this as the way forward. If we piss off the agencies this early, we could set the whole market back.”