chuck levine's mobile presentation

MOBILEThe Dawning of

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ADVERTISING

Mobile ads will become a big business.

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Experts have predicted that over the next 5 years,mobile advertising will become a $2 billion business.

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JupiterResearch, 2008

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008

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Experts have predicted that over the next 5 years, mobile advertising will become a $2.3 billion business.LocalMobileSearch, a subsidiary of Opus Research

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008

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Experts have predicted that over the next 5 years, mobile advertising will become $2.3 billion business. LocalMobileSearch, a subsidiary of Opus Research

Experts have predicted that over the next 4 years, mobile advertising will become a $6 billion business.eMarketer

Experts have predicted that over the next 5 years, mobile advertising will become a $2 billion business. JupiterResearch, 2008

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Experts have predicted that over the next 5 years, mobile advertising will become $2.3 billion business. LocalMobileSearch, a subsidiary of Opus Research

Experts have predicted that over the next 4 years, mobile advertising will become a $6 billion business. eMarketer

Experts have predicted that over the next 5 years, mobile advertising will become a $6.5 billion business.Mobile Advertising: After the Growing Pains

And everyone knows how accurate experts can be…

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And everyone knows how accurate experts can be…

“There is a world market for maybefive computers.”

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And everyone knows how accurate experts can be…

“There is a world market for maybefive computers.” Thomas Watson, chairman of IBM, 1943

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And everyone knows how accurate experts can be…

“There is no reason anyone wouldwant a computer in their home.”

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And everyone knows how accurate experts can be…

“There is no reason anyone wouldwant a computer in their home.”Ken Olson, president, chairman, and founder of Digital Equipment Corp., 1977

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And everyone knows how accurate experts can be…

“No one,” he declared, “will everneed more than 640K of RAM.”

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And everyone knows how accurate experts can be…

“No one,” he declared, “will everneed more than 640K of RAM.”Bill Gates, ~1982

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And everyone knows how accurate experts can be…

“I predict the Internet will soon gospectacularly supernova, and in1996 catastrophically collapse.”

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And everyone knows how accurate experts can be…

“I predict the Internet will soon gospectacularly supernova, and in1996 catastrophically collapse.”Ethernet inventor and 3Com founder Bob Metcalfe, 1995

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And everyone knows how accurate experts can be…

“Everything that can be inventedhas been invented.”

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And everyone knows how accurate experts can be…

“Everything that can be inventedhas been invented.”Charles H. Duell, Commissioner, U.S. Office of Patents, 1899

The mobile market is growing rapidly.

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Harris Interactive, 2008

40M Americans already browse on their phones. (but that’s less than 20% of users)95M have internet access.

But, mobile ad growth has been painfully slow.

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While some users have mobile web access, they don’t use it much.6.4 sites per month vs. 100+ for fixed internet.

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Harris Interactive, 2008

And, users perceive mobile ads to be an intrusion

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Little or no perceived value.Perception that the user is paying for the ads.

Few people claim to be interested in mobile ads.

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On the other hand…

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And, other studies show users are interested in mobile ads.56% of teens.37% of adults.

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Harris Interactive, 2008

But… they want to be compensated for viewing ads.

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But they want to be compensated for viewing ads.Teens want cash and freebies:Cash (80%)Downloads (61%)Music (57% )Minutes (53%)

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Harris Interactive, 2008

But they want to be compensated for viewing ads.Adults want freebies and coupons:Free minutes (49%)Coupons (37%)Free entertainment (37%)

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Harris Interactive, 2008

The question foryou is when to enterthe fray, and how

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What will determine winners and losers?What role will the carriers play?Will the political environment play a role?

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How does our company invest intelligently?Should we lead or fast-follow?How do we offset the death of the mass market?How do we protect our brand?18% of marketers are already experimenting.

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JupiterResearch, 2008

What are the keys to success in mobile advertising?

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Mobile ad growth has been painfully slow.. But why?

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Carriers are not risk-takers.Dependent upon recurring revenue

Few are willing to risk being first

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• Churn is their biggest enemy

Advertisers see little value.

Most ads today are text/SMS

Screens are typically small and resolution is poor

Download speeds have been slow

Video resolution has been poor

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• Little impact• But 69% of adults and 64% of teens claim to prefer text ads

• Only 47% of teens and 35% of adults want images in ads

• Acceptance of video ads dropped 10% this year

Harris Interactive, 2008

Still, growth in thepast 12 months hasbeen 104%.From a small base, too.

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AdMob

But, most users stilldo not have theright equipment.

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The growth is likely to accelerate, and technology is an ally.

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Mobile phones are improving.

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Screen quality

Video capability

Location capability• Matching people & places

It began with the iPhone, but is rapidly expanding.

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The iPhone serves as a good case study.

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>30%of iPhone users

compared to 4.6% of all users

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watched TV or videos –

50%visited social networking sites compared to approx. 4% of all users

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Almost

30%visited YouTube vs. 1% of all users

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Of those…

59-85%of iPhone userssearch the web vs. 6.1% of all users

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74%listened to music vs. 6.7% of all users

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All of this was on a slow cellular network.

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That is shifting.

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Networks are improving.

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HSDPA/ HSUPA

CDMA Rev-A

WiFi

WiMax

LTE

What began with the iPhone, is rapidly expanding.

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Samsung InstinctBlackberry 9000Treo 800OpenMoko NeoLG Voyager

Carriers know a lot about their customers’ habits.

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New techniques are available.

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Interstitial advertising

And there is $$$ to be made.

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Social networks/internet sites

Ad agencies

Ad placement companies

Carriers

Advertisers

Carriers must differentiateor die.

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Majors are consolidating.

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Sprint / Nextel

Verizon / Alltel

AT&T / Cingular

It’s still questionable whether all can survive.

• Sprint & T-Mobile are most vulnerable

MVNOs are consolidatingor disappearing as fastas they appear.

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Helio is saved by Virgin Mobile

Amp’d & Movida disappear

Price has always been aprimary differentiator.

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Few admit it.Verizon - The network

Sprint - Sprint speed

AT&T - Coverage (more bars in more places)

Price has always been aprimary differentiator.

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But everyone subsidizes phones.

Price has always been aprimary differentiator.

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A huge part of the spending is price-based ads.

Price has always been aprimary differentiator.

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Mobile ads may allow price differentiation.Likely the first reason for carriers to get excited.

It’s happening in Europe.

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Blyk targets only the 16 to 24-year-old market. Profiled based on lifestyles and interests.

It’s happening in Europe.

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Free voice and data. 43 voice minutes and 217 texts a month per month.

Provided customers accept ads.

It’s happening in Europe.

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Blyk claims 29% click-through.Down from the 43% they claimed last November.

It’s happening in Europe.

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Over 100,000 customers in the first 7 months.

Blyk claims to be cost-effective.

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Are people buying or just clicking?

Medium Avg. Response Rate (%) Cost/Response ($)

Online Advertising 0.5 3.00

E-mail 2.5 4.00

Direct Mail 2.0 25.00

SMS Push 4.5 4.45

Blyk 29.0 1.06

Source: E-consultancy, September 2007, trade estimates , February 2008.

Social trends will also drive mobile advertising.

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People want to be connected.

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Facebook, MySpace, and about a dozen copycats every month. All are testing mobility.

Social trends will drive devices that are optimizedfor mobile advertisers.

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Driving more feature-rich phones

• Picture phones

• Video capability

• Full keyboards and simplified text entry

• Voice input

Likely to drive some location-based service.

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All of this is likely to take 2-3 years to mature.

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Why will people want mobile advertising?

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May reduce the costof phones / service.

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Location-aware

Preference-aware

Real-time comparison capability

Advantage vs. any other media

Or, if they believe it providesreal value… and it can.

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• E.g., buying a big-screen TV

How will people want mobile advertising?

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SMS/Text

Still Picture

Video

Appearance

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Search-driven

Location-based

Method

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Interstitial vs. featured

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Mobile apps can be mobile advertising.

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Free sites may drive brand awareness.

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But users need a relevant reason to view the site, and space is at a premium.

• Straight ads are unlikely to be effective

Mobile apps can drive revenue.

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Used correctly, they can also drive your brand.

But beware of backlash if the site is not perceived to be worthwhile.

Privacy may be a “black swan.”

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Privacy may be a “black swan, or the elephant in the room.”

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Is privacy a real consumer issue?

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Is privacy a real consumer issue?

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How many passwords do you have?

Is privacy a real consumer issue?

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How many passwords do you have?How many of those sites have written privacy policies?How many of them have you read?

Or a political issue?

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The black swan is now surfacing, and willextend the debate into the political arena.

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• On August 1, 2008, the FCC sent a letter to cable companies.

• Demanding information on use of customer profiles to tailor advertising.

• Recipients included Comcast, Cox, AOL, AT&T, Yahoo!, Microsoft

and 27 others.

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May delay broad adoption, but is unlikely to stop it.

• Opt in/opt out

But onerous restrictions could be imposed.

The black swan is now surfacing, and willextend the debate into the political arena.

Why begin spending today…

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…if the market will not really develop for several years?

Why begin spending today?

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Define the key success factors beforeyour competitors do

• Make mistakes early

• Radio to TV analogy

Build a case for your ROI

Can you testsuccessfully?

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Can you test successfully?

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Testing has been challenging in the mobile market

The market has moved quickly, and with seismic force• Bundled pricing

• Free handsets

• RF technology rollouts – 2G/ 3G

Find the right partners to begin testing

Mobile advertising IS likely toallow for testing

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Mobile advertising is less likely to move at thespeed of technology

• Social trends are slower than technology trends

• Bad news for mobile ad networks and agencies

• Good news for advertisers who start early

Recommendations

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RECOMMENDATIONS

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Make mistakes now!

RECOMMENDATIONS

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Recognize the risks.

RECOMMENDATIONS

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Develop an ROI model.

RECOMMENDATIONS

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Understand the keysto success inmobile advertising.

RECOMMENDATIONS

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Look for opportunitiesto differentiatewith partners.

?Questions

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