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Mobile Advertising Opportunity 2008-10-15

Ericsson AB 2008 1

Opportunities of mobile advertising


Ericsson AB 2008 2Ericsson AB 2008Ericsson AB 2008 2Ericsson AB 2008 2

2008-05-25

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© Ericsson AB 2008 Mobile Advertising Opportunity 2008-10-152

The mobile advertising landscape

Some operators estimate 1-5% of tot. revenues may come from‘mobile advertising’ in 5 years time

The mobile is an unique marketing channel because it is personal, interactive and always on

Expected to generate substantial revenues in the future

50% of brands say they will spend 5-25% of their ad spend on mobile in 5 years time

Mobile advertising has created a lot of hype but also a lot of uncertainty among all parties involved such as operators, brandsand agencies. The forecasts for mobile advertising spend vary depending on source but it is clear that the revenue potential is there but there is still uncertainty regarding the exact size and timing of the

market. The figures we see from various analyst vary greatly depending on what markets and factors they include in their estimates (mobile

banners only, with/with out SMS marketing etc).

At the same time the mobile provides us with some unique capabilities:

The mobile is personal and always there

The mobile has become one of our most personal possessions. We rarely leave the house without it, along with our wallet and keys and we don't lend our phone except in emergencies. And everyone has one and the mobile device contains personal and private information. Also, now that the mobile provides information and content in addition to voice, it would appear to be the ideal platform for personally targeted advertising where you 'know' the user, as opposed to the Internet where you only 'know' the PC.

The mobile is always on

Many people sleep with their mobile device and it is always on - sad but true. The user is out and about, the device is always on and when you add location information it becomes really interesting

It is interactive

We can start to interact with individuals in a direct and interactive way


Ericsson AB 2008 3


Behaviors are changing Driven by the youth….

91837383Watch TV

10315431Browsing the internet

6102312Watching or listening on media content

58473347Reading newspaper/magazines

55-6925-5415-24Total% who do daily

Source: Ericsson ConsumerLab study Czech Republic 2008

Instant Messaging 47% Weekly

Communities 29% Weekly

YouTube (or similar) 40% Weekly

Voice 93% Daily

SMS 92% Daily

MMS 19% Weekly

This year Ericsson Consumerlab did a extensive study of the CZ ICT market including over 1500 face to face interviews with a representative sample of the CZ population. The study covered values, attitudes, behaviour and current and future usage of mobile services, fixed services and Internet services. For example, we see a change in media consumption going from traditional type of media to online consumption and this is very much driven by the young population. One example, is that now, for some segments the Internet and Youtube has become the primary source for watching entertainment , news and music

Observing how media is consumed and how time is spent and comparing the Czech youth vs. the more mature Czech population we detect an ongoing change in media consumption

To a large degree driven by ICT usage


Ericsson AB 2008 4


Online advertising market in CZInternet ad spend an indicator for mobile advertising potential

� Time shift in media consumption is not being fully reflected in advertising spending yet, Change Takes Time…

� Total ad spend in CZ ~ 1.1 billion Euro

� Online ad spend in CZ ~ 170 mEurocompared to Sweden ~ 420 mEuro

� 20% growth of online in CZ compared to 5% for total media spend

� Mobile ad spend in Sweden 2007, 5.3 mEuro expected to grow to around 50 mEuro 2010

TV45%

Print31%

Radio9%

Online15%

Ad spending distribution in CZ

Source: Media agency OMD, Svenska Dagbladet

Mobile advertising is still a very small market both in more developed online markets such as Sweden and also in CZ

Internet advertising spend can be considered a strong indicator of the degree to which brands have embraced electronic forms of advertising and can be an indicator for mobile advertising potential. Online ad spend in CZ is 170 million Euro, which is around 30% on what is spend on the TV medium. In Sweden the change in media spending has evolved faster and online ad spend in Sweden is around 420 mEuro, which is same as TV, the same figure for Austria is 270 mEuro.

Mobile advertising turnover in Sweden last year was 5.3 mEuro (1,25% of online spend) expected to grow to around 50m Euro 2010, for Cz that would be around 2 million Euro, with same growth rate the value in the CZ market would be around 20 million Euro

US: 55

Sweden 31 Euro in 2006


Ericsson AB 2008 5


� High share of early adopters

� They are driving change

� High interest for new services

Relevant for who?Who would be the target for mobile advertising in CZ?

Base: Main mobile phone userSource: Ericsson ConsumerLab Czech country study 2008

Consumer interest in mobile advertising in CZ

� Favorite brands = friends

� Interest related brands = accepted to certain degree

� Any brand = not in my mobile

42%

32%

25%

17%

49%

34%

30%

21%

0% 10% 20% 30% 40% 50% 60%

15-24

25-35

35-44

45-59

Ads via SMS/ MMS Special promotions based on location

Age

Interest

But the interest is there and the interest is much higher than in many other markets….High share of early adopters in Czech Republic compared to other

European markets (over 30% defined as early adopters)

Provides a good potential for new servicesHave a lot in common with other early adopters in the rest of EuropeCzech Republic is a mobile centric market compared to other

European markets

Low fixed usage today expected to decline even furtherThe convenience of the mobile is the primary reason for not using fixed28% use VOIP on a weekly basis which is high compared to other markets – offers possibility for mobile operators to attack the declining fixed phone marketUsage of mobile phones services is still quite basic but in line with

other European markets

SMS is very high (91% use it on a weekly basis)The early adopter segments are driving changeThere is a high interest for new mobile services There are barriers in the market for using mobile VAS services - not only price but also information, awareness and configuration related

Similar to the analysis of advertising channels that are allowed into consumers’ private sphere, different brands are accepted to a varying degree depending on the intimacy of consumers’ relationships to the brands.

A consumer’s favourite brands are perceived more in terms of friends than in terms of commercial actors and are therefore accepted as something that actively enhances and enriches the consumer’s life world.



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Mobile advertising opportunities

� Operators– New revenue stream– Differentiation– Speed up consumer adoption for new services

� Consumers– Subsidized content and services

� Advertisers– Targeted - messages must be more engaging and

relevant to be of interest– Interactive - orientate their values around

connection and sociability

� Agencies– New area of expertise and improved campaigns

There are opportunities for all players in the value chain….

Operators

ARPU is flattening out and operators need to find new revenue sources.. For the operator it could mean several revenue openings:New revenues

selling and leveraging inventory on their own mobile portals and enablers, increasing data traffic in their network, as well as selling information such as location from their network, and billing opportunitiesDifferentiate

Could also be a way to differentiate and reach out to new segments in the market, to some exten what the Czech operators have done today, BLYk would be another example or VIPnet in CroatiaDrive adoption of new services

Could also be away to speed up the adoption of new services and reach out to new customers offering subsidised services to the consumers.Reduce churn

Banner ads to pre-paid customers, convincing them to switch to post-paidBanner ads to post-paid subscribers two months before their contracts end, convincing them to renew for another yearPromote content partners

Promote content partners on the WAP deckFixed partner ad positions can be sold (or given) to content partners

Consumers

Consumers will not open their wallets every time a new premium service is launched so the possibility to receive subsidized content and services in regards to their needs and interest would be attractive for at least some segments. For the Consumer mobile advertising provides the opportunity to receive personalize and interactive messages at the right time in the right context, if that happens that could actually be seen as a benefit for the consumer.. Also, certain segments are expected to be more positive towards non-traditional forms of marketing and advertising such as mobile advertising and the Internet

Advertisers

•New type of media consumption from traditional to online., Fragmented youth attention - Marketing messages must be more engaging and relevant to a much greater degree than in the past•Many large buyer of advertising is cutting down on TV ad spend and increase the expenditure on Internet channels•Decreasing effectiveness of TV as an advertising medium, Brands will more strongly orientate their values around connection and sociability •40% of major Eurpoean brands have already deployed SMS campaigns, and 18% have deployed MMS campaignsAgencies

The Agencies can use the mobile advertising opportunity to develop a new area of expertise and improve the results of their clients campaigns. Ability of mobile advertising to be highly personalised and targeted – will push up the rate cardFor advertisers the mobile channel present an opportunity to reach relevant customers in a time when traditional media like TV is starting to lose the customers attention. Web and mobile marketing will more commonly fit alongside traditional media but bring an increasingly personalized and customizable way to engage an audience* Hard to reach their audience, the cost for reaching the same audience has increased(fragmented media consumption). Especially the youth segment. They decide when, where and how they consumer media.

Ex: in 1965 – reach 80% of the adult US in 3 60s commercials. Now it takes 120 prime time commercials for to obtain the same reach. (source: MediaVest, MMA Forum June 07)



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Industry challenges and barriers

� Operators– Lack of knowledge and inventory to monetize

� Consumers– Fear of intrusiveness

� Advertisers– Uncertainty of Return on Investment

� Agencies– Expensive and difficult to buy mobile

advertising

But there are also challenges….

Operators

For many operators this is a new type of business environment representing a fundamental shift in how to do business, moving into a more media and lifestyle type of business.

They often do not have the competence and resources to handle this new environment and are still uncertain of the opportunities

Consumers

It is still uncertain to what extent consumers will accept advertising on there mobile although response figures are quite high and early trials have been quite positive especially within certain segments. The key question would be opt-in, what segments to target and what are the incentives for the consumers

Advertsiers

Still in the beginning phase and advertisers are still uncertain of the potential of the mobile channel, what they can do outside SMS push and the ROI. They see it as a powerful channel with SIM penetration of 130% in CZ. For advertisers it is about reach, frequency, relevancy and ROI

Agencies

the challenge is that the medium is still immature, lacking standardized metrics and a common buy and sell ecosystem. Also as long as therevenues within this medium are small and other mediums still are attractive they would focus on these areas.


Ericsson AB 2008 8

Ericsson Networked Advertising 2007-06-13

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Revenues

It is all about Relevance and Reach

� Delivering the right content in the right context to the right person

� Targeted and personal, but not intrusive

� Reach as many people as possible

� Across media, platforms, devices and territories

Relevance Reach

But we cannot forget the advertisers and agencies…..

Advertisers will not start to pull in money just because we have a 130% SIM penetration in the CZ market. Advertising is all about relevance, reach and frequency of consumer engagement

Delivering the right content in the right context will be key for both advertisers and consumers when it comes adding value and increase revenue for different stakeholders in the Mobile advertising value chain.


Ericsson AB 2008 9

Ericsson Networked Advertising 2007-06-13

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Relevance is keyRelevant targeting is one of the major factors differentiatingmobile media from other advertising windows

AnonymousAdvertising

Ads are not basedon any targetingCriteria.

$5

CPM rate

Level of targeting

Contextual advertising

Ad based on contextual criteria, e.g. type of content, location.

$25

Personalised advertising

Ad based on specific, personal criteria, e.g. preferences, location, usage, time.

$50

Source: Eden Zoller, Ovum, May 2007

The targeting capabilities with the mobile channels is one of the drivers for the interest among advertisers and agencies.

Last winter Ericsson Business Consulting conducted a major study regarding mobile advertising interviewing several major stakeholders in the value chain around the world. Several players including major brands and media agencies concluded that relevant targeting is one of the major positive factors differentiating the mobile media from other windows.

This is a great opportunity for operators since they sit on valuable customer and location information in their networks, just waiting to be exploited. But it is also important to find a balance. The balancer is that the more you target in mobile, the more you can drive up the cost, but you sacrifice on the audience in CPM. Also the targeting capabilities should not be overplayed either. At this stage, few advertisers or perhaps even more the agencies want micro-segmentation and targeting at this point at the same time users may not be ready for such tight targeting either


Ericsson AB 2008 10


WAP

RBT

Voice

Mobile TV

Mobilesearch

Idle screen

Voicemail

Portals

Video

Music

Games

MMSSMS

How can we reach them? Many potential advertising bearers for operators

What operators do today

� Messaging wholesale

� Targeted Banners

� Pushed messages

� Mobile search

� Idle screen ticker `

� Ad funded/ free content

� Prepaid budget notifications

� Ad sponsored MVNO

� Ad sponsored sub brand

� Mobile TV advertising

� Tiered advertising

� Location based advertising

� Ad funded email services

And the operators has several channels to be utilized….

So far SMS far outpaces all other mobile channels mostly via short-code opt-inns. Outside messaging operators and off deck portals is where most advertising activity has occurred to date. Improved pricing, better user experience, better handsets and richer multimedia services will increase the adoption of the mobile internet and other value added services which will increase the interest for this services as well in regards to mobile advertising.

Targeted Banners

Typically on the operator controlled portal, launched by all major operators in WE

Push advertising

Dominated by SMS, MMS and WAP push, must be opt-in

Idle screen ticker `

AIS Thailand and Honda sponsored interactive content messages broadcasted twice a day, appearing on screens when phones were in idle mode

Advertising funded and free content

Free video clips accessed through a specific section on the 3 portal titled `Free Stuff‘ (3 UK)

Eg interstitials while loading a game - Many operators in test phase but few commercial launches

Subsidised and free content

Vodafone offered the same game at a standard price of £3, a subsidized price of £1, and also for free

Sudoku type game, with ads between the levels

A 6-fold increase in usage comparing full price to the subsidized - 60-fold increase when free


Ericsson AB 2008 11


What are they using?Potential advertising formats today and tomorrow…

Source: Ericsson Consumer Lab survey Czech Republic 2008

� 100% have a mobile phone

� Over 90% use SMS on a weekly basis

� Over 25% send/receive pictures on a weekly basis

� 45% of professional users send/ receive emails

� Around 20-30% browse the mobile internet regularly

� Over 40% of Young early adopters play games on their mobile

� Around 10-15% use Ringbacktones

� 15% is downloading full length songs monthly

� Around 5-10% is downloading video clips to their mobile

And a lot of the operators inventory is already used and the usage is expected to increase when prices go down, users gets better handsets, better and more interesting services…so a lot of inventory, some of more interest for operators and brands than others but it is important to analyseeach channel based on the opportunity and the strategy you have set as an operator


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Managing ReachOperators working together to make MA more attractive….

� 4 major operators in Sweden have launched a cooperation

� Agreed standard for formats, measurement and reporting (GSMA)

� One point of contact for the advertisers

� Ability to offer campaigns across the operators networks

� Reach. 2 Million (22% of Pop.)

� Major age group: 26–34 years

� Pricing: Depends on the place on site

� Revenue share between operators depending on number of views per site

“We realized that not even with our large market shares we can create enough interest among advertisers for the mobile channel so we asked ourselves the question: How can

we grow the market and make it more interesting? The answer was that we need to work together” (Johan Lindgren CEO of Telenor Sweden)

Source: Svenska Dagbladet

As I mentioned earlier the key is relevance and reach. We have talked about relevance but still the reach in markets such as CZ is still limited. In Sweden, a similar sized market as CZ, the operators have started a cooperation to increase the attractiveness of the mobile channel.

Publicerad: 30 september 2008, 10.23. Senast ändrad: 30 september 2008, 10.38

FYRAS GÄNG Sveriges fyra största mobiloperatörer Telia, Tele2, Tre och Telenor samarbetar för att få flerannonsörer att använda mobiltelefonen som en reklamkanal. Samarbetet beskrivs som en ”kataly-sator” för attfå fart på tillväxten inom den mobila annonseringen.

Hård konkurrens på mediemarknaden har gjort att mobil-operatörerna har tvingats gå samman i en gemensamoffen-siv för att få fart på mobilannonseringen.

Tillsammans lanserar de ett paket som ska göra det enklare för annonsörer att nå ut till de två miljoneranvändare i Sverige som surfar via mobilen.

–Det går inte ens med våra stora marknadsandelar att bli tillräckligt intressanta för annonsörerna så vi ställdeoss frågan hur vi skulle få marknaden att växa och kom fram till att vi måste göra någonting gemensamt, sägerTelenors Sverigechef Johan Lindgren.

Mobiloperatörerna har länge pratat om mobilen som nästa stora annonskanal. Än så länge omsätter mobilannonsering dock ynka 50 miljoner kronor, vilket kan jämföras med tv- eller internet-reklam som omsätter 4 miljarder kronor vardera. En droppe i havet sett till mediemarknadens totala omsättning på 32 miljarder kronor.

Skälet till att genombrottet har lyst med sin frånvaro är att det har tagit tid att vänja folk vid att använda mobilenför att surfa på nätet, men också att det har varit svårt och omständligt för annonsörer att placeraannonskampanjer på de fyra mobilsajterna, säger Tele2:s vd Niclas Palmstierna.

–Omsättningen för mobil annonsering har varit liten fram tills nu, men det har också att göra med attmarknaden inte har mognat förrän nu. Marknaden väntas växa till 500 miljoner kronor år 2010, och med dettainitiativ räknar vi med att påskynda den tillväxten, säger han.

I praktiken innebär samarbetet att de fyra operatörerna enas om ett särskilt annonsformat på sina respektivemobilsajter. Istället för att annonsörerna måste anpassa sina annonsformat till respektive sajt, räcker det med att annonsen utformas på ett sätt för att passa alla mobilsajterna. Annonsutrymmet ska förmedlas via säljbolagen Jumptab och Adiento, vilket betyder att annonsörerna endast behöver en kontakt.

–De mobila portalerna är väldigt populära idag, vi tror att annonspaketet snart ska ha en räckvidd somkonkurrerar med de största mobila sajterna, säger Telias mobilchef, Håkan Dahlström.

Den begränsade mängden surfare som varje enskild operatör har kunnat erbjuda annonsörerna har varit en bromskloss för tillväxten. En annan har varit den begränsade mätbarheten. För annonsörer är det i dagenstäta annonsbrus viktigare än någonsin att veta hur många mottagare de når, och vad de får ut av sinamedieinvesteringar. En del av samarbetet innebär dock att operatörerna nu sluter upp bakom en mätstandard


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� NRK – Mobile TV Interactive Advertising

� CNN Mobile – Ad revenue supported news portal

� Mobile TV Vodafone Spain / UK

� Daimler Chrysler – Promo Application

Ericsson experiences

NRKEricsson and NRK conducted the world's first trial of personalized mobile TV advertising. The trial has proven its effectiveness with a positive consumer response.The trial lays the foundation for a mobile TV advertising business model. For broadcasters and operators, the mobile TV application results in increased traffic and new revenues from advertising and paid interactions.

Turner

“a logical fit where the customers and mobile operators benefit thruogh Turner focussing

on providing innovative news and entertainment content to its global audience and

Ericsson providing the technology behind it”

�Mobile operators will be able to deliver access to Turner content through their own branded portalsAnd/or

End-users will have direct access to the CNN mobile site from their mobile devices (D2C) As part of a wide ranging deal, Ericsson and Turner are collaborating to develop Turner's internet, broadcast news and entertainment content for mobile multimedia environments.

The joint offering combines the delivery of Turner’s news and entertainment content with Ericsson’s hosting and content management technology. The initial product launch for mobile users includes CNN News portal, Cartoon Networks and Adult Swim entertainment portals

Mobilization of Turner assets globally

Branded envrionement

News and entertainment content adapted for mobile multimedia

Focus om TV and video content

Advertising space

Enabled, operated and delivered by Ericsson Delivery of content through operator channels to maximise service quality and exploit 3G network capabilities

Vodafone Spain Mobile TV

New business model: live channels sponsorship



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Enabling and Orchestrating Advertising Inventory

2007-11-19

Ericsson AB 14


Ericsson helps to enable the mobile advertising industry acting in different areas

1

Orchestration

AdIndustry

Ad inventory enablers Orchestration tool

2

Orchestration

AdIndustry

Enablers and Enablers and

EnhancersEnhancers

Ericsson Advertising Ericsson Advertising

Orchestration EngineOrchestration Engine

3

Advertising networks

Orchestration Orchestration Orchestration

The Mobile Advertising Exchange

AdIndustry

AdIndustry

Country X

TechnicalTechnical

Ad networkAd network

• Ericsson offers a large range of inventory enablers like SMS and MMS, Mobile TV, Ringback tones, music solutions, IPTV and On device portals. We also provide data mining components that can help the customers increase the value of their ad space.

• The inventory enablers don't provide full value for our customers if we can't connect them to the advertising buyers in a good way. Ericsson provides an orchestration system that enables interactive and personalized advertising across platforms, that connects the available inventory to the advertising industry in an efficient way, as well as reports back the results of the campaign to the buyers.

• The solution is ready for trial Q4 2008.

1-2. Enable inventory and orchestration control; Ericsson support the customer in embracing the advertising opportunity by enabling inventory and components for CPM increasing information as well as a reliable orchestration tool.

3. The interfaces towards the advertisers is determined based on local conditions

When it comes to the third step of the Advertising strategy, our role is to aggregate the inventory of several mobile operators in a market, or a region, on a technical level and make it more easily available to the advertising industry. You could see it as an “orchestrator of orchestrators” that facilitates both campaign planning and result reporting across operators regardless of what ad platform they have installed.

The technical ad network consists of two parts; 1. Ericsson as a technical provider and integrator of the various stakeholders involved, and 2. One or several local sales partners who will interact with the buying side of the advertising industry and sell the available inventory from the participating partners. I have tried to illustrate this on the slide that I attach.


Ericsson AB 2008 15


Summary� Great interest for mobile advertising

� The key is relevance…for all players involved– Build inventory – reach, incentives, non intrusive

� Awareness and education– Innovate and develop credible trials/ proof of concept

demonstrating the effectiveness of this channel– Educate the advertising community about the opportunities,

capabilities and performance of the mobile channel

� Making it easier to do business should be a high priority– Standard formats, metrics and measurements – Cross-network connectivity needs to be addressed – More clarity around business models

There is a lot of potential in this industry if we do it in the right way.

There is a great interest for targeted mobile advertising through the mobile channel from both consumers, advertisers and operator perspective

The key is relevance for the consumer…

Message, Brand, Incentive, Format, User experience etc

…but also relevance for operators and advertisers

Revenues, Targeting, ROI, easy to reach relevant audience etc

Need to be innovative and produce credible trials/ research demonstrating the effectiveness of this channels

User acceptance, Metrics and measurement, Business models, Formats

Need to educate the advertising community about the opportunities, capabilities and performance metrics of the mobile channel


Ericsson AB 2008 16


microsoft power point johannison final

Documents

mobile advertising landscape

mobile advertising turnover

mobile device

cz internet advertising

advertising spendingyet

targeted advertising

online advertising market

estimates mobile banners