Mobile Advertising and SDPs

The Revenue Stream of Future?

Martin Prošek, Telefónica O2 Czech Republic

15.9.2010

Contents

1.Mobile Advertising Overview

2.Potential Revenue Stream

• Business Models• Simple Business Case

3.Important Considerations

4.Architectures with SDP5.Experience with Mobile Advertising in O2 CZ

6.Assessment of Future Development

Introduction

• What is Service Delivery Platform...?• ...

• What could be SDP used for...?• Services, of course!

• What services...?

• Communication, information, entertainment, security, payment, wholesale...

• And Mobile Advertising!

• Could be Mobile Advertising the Revenue Stream of Future?

Traditional Revenue Stream

• Mobile subscriber pays to Mobile Network Operator• Calling, texting, e-mailing, browsing...

• These revenues are declining

Payment

ServiceProvider

RevenueShare

Mobile NetworkOperator

Partnered Revenue Stream (wholesale etc.)

• Business Partner pays to Mobile Network Operator• Mobile subscriber just receives service (e.g. bank balance daily notification)

• Mobile Advertising uses the same model – Advertiser pays

• So the Mobile Advertising is a promising source of revenue

Mobile NetworkOperator

Payment

BusinessPartner

Mobile Advertising

• Similar to web advertising

• Reach far greater than related web advertising

• Mobile phone is personal – allows targeting

• Interactivity increases advertising effect

• Operators started to utilize their opportunities

• Operators had best start position

Types of Mobile Advertising – examples

• Traditional Mobile Advertising• SMS and MMS campaigns

• Advertising types originated in Internet• Banner advertising at mobile web pages

• Text and links

• Sponsored search

• In-application Advertising

• Sponsored games

• Video – sponsored video or TV

• Download – sponsored application downloads

• Calling – sponsored calling

Role of Mobile Network Operator

• Dumb pipe – no involvement (no revenue)

• Smart pipe with support of Advertising Partners

• Smart pipe and own advertising sales department

• SDP is important tool to defend operator place in the value chain

Mobile Advertising Business Models

Assuming that dumb pipe role is omitted – otherwise the operator is out of the chain

Business model examples:

• Add ads to existing services and sponsor them – increase loyalty• Use available space and monetize it – new revenues

• Create new distribution channels – new revenuses

• Revenue from not presenting ads...?

Common pricing models:

• CPM – pay per impression (cost per thousand)

• PPC – pay per click

Important parameters:

• CTR – Click-through rate

• Conversion rate

Potential of the Mobile Advertising Revenue Stream

Is it the Killer Application?Or Cash Cow?

No, it does not look like cash cow yet, but – multiplication, better targeting with higher prices...

Let us calculate simple business case for mobile portal banner advertising:

• Unique users: 1 million per month, 100 thousand per day

• Average session length: 10 minutes

• Amount of banner impressions per session: 10• CPM 0.1 €

• Revenue = 100 € per day (3 k€ per month)

• Another case for SMS campaign:

• Addressable users: 1 million per month, 33 thousand per day

• Campaign throughput: 1 SMS per second

• CPM 8 €• Revenue = 264 € per day (8 k€ per month)

Important Considerations

• Advertising is very sensitive service• It must not bother subscribers – disastrous example is

e-mail spam (also legal issue)• Maximization of profit from mobile advertising might

cause enormous churn• Privacy concerns – not possible to disclose personal

profile to 3rd party (prohibited by law)

• How to overcome it?• Give incentives to subscribers – free services sponsored

by ads• Target ads – subscribers would receive only relevant ads

that they would appreciate (discount coupons etc.)• Add ads to messages that would be sent to them anyway

(service messages like call completion notification etc.)

• Effective technical solution requires presence of SDP

Quick Feasibility Assesment

• Mobile Advertising is growing opportunity where operators should claim position in value chain

• Mobile Advertising could be the revenue stream of future

• It is meaningful to use SDP

• But not at any cost – the revenues would not be so high*

* Example: failure to launch Blyk as fully ad sponsored network

Technical solution

• Basic Landscape• Important Parameters

• Architectures for

• Banner Advertising • Messaging Campaigns

• On-line Campaigns

• In-application Advertising

• ...

Basic Landscape

The main functional blocks are:

• Mobile Device

• NW Platforms

• Ad Server

Important parameters:• Subscriber profile (gender, age, education, home location, monthly spend, interests...)

• Location• Access NW type (2G, 3G...)

Network Platforms

Ad Server

Get profileServe ads

Architecture for Banner Advertising

The banners are displayed as inserted to the web pages (e.g. mobile portals).

The insertion of Ad codes should be made by service provider (Java Script or link to a dynamic image).

The targeting profile can be transferred already in-band using HTTP headers

Network Platforms

BrowsingProxy

BrowsingProxy Service BusService Bus

AdaptorsAdaptors

BSS/OSSBSS/OSS

B2B GatewaysB2B Gateways

Ad Server

Banners

Internet

Profile for targetingBrowsing

Architecture for Messaging Campaigns

The message ads can be received on almost any device –from legacy mobile phone to cutting edge latest smartphones.

They might be many types of messages: SMS, MMS, WAP Push...

The list of subscribers to be addressed has to be prepared in advance.

Network Platforms

Service BusService Bus

Messaging CentreMessaging Centre

BSS/OSSBSS/OSS

B2B GatewaysB2B Gateways

Ad Server

Target base list (off-line)Messages

Architecture for On-line Campaigns

Important option is advertising in service messages – when any platform is sending messages that the subscriber wants to receive.

Another option is to provide sponsored calling.

The Ad Server receives request from the Service Platform amended by the subscriber‘s profile.

The Service Platform retrieves the ad text from SDP.

Network Platforms

Service Platform

Service Platform Service BusService Bus

AdaptorsAdaptors

BSS/OSSBSS/OSS

B2B GatewaysB2B Gateways

Ad Server

Advertising Messages (incl. user profile)

Architecture for In-application Advertising

Application running on the device is displaying ads that are retrieved from Ad Server.

Operator can enhance the communication with the Ad Servers.

But usually the operator is bypassed (e.g. Gameloft, EA Mobile, Google or iAd).

The targeting profile can be transferred in-band using HTTP headers of retrieved from B2B GW.

Network Platforms

Service BusService Bus

AdaptorsAdaptors

BSS/OSSBSS/OSS

B2B GatewaysB2B Gateways

Ad Server

Advertising Messages (incl. user profile)

BrowsingProxy

BrowsingProxy

Practical Experience from O2 CZ

• Czech market• O2 CZ

• Advertising inventory and portfolio

• Solution example• Plans

Czech Market Overview

• Small country, 10.5 million of inhabitants• More than 14 million mobile subscribers

• 3 mobile network operators:

• Telefónica O2• Vodafone

• T-Mobile

• Biggest internet portal is not Google – it is Seznam.cz

• O2 CZ is providing Mobile Advertising services already for many years

• Other mobile operators as well...

• Big competition from Internet players (Seznam.cz, Google...)

O2 CZ Advertising Inventory

SMS support in devices in the network• 99 %

MMS support in devices in the network

• 66 %

Web browsing support in devices in the network

• 83 % (but only 36 % is active so it is actually about 30 %)

Ad adaptation to particular device is necessary

O2 CZ Advertising Inventory

SMS/MMS campaigns• About 5 million of addressable subscribers

Service SMS• Who Called Me (Called Party unavailable) –

monthly 16 million messages

• Call Me Back (Calling Party has no Prepaid Credit) – monthly 300 thousand messages

• Recharge Me (Calling Party has no Prepaid Credit) – monthly 60 thousand messages

Mobile Portal• More than 500 thousand unique subscribers

monthly

Mobile TV

• Both for 3GPP mobile phones and iPhone

O2 CZ Mobile Advertising Portfolio

http://www.petmilionu.cz

SMS/MMS campaigns

• CPM 200 CZK (8 €)• CTR 1 - 1.5 % (with good targeting up to 7 %!)

Mobile Portal Banners

• CPM 2.5 CZK (0.1 €)• CTR 1.1 %

Call Completion (Who Called Me)

Kvido sponsored voice calling (mainly for fixed lines)

Sponsored SMS web gateway• Web page advertising

• In-message advertising

O2 CZ Mobile Portal Banner Advertising Solution

Currently no particular SDP solution in place

O2 CZ Plans for Mobile Advertising

• Continue and further develop current advertising services using group Amobee Ad Server

• Improve accuracy of targeting• Add new advertising channels

• Work on 3rd party advertising support.

• Utilize common group platforms as UNICA SDP when they are ready.

Assessment of Mobile Advertising Future Development

• Market perspective

• Leading technologies and expected strategies

• Apple iAd

Mobile Advertising Market Perspective

The segment will definitely grow: • There are 4 times more mobile phones than TV sets already.

• The banner response rate (CTR) is much higher than on web (more than 5 fold).

• Mobile phone is personal device – ideal for targeting.• User can be identified – effectiveness is easily measurable.

Extrapolation of further development in the area:

• Established fixed Internet players as Google, Microsoft etc. would expand.• With mobile phones capabilities fully supporting Internet there will not be big technical

difference.• With SDP almost every company would be able to reach all the mobile advertising

methods.

• Operators will be able to monetize user profile (anonymised) using SDP.• Users will be defending – on technical level (antispam, antiadware...), on legal level

(privacy laws...).

Leading technologies

Display advertising - banners, links, search, sponsored applications...

Apple

• iAdThe others will follow as they already did for touchscreen phones and application stores.

Google

• AdSense, AdMob

Other players

• Microsoft • Nokia

• AOL

• Yahoo

• Jumptap• Greystripe

• Millennial Media

• Adware providers (Tribal Fusion, Zango...)

Apple

iAd• In-application advertising

• iAd network launched July 1, 2010 through Quattro

• Already when announced it caused lot of controversy by blocking competitive ad networks (limiting T&C)

• Apple is trying to establish new kind of advertising platform

• premium – minimum account spend of $1m • advertisers will not only pay a CPM $10, but also a $2 PPC

• revenue share with developers 60 %

• Focus on North American market now – it might be expected that some markets will be omitted – similarity to iTunes

• Technically interesting – HTML5, try to supersede Adobe Flash

• Implication for operators • they are forced to be dumb-pipes

• Apple is trying to avoid telcos as much as it can (WiFi...)

Advertising sponsored softwareware

Summary

1. Mobile Advertising is the revenue stream of future, but it cannot replace current streams

2. The revenue source will grow stronger in the future and is really showing the money already

3. Operator has still chance keep its position in the value chain - but must provide value and do it sensibly

4. SDP is a key enabler for it

5. Apple is a trendsetter – expect spread of ad sponsored applications

6. Operator might to decide to join this trend as application developer or might boycott it

Thank you