Incentives Still Key to Mobile Advertising

Nearly all of the respondents to a Nokia-sponsored survey on mobile marketing agreed it would be more widely embraced if it provided a benefit such as keeping the cost of wireless services down.

Nearly nine out of ten (86 percent) respondents agreed there should be a tradeoff for accepting ads on their mobile devices, according to the study, which conducted by HPI Research Group. HPI interviewed more than 3,300 people across 11 global markets during June 2001 for the study. The markets were Brazil, Denmark, Germany, Italy, Japan, Korea, Singapore, Spain, Sweden, Britain, and the United States.

The study found that the core mobile phone market (ages 16 to 45) is receptive to experiencing mobile marketing in the form of a received SMS sales message. When asked about receiving an electronic coupon to be reimbursed at a nearby shop, 88 percent stated that they would be receptive to this sort of marketing. Nearly one-third (31 percent) expressed more enthusiasm by stating they would actually welcome such marketing.

The study identified four key factors as being important to consumers’ acceptance: choice — being able to decide whether or not to receive messages; control — being able to bypass sale messages easily; customization — being able to filter the types of messages received; and mutual benefit — getting something back in return, a reduction in the cost of services for example.

The study dealt with consumers who had expressed interest in mobile visual entertainment. Of these, more than three-quarters (76 percent) would find it acceptable if the programs they viewed were punctuated with very short ads. In fact, 51 percent of the respondents said that they would not see advertising as an intrusion if it were presented to them in the same way as on television. Once wireless bandwidth increases, this will be a viable way for mobile ads to be delivered.

HPI’s finding echo a report by Cahners In-Stat Group, which also found that there must be a clear benefit to end users from mobile advertising. The report, “Mobile Advertising: Not as Bad as You Think“, revealed that consumers first thoughts are to reject mobile advertising.

In fact, 64 percent of In-Stat’s Wireless Internet Panel respondents do not warmly embrace the concept of mobile advertising. However, responses from the same participants improve when mention is made of special offers or discounts that allow them to opt in.

“Just as sales drive consumers to stores, special savings will lure consumers in, and will make the whole process of receiving mobile ads more palatable to users,” said Becky Diercks, In-Stat’s director of wireless research.

SMS marketing has shown signs of promise in the mature European wireless market. A study by Forrester Research in conjunction with the Federation of European Direct Marketing (FEDMA) found that SMS can reach two-thirds of Europe’s 250 million European mobile phone owners.

According to the Forrester study, 21 percent of the 250 direct marketers surveyed online use SMS at least occasionally, 12 percent have tried it and 5 percent plan regular SMS use in 2003. The advantage of SMS marketing is that, unlike email marketing, it offers three types of campaigns — one-off push campaigns for awareness building; one-off pull campaigns for promotion; and continued dialogue for customer retention. One-time pull campaigns average 13 percent response rates, which outperform phone and mail alternatives, according to Forrester.

Spending on Mobile Content
Europe, 2001-2006
Year Spending
2001 $590
2002 $860
2003 $1,407
2004 $2,233
2005 $2,915
2006 $3,280
Source: Jupiter MMXI

There is another train of thought in the wireless world that believes mobile advertising is the wrong approach to take, and that charging for mobile content, or a business model that combines paid content with advertising, will reap more immediate rewards. Research by Ovum predicts that global revenues from advertising on wireless devices will stay below $1 billion until early 2004 and will only take off from 2006 onwards. But Ovum found that companies will be more likely to succeed in the wireless sector if they charge for content. A business model that hinges on paid content typically shares the content fees with the content provider and combines this with secondary revenue streams such as transactions and wireless marketing.

Such valued content would include information that has emotional or psychological pull (horoscopes) or is needed urgently (stock quotes), said Eden Zoller, a senior analyst at Ovum. The information would be delivered in a personalized, location sensitive fashion to any device. Ovum also recommends that service providers offer a mixture of paid for and free content from the start. This immediately helps to instill a sense of value in the consumers’ eyes — a clear message is sent that content is worth paying for. This also means companies will earn revenues from day one. A mixed content model offers basic services for free while a charge is levied for the more desirable, valuable premium content.

According to Jupiter MMXI, European consumers will spend €3.3 billion for content on their mobile phones by 2006, compared to €1.7 billion for content on their PCs. Mobile phones offer a much better billing platform than the PC.

In 2001, €590 million was spent by Europeans for content on their mobile phones, such as ring tones, logos, sports scores and stock prices. This is almost twice the €252 million spent on the PC.

“Increasing use of Short Messaging Service on mobile phones is good news for the media industry. Newspapers and magazines struggling to generate direct consumer revenues from their Web sites have more opportunity to charge for content on mobile phones,” said Jupiter MMXI’s Olivier Beauvillain. “They should use their Web presence as a way to promote mobile content with which they will be able to generate more revenues.”

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