Mobile Advertising: More Talk than Action in 2007

Apple iPhone, the mobile darling of 2007, and lesser known Wi-Fi enabled handsets set the foundation for mobile advertising in coming years, industry analysts said.

This new generation of devices offer capabilities, such as high-speed data connections and Wi-Fi access, that stand to lure more consumers to access the Web using mobile devices.

“The iPhone itself wasn’t amazing,” said John Hadl, founder and CEO of mobile advisory firm Brand in Hand. “The interface plus Wi-Fi enables consumers to want to use their phones in more ways, and that will affect mobile advertising in a big way.” The advent of Wi-Fi enables access to mobile Web content at higher speeds, and provides more consistent reception where cell towers might not reach. Retail outlets can leverage Wi-Fi to market to consumers while in a store or mall. Crowds at music and sporting events can be reached for sponsor or marketing messages.

“That is the biggest thing that will affect the future that occurred this year,” Hadl said.

Aside from the iPhone, Wi-Fi is enabled in certain Nokia handsets, and newer Blackberry models on AT&T and T-Mobile networks.

Wi-Fi is a complement to other connectivity modes, including Bluetooth. “This is the year of non-cellular wireless,” said Qwikker founder and CTO Saul Kato. “You will see this go mainstream, the idea of content for local interactions.”

For its Web browsing capabilities, Roger Wood, SVP and general manager of the Americas region for Amobee, also believes the iPhone is the most significant event of the year. It helped the industry distinguish separate groups of mobile content followers: “People who see the future of mobile as being an extension of the Web on handheld devices. And people who understand mobile as intrinsically different than the Web, a new media platform.”

The iPhone has been credited with increasing mobile Web adoption. “We are managing more than 200 sites for media and entertainment companies,” said Boris Fridman, CEO of Crisp Wireless. “We saw a meaningful increase in traffic attributed to the iPhone.”

Some see the entry of the iPhone more pragmatically. “The impact of the iPhone reminds people how cool mobile can be. It colored everybody’s imagination, and I think it points the way to a better user interface and more consumer friendly mobile future,” said Mike Baker, VP and head of Nokia Ad Business.

Crisp’s Fridman observed a general shift towards advertising as a revenue source for mobile in 2007, more so than in previous years. “If you talked to me two years ago, I would probably not have mentioned advertising, I would have talked about content sales,” said Fridman. “Content sales remain a significant revenue generator. Ultimately advertising will primarily be the generator of revenue for content companies in mobile.”

To feed mobile content sites, a handful of agencies created or built mobile units. Publicis acquired Phonevalley, and IPG launched Ansible.

“Although this did not result in hundreds of millions of dollars being spent in media, it did represent the incorporation of the advertising buying community in the conversation of mobile advertising,” said Wood. “Never before did we see the conversation include buying departments. This lifted the conversation out of the theoretical and into the practical.”

Anticipation of open networks including Android, announced by Google and the Open Handset Alliance, and a follow-up from Verizon a few days later is expected to make mobile more universal — and potentially more consistent — for advertisers and marketers. “It will create a commonality of services and functionality by more carriers, so it’s going to make it easier for advertisers to buy across carriers with more campaigns, which is what matters,” said Hadl. “The industry has been highly fragmented, and I believe we’ll see some more cohesive moves and partnerships in order to help advertisers with what they need to make a large-scale buy.”

Some partnerships will come in the form of acquisition. Handset manufacturer Nokia jump-started its media business with the acquisition of Enpocket this year. AOL’s division also ramped up its mobile ad capabilities with its purchase of mobile ad network Third Screen Media in May. In addition, Microsoft snatched up European mobile ad firm ScreenTonic.

“I think you are going to see the market consolidate further, and particularly in some of the big players more aggressively going to market,” said Baker, who joined Nokia as part of the acquisition. “We’ve see Yahoo and Google both do that. The question is will they buy it or just build it.”

Baker said “There are not a lot of mature startups in the space. There are small, nascent startups, but not a lot with mature platforms and significant revenue streams.”

While standards between carriers and operating systems remain an issue, Cory Van Arsdale, general manger of Microsoft’s Screen Tonic unit, says advertisers understand mobile better than other new media channels such as in-game advertising due to the correlation between the Web and the mobile Web. “Mobile sales are much more synergistic to the Web.”

“I would say next year you’re going to see ads on your mobile phone, and I think the ads will hopefully be in a construct and manner valuable to users,” said Van Arsdale.

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