Friday, February 29, 2008

Mobile - advertising revenues

Mobile ads: Will the carriers be left out?

As mobile advertising gears up, one of the basic components of the ad network is still missing: the carrier. Though mobile operators hold a wealth of information on their customers, it’s still sitting dormant in the customer relations management and back office systems. The first mobile ad platforms have begun to launch without access to those databases, potentially leaving operators out to dry in what may be one of the most lucrative opportunities in wireless.

At the Mobile World Congress, Nokia launched its mobile ad network, based on the assets it acquired with its purchase of Enpocket in October. The network comprised 70 different publishers, including Nokia’s own mobile portal properties as well as worldwide publishers such as Hearst, Reuters and the Discovery Network. It included advertisers like Paramount and BMW, and even included a service provider, Sprint. But one thing the network does not do is incorporate the user data of the carriers whose networks these ads will run over, said Mike Baker, former CEO of Enpocket and current head of Nokia Interactive’s new ad business.

The interfaces between carrier customer data and ad networks haven’t yet been developed and it could take years before an open link between their arcane back office systems and ad platforms emerges, Baker said. In the interim, mobile adverting networks are going forward without them, compiling their own user databases, Baker said. Publishers and advertisers can’t afford to wait. Even in its infancy mobile ads are a $1 billion a year business, Baker said.

“We’re taking a pragmatic approach,” Baker said. “It will take 3 years for that subscriber data to filter back to our network, so on our own network we’re surveying the end customers and building our own databases.”

The irony of the situation, though, is that the more customer information that the ad networks collect, the less need they’ll have the carrier data when it is finally available. Through surveys and tracking customer behavior on mobile portals and sites, the ad networks can compile much of that information. When the carriers are ready to contribute, ad networks could already have the necessary data to target ads most effectively.

Still, operators stores of information are vast and our constantly updated. That information can also be applied across the spectrum of the mobile Internet, not just on a site where a user has a history. But it’s still a matter of debate how valuable that information is, no matter how granular, Baker said.

“Even if I had all of these data fields on Mike Baker, how do I use that data for mobile advertising?” Baker said. “Maybe it’s more relevant to know what I click on than the fact I’m 44 years old.”

IBM telecom group general manager Michael Hill doesn’t agree with Baker that carrier customer data is overrated, but he does agree that operators need to be much faster at integrating it with ad networks. IBM along with several other software companies is trying to find ways of aggregating that data presenting it in a useful way to advertising platforms.

“They have fabulous data,” Hill said of the operators. “The problem is it’s so scattered. The first thing we need to do is put that data in a usable format.” Data the carrier can track and centralize will have enormous relevance to advertisers, going far beyond just basic demographic info. The customer’s pinpointed location, via GPS or cellular triangulation, can be used to tailor ads. Presence data such as whether a user is at home, at work, available to chat or offline would also help networks target ads.

Content providers and ad networks are already compiling some of that data, though. Google applications such as Maps already access location data natively from their onboard applications. It’s not too far a stretch to imagine Google using that data to target text ads. IM applications on the device could similarly leverage presence data for on board display ads. The problem with those scenarios is information exists in a vacuum. Only the operator can aggregate the data, combine it with information from other applications and its own customer databases and then mine it to produce a comprehensive profile used for the highly accurate targeting mobile advertising promises, Hill said. For carriers there’s a definite urgency in installing the systems that can aggregate that data, Hill said, but it’s no simple task.

“An operator could take in a continuous stream of X and Y coordinates from millions users, but what the hell do they do with that data?” Hill said. “You need to be able to put that data to some use, and you need to be able to sort through it to determine what’s relevant.”

How carriers use that location and presence information is still a matter of some debate. While serving up an ad when a user requests specific information from a Web or maps search may not raise any red flags, using such personal information as whom a customer calls and his or her exact location could raise privacy hackles. Many companies that now use location-based data are restricting what information they collect and store from customers, and plans to use aggregated data are being launched entirely under opt-in situations.

Ultimately, it could be those opt-in scenarios that tie the operator and ad networks closely together. Though ad platforms may not be dependent on carrier data, they are dependent on the carrier networks to deliver services and ads, and the cost of wireless data connections is one of single biggest barriers to bringing more people to mobile Internet services. A relationship between the advertiser and operator would not only supply the advertiser with more granular information about the customer but also a means for the carrier to subsidize mobile data services to the customer. The better the information, the higher the cost per thousand of any given ad, meaning more revenue to be split between the publisher and the operator. The more revenue the operator receives the more it can discount the price of its data connections, which in turn would bring more users to the network and more eyeballs to the ads.

The goal is to bring that symbiotic relationship to the point where all wireless data services are free to the end user, funded entirely by ad revenues, said Hal Steger, vice president of marketing for Funambol. Funambol is in the e-mail business, which it offers as a white-label service to carriers subsidized by ad revenue.

“Our customers have found they can make almost as much money for free as they can offering it for a few dollars a month,” Steger said.

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