Mobile operators - the decline in advertising

Operators slow at getting the message

The nascent state of advertising on mobile phones is underlined by how its greatest successes come only when consumers are rewarded for tolerating it.

Blyk, a mobile operator in the UK, offers young people free phone calls and text messages if they agree to receive marketing campaigns on their handsets. Most of the advertisements are in text or multimedia message format; by targeting fun, relevant marketing at a mobile-literate niche, its response rates are high.

That compares with the fact that just 0.1 per cent of people visiting websites click on banner advertisements by companies seeking to sell their wares.

“From the advertisers’ side, mobile media has not been the simplest or easiest one to use,” says Pekka Ala-Pietila, co-founder and chief executive of Blyk, and a former president of Nokia, the world’s largest mobile manufacturer.

“Advertisers needed to put multiple piecemeal elements together from multiple different companies. We believe we have overcome the challenges of buying and using mobile from [an] advertising perspective.”

Blyk has attracted 200,000 UK customers in its first year, which puts it well ahead of its internal targets, and more than 100 different brands have now run more than 1,000 advertising campaigns. But Blyk is mindful of not overloading customers.

It is still sending them less than the maximum six marketing messages each day that it could do because it does not want to irritate its audience.

Blyk’s story is being closely watched by the mobile industry’s groups. Network operators and handset manufacturers, such as Vodafone and Nokia, are hoping mobile advertising will provide them with a significant new revenue source.

Nokia, the world’s largest mobile manufacturer, regards advertising as an important part of its strategy for expanding from hardware into services that run on handsets.

But the Finnish company admits that the mobile advertising market is in its infancy. Tom Henrikkson, Nokia’s head of interactive advertising, says: “Today mobile [advertising] is still small. We are honest and realistic about that.”

Advertisers are looking at mobile phones as a new venue for their marketing messages, but they are not allocating significant resources to the activity.

Their reluctance is not only due to the global economic downturn, which is prompting advertisers to cut back their marketing budgets.

The lack of widely accepted ways to display advertisements on mobiles and measure handset users’ response rates to the marketing makes it harder to be confident of a return on investment.

Babs Rangaiah, director of global communications planning at Unilever, the consumer goods company, agrees the mobile phone “is going to be a much bigger area than it is today” for advertisers. The ability to personalise advertisements is one of the operators’ greatest assets and is seen by many as crucial to ensuring the relevance and acceptance of mobile marketing.

But some carriers are nervous about invading customers’ privacy by using their extensive databases, and many agencies are ill-equipped to execute highly targeted campaigns.

Expensive targeted advertising space is not selling as well as cheaper, generic marketing which is often bundled with fixed-line banner sales.

Shailendra Pandey, analyst at Informa, the research firm, highlights how operators have been offering customers free content, such as music, in return for accepting advertisements on their handsets.