March 10, 2008
Mobile Marketing: More Ads on the Go? (Part I)

A few days ago, Nielsen released a report where they estimated that 58 million Americans had seen advertising on their phones in the last month. Even though no one would debate that's a lot of people, it represents 23%, less than a quarter, of subscribers in the U.S.

And that number might be a little high.

According to Nielsen's site, the findings were based on a survey of 22,000 people who were "active mobile data users who used at least one non-voice mobile service in the fourth quarter," suggesting that the respondents may be more open to or better able to receive advertising in a variety of formats than the average subscriber.

Clearly, there is growing interest in mobile as an advertising channel, but the study found that just 10% of respondents thought that "advertising on their mobile device was acceptable."

As I work on my thesis, I've been thinking more and more about mobile phones as a delivery channel for targeted advertising. Although I'm very new to this area, the Nielsen study did make me think about why we aren't seeing more advertising on our phones and PDAs, why consumers are so opposed to the practice, and if there is a trade-off that's preferable to the ad-supported content model.

The best advertising medium?

Mobile devices offer some advantages over TV and in some cases the internet, in terms of tracking, timeliness of communications, and understanding consumer behavior. People don't tend to share mobile phones and PDAs the way they share computers or televisions, making it easier to figure out what people in certain segments are looking for based on their usage of the device, and to reach the right person at the right time. The smaller screen, ability to do one task at a time, and access when other media may not be available may actually create a more engaged audience. Consumers could interact with their phones in many of the same ways they can interact with the internet, taking some of the guesswork out of tracking conversions.

The phones and PDAs themselves are getting more and more sophisticated. Many can how access the internet as WiFi hotspots multiply across the country; an increasing number of cities are making investments in free or inexpensive WiFi. Just about all phones on the market today can download music, ringtones, wallpaper, games, and other content through proprietary networks.

Telecommunications companies are investing in force again, puring money into technologies such as 3G and WiMAX that offer wider-range networks and faster service. In the next few years, the sheer volume of mobile content available, and the average consumer's ability to access it, will probably increase substantially and, as several studies have shown, mobile devices become an increasingly important part of our daily lives.

Willingness to pay

I have seen a great deal written about the possibilities new devices and technologies as platforms for ad-supported entertainment content lately, perhaps to soften the blow of the ads, but
results like this make me wonder if entertainment is really what most consumers want and need right now due in part to preference, in part to price.

As always, consumer behavior and preference will set the tone for marketers. According to the April 2006 study by the Pew Internet and American Life Project with AOL and the Associated Press, the most desired mobile device features the users wanted to add were access to maps (47%), instant messaging (38%), services like stock quotes, movie listings and weather reports (24%), email (24%), ability to take still pictures (19%). The desire to access entertainment content, play music, watch video and play games, came in at 19%, 14% and 12%, respectively. Granted, the survey is almost two years old, the technology has improved, and user preferences may well have changed or be on the verge of changing. However, these findings highlight that the primary use of mobile devices are information and communication.

As technology and preferences change, consumers probably will want more entertainment content on their mobile devices. The problem is that the general dislike of advertising is unlikely to shift much in the near term, especially as we're advertised to more and more of it on every platform, and getting people to pay for some content would be a tough proposition in an environment where television, DVRs, and the internet have conditioned us to expect entertainment to be free, multi-platform, on demand, and ad-free if we choose.

Another consideration is price. The Pew/AOL/AP study found that 36% of cell phone users had "been shocked from time to time at the size of their monthly bills". The cost of using 3G services where they're available can run subscribers an extra $15-25 a month (or more) on top of a bill that is likely around $35-40 dollars a month already. Devices themselves are changing rapidly to build in greater functionality, but the way many cell phone contracts are structured, the customer can only replace his or her phone for free or a small fee after two years, or pay hundreds of dollars. Consumer reluctance to spring for a new phone unless the device is really compelling (like the Razr or th iPhone) may also slow adoption of new technology, both in terms of the devices and the network used.

The Nielsen study suggests that price sensitivity is a factor for at least a third of users, and that advertising that supports services they already use may be the best bet for marketers. Findings indicated that 32% of respondents "are open to mobile advertising if it lowers their overall bill," while only 13% "are open to mobile advertising if it improves the media and content currently available." Although the release doesn't suggest that those opinions are mutually exclusive (or correlated), it does seem that more people want to reduce the cost of the services they are currently using over getting better (and probably more extensive) content.

The question then becomes, what mobile applications, services, and content will people consider indispensable enough to pay for, and is that what should be ad supported?

In my next post, I'll explore issues of personalization and privacy in mobile marketing, and propose some future scenarios for mobile advertising. Look for more on this subject next week.

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