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Guest Post: Blyk - A Message from the Advertising Industry

This guest post by Telco 2.0 partners Blyk contains useful guidance to operators and others seeking to grow the telco-enabled advertising and marketing business. Blyk will be at our EMEA Brainstorm, where we’ll be discussing some of the issues they raise in our Consumer 2.0 session.

You can also find more from Telco 2.0 on our research portal under ‘Advertising & Marketing’, including Mobile Advertising: 100 times more ‘eyeballs’ - Blyk’s Wholesale Strategy. There’s also a summary here of the links from the Telco 2.0 Best Practice Live! videos - ‘last chance to see’ - Tuesday 28th September 2010.

Listen to the Customer

As a provider of messaging media to MNO’s, we sit in an interesting position at Blyk. We spend half our time listening to Operators telling us what they think advertisers want, and the other half hearing what advertisers want from Operators. Considering the number of strategic conversations going on internally at Operators about how to work in a media environment dominated by Google, one might expect there to be attention to the messages emanating from the advertising industry. The message from advertisers is clear and in this article we attempt to clarify those messages and at the same time provide some advice about how to maximise the relevant opportunities.

Firstly, ‘mobile advertising’ itself is a multi-format opportunity. It is not unfair to argue that despite its relative immaturity, each major format is now serving a certain set of advertiser objectives where the release of advertising budget has some basic prerequisites.

Telcos need More Scale and Reach

Display advertising, however interactive the banner or link ultimately proves to be, is a game of scale. Its payment may be increasingly performance-related but there is usually a need for a seven-figure number of impressions to generate a four-figure number of clicks. With that kind of attention generation, then those with largest number of viewers will always be most attractive to advertisers. In that context we fail to see how Operators can compete individually in this area. The major ad networks and digital media giants have global reach and mass-market scale whereas Operators can only ever serve a proportion of their share of the market.

Create a Market, or Stop Wasting Our Time

This game is over - work with the major players to enable this ecosystem to flourish on your network or prepare to fail. What is certain is that the advertisers don’t want to deal with each network individually; instead a proactive approach would involve collaboration amongst operators to ensure the needed scale that attracts a bigger share of advertising spend.

The argument is similar when it comes to looking at Search advertising. Google isn’t necessarily the market leader in every territory but there are always one or two major players who likely have the market sewn up. Again, ‘if you can’t beat ‘em, join ‘em’. Why waste time trying to build your own mobile search opportunity when there is no evidence to suggest that’s what advertisers want you to do?

‘In-application’ advertising looks like a marketplace that will be dominated by handset manufacturers, or at least the providers of the application stores. Again, why should the networks even get a look-in here? Even if they provided their own-brand store to customers of other networks, the operators still don’t have the mass-market, global availability that the likes of Apple, Nokia or Blackberry do.

Some Depressing Numbers

Despite the generally positive growth trends, one very simple factor still undermines all three of these advertising formats. Numbers. Small numbers. Painfully small numbers. Last year Group M, one of the largest advertising agency groups in the world, stated that mobile advertising revenue made up 0.1% of their revenue - enough, in their speaker’s words, ‘to pay for a couple of receptionists’. The plea from such groups is to ‘get real’. Scale and reach are all that matter here.

Hopefully this isn’t starting to sound depressing if you’re in charge of advertising or strategy at an MNO. We’re simply suggesting that if you want to take a slice of the pie when it comes to monetising these formats then you will do better by collaborating with current market leaders. Generating advertising revenue from these formats is their raison d’etre, it is not so for Operators. If you can work with them, there may be a steady stream of cash building over the years, but there almost certainly won’t be if you choose to go it alone.

Permission + Data = Value

However, there is one format where we believe Operators hold a significant strategic advantage. Whether it is termed DM, D2C or labelled with whatever acronym is your personal favourite, gaining access to permissive customers on their phones is a consistently requested need from advertisers. In our view, no other type service provider can currently match Operators in their ability to reach customers on their phones directly.

Currently, direct access to customers is generally provided through messaging formats such as SMS and MMS. As the level of phone functionality increases globally, this may also take the form of e-mail, IM, and any other format where a message is pushed and a conversation started, directly to and on the phone.

For the advertisers, this advertising mechanic not only provides access but a deep, personalised data set, numerous opportunities to innovate and a pricing scheme that is nearly always directly related to performance. If you are a media owner that provides such an opportunity and your channel continues to perform for the advertiser, the flow of money in your direction should never cease. Other formats, where the true level of performance is rarely understood, will never command such unlimited budgets. In essence, get this format right and it will grow faster than any other format in your mobile advertising portfolio.

Some More Encouraging Numbers

At Blyk we have seen evidence of this. In the UK the company was generating over $1.5 of revenue from advertisers for every opted-in customer every month, sometimes up to $4.5. That was with an opted-in base of 250,000 and no obligation on the subscriber to respond to the message. With the scale of an Operator’s subscriber base, imagine what could be achieved for advertisers. Certainly operators such as Orange, O2, E-Plus, Vodafone, Maxis and Turkcell will testify to similarly exciting results in the early days of their own D2C strategies.

How to do it?

To conclude, we’d like to suggest how to execute such a D2C strategy to best effect. Of course any Operator can simply ask any of its subscribers to opt-in to receive advertising. But does simply receiving advertising add up to a sustainable, engaging User Experience? We would argue not.

Therefore it is encouraging to see an admittedly limited number of Operators understanding one key aspect of human behaviour. If you want me, the consumer, to enjoy something I wouldn’t normally choose to enjoy, serve it up with something I know I like. If you want your kids to eat fruit, maybe you give them yoghurt or ice cream at the same time. Maybe you even cut the fruit up into funny shapes. However you do it, you want your kids to enjoy the fruit, not just tolerate it. How does this have any relevance in media terms you ask?

Consumers want a Good Experience

Imagine if Vogue magazine published a magazine full of just ads. Now take another look at the real thing and congratulate the publisher on a product where neither the editorial nor the ads would work so well without the other. The editorial inspires the advertising content and vice versa. We believe that if Operators want to engage subscribers with the advertising it sells then the overall User Experience should consist of a mixture of editorial content and ads, so that it becomes a seamless, engaging, interactive whole. How that user proposition materialises might vary from demographic to demographic but the concept remains the same.

In summary, for Operators to succeed in mobile advertising it’s very simple. Give advertisers what they need, not what you need. Then deliver the advertising the way other media owners have for decades because they didn’t chance upon that formula by accident.

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Hi, Lisa from the Optism team at Alcatel-Lucent. We agree that now is the time for operators to take their place in the mobile advertising ecosystem. In fact, we believe mobile operators enjoy an advantage over others in the ecosystem - their direct relationship with customers – that makes their involvement particularly valuable. Of course, their customers must be able to trust them to protect their privacy and respect their right to determine what appears on their mobile. Getting users’ permission and tailoring the mobile advertising experience to match their preferences goes a long way in building that trust. But as you point out, that is only part of the equation. Advertisers must be provided with inventory that reaches the mass markets they rely on. www.optism.com/blog.

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