Mobile Advertising - The Opportunity is Off-Portal

More context here in preparation for the 'Telcos in Advertising' workshops on 29th March, London (and 30th in NYC):

Writing our report, Telcos' Role in the Advertising Value Chain has been like giving birth: arduous in delivery, but ultimately life-affirming. Thanks to Alan Patrick at Broadsight for his help with producing 140 pages of solid beef (worrying mix of metaphors with giving birth and cows here - time to stop).

During background research on the subject, I had the pleasure of meeting Andrew Bud of mBlox. Andrew is not only a charming man but something of a rocket scientist (comparable brain power to STL Partners' own guru, Martin Geddes). He has built mBlox into the global leader in SMS billing services for mobile content, so knows a thing or two about being a platform player and building scale. He says mBlox's success has been built on aggressive pricing and leveraging scale economies.

I was delighted to see that Andrew had reached similar conclusions as we have about the opportunity for operators in advertising: the money ain't in Ad-funded content and telco services, it's in enabling the on-line and mobile advertising value chain to become more effective and efficient. Compare the two charts below: one from our Telco 2.0 Advertising report and one from Andrew:



Uncannily similar and produced independently (honest). Essentially, we both feel that the market opportunity for operators is in leveraging under-used customer data and network, billing and customer service assets to support the advertising community as an enabler, rather than in discounting existing telco services with advertising (รก la Blyk). This latter market will become horrendously competitive and operators have too much to lose. They would do much better to preserve their existing paid-for voice and messaging (on how to do this, see here) and content revenues and only use advertising to subsidise new premium content services such as IPTV or mobile TV.

Sizing the two markets is very difficult but here is our estimated split:


(For more background, see previous posts on this topic are here
and here.)