Ad Funded Mobile Content 2008

Ad funded mobile content Forecasts and Analysis 2008

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Contents Chapter 1 Introduction

Chapter 2

1.1 1.2 1.3 1.4

Executive summary Mobile advertising Mobile content funded by mobile advertising The focus of this report

What mobile content? Chart 1

Bango mobile content sales 2006-2007

2.1 2.2 2.2.1 2.2.1.1

Which mobile content is most appropriate Mobile TV and video Issues with mobile TV Forms of advertising enabled by Mobile TV

Chart 2

Mobile TV handset penetration comparison

2.2.2

Subscriber take up

Chart 3

Mobile TV trends

Image 1

Sony Ericsson Bravia

Image 1.2

Sony Ericsson Bravia

Image 2

Nokia DVB-H Handset

2.2.3 2.2.4 2.2.5 2.3 2.3.1 2.3.2 2.4

Prospective impact Live video streaming Mobile ad funded TV and video Mobile MMS Converged handsets Subscriber reach Mobile social networking

Table 1

Examples of social networks on the mobile

2.4.1 2.4.2 2.4.3 2.4.4 2.4.5 2.5 2.5.1 2.6

Global phenomenon Potential improvements and impact Exclusively mobile social networks LBA Messaging Ringtones Target market base Music

2

Contents

Chapter 3

2.6.1 2.6.2 2.7 2.7.1

iTunes competitors Market base Mobile search Revenue

Chart 4

US search engine market share

2.7.2 2.7.3 2.8 2.8.1 2.9

Ad funded models Killer app Mobile games Market base Mobile content growth

Chart 5

Content used in EU and US

2.10

Conclusion

Implications of mobile ad funded content 3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.1.7 3.1.7.1 3.1.7.2 3.1.7.3

Mobile operators Opex CAPEX Ad funded MVNO Mobile subscriber reach and contact Network management versus content management Off portal versus on portal Mobile operator case studies 3 UK Vodafone Orange

Chart 6

UK Mobile games market worth

3.1.7.4 3.2 3.3 3.4 3.4.1 3.4.2 3.4.3

Cellcom Mobile handset vendors Mobile advertisers Mobile content providers Adult content Mobile magazine Audio

3

Contents 3.4.4 3.4.5 3.4.6 3.5 3.5.1

Visual Market leaders What will be best suited to being ad funded? Mobile subscribers Mobile ad funded content benefits to mobile subscribers

Table 2

Benefits and detriments of ad funded mobile content to mobile subscribers

Chapter 4

3.5.2 3.5.3 3.6 3.6.1 3.6.2 3.6.3

Targeted advertisements Free content Mobile advertising Targted audience Size of market base Target market

Table 3

Mobile ad funded content market trends

3.7

Conclusion

Global market reach of mobile ad funded content 4.1 4.1.1 4.2 4.3 4.3.1

Developed markets Target market segments Advertisers using the platform Emerging markets Reduction in end user costs

Chart 7

Cost reducing mobile data usage

4.4 4.5

Click through rate Age demographic

Chart 8

Age trends in mobile content

4.6 4.7 4.7.1 4.7.2

Best content Mobile content standards 3GSM 3G HSPA

Table 4

HSPA-Enabled devices September 2007

4

Contents

Chapter 5

4.7.2 4.7.3 4.7.4 4.8 4.9

4G and LTE WiMAX Mobile TV standards Location aware advertising Conclusion

Mobile ad funded content available 5.1 5.1.1 5.1.1.1 5.1.1.2 5.1.1.3

Ad funded MVNO Blyk Blyk strategy Drawbacks to strategy Blyk branding

Table 5

Examples of Blyk case studies

5.1.1.4 5.1.2 5.1.3 5.1.4 5.2

Future for Blyk Xero mobile MOSH mobile Ümobile Mobile ad funded social network

Chart 9

Ad funded content in mobile social networks

5.2.1 5.2.2 5.3 5.4 5.5 5.5.1 5.5.2 5.5.3

M3 Mobile itsmy.com Greystripe Mobile ad funded TV Mobile ad funded content providers Pitch/Play Phone Myxer innerActive Smart Media

Table 6

InnerActive Smart Media advertisers include

5.6

Greystripe

Chart 10

Trends in mobile internet users

Chart 11

Branding and advertising in ad funded mobile content

5

Contents Chapter 6

Chapter 7

Branding and advertising in ad funded mobile content 6.1 6.1.1

Branding examples Blyk: Penguin books

Table 7

Blyk’s Penguin campain stats

6.1.2 6.2 6.3 6.4 6.4.1

Greystripe: New Line Cinema Market demographic Display of mobile advertisements Who will buy ad funded mobile content What will mobile subscribers want from ad funded mobile content? Conclusion

6.5

Market potential

Chapter 8

7.1

Mobile advertising spend

Chart 12

Mobile ad spend forecast

7.2 7.3 7.4 7.5

The market landscape in 2013 Market demographics in 2013 Advertisers Content in 2013

Table 8

Ad funded mobile content SWOTs

Conclusions and recommendations 8.1 8.2 8.3 8.4

Mobile content providers Mobile advertisers Mobile operators Mobile handset manufacturers

6

Ad funded mobile content Companies mentioned in this report 3

Fon 11

20th Century Fox

Frengo

4INFO

Gofresh

Adidas

Goldspot Media

Advanced-television.com

Google

Airtel

Greystripe

Aka aki

Groovr

Alcatel Lucent

GSM World

Amobee media systems

Honda

AOL

innerActive Smart Media

Apple

itsmy.com

Bango

Jaiku

Bebo

Jamster

Bluepulse

JJB Sports

Blyk

Jygy

Boots

Loopt

Britekite

L’Oreal

Buongiorno

M3 Mobile

Calvin Klein

M:Metrics

Cellcom

Meet now live

CNN

Microsoft

Coca cola

Mig 33

COI Connexions

MobiAd

ComScore

Mobifun

Dada

Mobile Entertainment Forum

Dada Ad

Mobi TV

Daimler Chrysler

Mobile Europe

Disney

Mobile marketing magazine

Dodgeball

Mobixell networks

Domino’s Pizza

Moconews.net

Dynamic Logic

Mocospace

ebay

MOSH Mobile

EMI

Motorola

Emarketer

Myspace

Ericsson

Myxer

Europa

Natwest

Facebook

NEC

Flickr

Netsize

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Ad funded mobile content New Line Cinema

Ümobile

Nielsen

Utterz

NME

Visa

Nokia

Vodafone

NTT DoCoMo

Wadju

Opera

What’s on TV

Orange

Whrrl

Paramount

Xero Mobile

Peekamo

Xunii

Penguin Books

Yahoo!

Pick me up

Zyb

Pitch Play Phone Qik Rhythm NewMedia ROK Entertainment Saab Samsung Shozu Skype SMART Telecommunications Sniff Societe Generale Sony Sony BMG Music Entertainment Sony Pictures Splash mobile entertainment Sprint Strands Suzuki Telephia Tellabs The European Commission The Guardian T-Mobile Treemo Twango Twitter

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Ad funded mobile content Chapter 1. Introduction As the content available to subscribers on the mobile grows in quality and quantity, mobile advertising is also increasing in its methods, sophistication and reach to global mobile subscribers. A method that has allowed mobile content providers, mobile operators and mobile advertisers to combine their energies is advertising funded mobile content. As mobile subscribers tentatively begin to explore the mobile web, mobile operators, content providers and advertisers can take advantage of this and gain vital brand exposure and revenues by encouraging users to continue to push this trend. The mobile web has had slow take up, due to the poor user experience suffered and the high data costs associated with downloading content on the mobile web. Mobile ad funded content has worked to reduce these negatives by providing content and services that are cheap, often free to the mobile subscriber by funding the content with affiliated advertising. Subscribers are given a service that reduces their costs, while the costs to the content provider can also be reduced. The advertiser gains additional exposure of their brand and a raised likelihood that the mobile subscriber will remember their brand or message, and operators can also gain revenue, particularly when the content is provided on their portal or network.

1.1. Executive summary Aspects of the mobile content market have been slow with consumer uptake, particularly when content on the mobile web is concerned due to the aforementioned barriers. However, recent developments within the mobile industry have helped to drive the market and will improve QoS for consumers. Mobile consumers are now more easily able to search the mobile web for content due to the improvements seen in the user interface of mobile handsets and the improvement in speed and data charges. Touch screen mobile handsets generally have larger screens making the content more easily visible and negotiable. The ability to use a touch screen allows for easier navigation as a lack of pointing device such as a cursor on a mobile handset has seriously hampered this in previous handsets. Mobile subscribers will be

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Ad funded mobile content driven to use content on the mobile web if their initial user experiences are positive, and developments in the handset industry are a step towards higher QoS. The interactivity of content on the mobile has also driven this market. Web 2.0 apps that are beginning to make a presence on the mobile encourage interactivity from the mobile subscriber, and by encouraging the mobile user to interact with mobile content the advertising messages and brands are more likely to be remembered by the subscriber. Interactivity is also encouraged with other mobile applications. For example, teaser advertisements sent to a mobile subscriber by text message request the recipient to respond to gain the full advertisement, requiring the recipient to fully engage with the advertisement. Mobile subscribers actively engaging with mobile advertisement content is particularly encouraging, demonstrating that mobile subscribers are not averse to receiving advertisements on their mobiles and will actively participate in the process. For mobile advertisement funded content this is particularly positive as it demonstrates to mobile advertisers and content providers that adverts around mobile content will be well received and may be further acted upon, provided that the subscriber is not swamped with advertisements. Mobile subscribers have become used to free or cheap content and services on the fixed internet, and while the mobile industry is at pains to remind consumers that the mobile is not the same as a PC, the transition must be smooth, and the standard of content available must be high. The content that mobile subscribers can access on the mobile is growing, in volume and in variation. As this grows, the audience will also grow and mobile advertisers will need to capitalise on this in order to reach diverse and targeted new audiences. Mobile ad funded content provides an avenue for advertisers, operators and content providers to access vital revenue streams, and make cost savings which can be passed on to the end user.

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Ad funded mobile content 1.2. Mobile advertising Mobile advertising provides the opportunity to effectively target a source of an enormous amount of potential consumers while still remaining personable and tailored. However, the response and uptake of mobile advertising has been varied in differing markets. Overall, advertisers are wary of a media that is as of yet, not fully tested and unsure in the market. The mobile web remains elusive to some users and previous poor user experience would put some subscribers off altogether, limiting the potential audience for advertisers. Other forms of mobile advertising, such as SMS may be perceived to be too much like spam found with e mail, and advertisers would be naturally wary of alienating their audience. However, mobile advertising is finding its way into the mobile market and advertisers recognise the sheer size of the mobile audience as having great potential. The difference between mobile advertising and mobile advertising funded content is that the adverts on mobile ad funded content are generally "wrapped around" or embedded in the mobile content which is then passed on to the consumer for free or at a discounted price. Through this method mobile advertising will be able to more specifically target its market segment, increasing QoS and taking a step to driving revenues up. Mobile advertising will continue to grow on the mobile and the quality of the advertisements will be crucial to driving this market.

1.3. Mobile content funded by mobile advertising The use and downloading of mobile content has been varied in differing markets. Mobile content covers many different types of media including video and audio, games, and other content emerging in the mobile and mobile web market. A particularly negative aspect that some mobile subscribers have come to associate with mobile content is high price. With the emergence of some less than scrupulous suppliers of mobile content such as ringtones, mobile subscribers will have been made aware by the media of instances of hidden charges and astronomical costs that some users have experienced. With the emergence of ad funded mobile content providers can reassure mobile subscribers that

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Ad funded mobile content minimal costs will be passed on to them. Subscribers must also be reassured that advertising that they receive will be relevant, and will not become like the spam marketing that has become so prevalent on the PC. Advertising funded mobile content presents potential advantages for all those involved. Mobile operators and mobile advertisers can share the revenues that are generated from this content as the amount of subscribers accessing and responding to such content and advertisements increase. Mobile content providers will also stand to benefit as by gaining sponsorship from mobile advertisers, costs can be driven down. This will also stand to benefit the end user as these cost savings will also be passed on to the mobile subscriber in the form of cheap or free mobile content. Advertising funded mobile content is therefore an area which mobile operators, advertisers and content providers must explore in ensuring the wider penetration of brands and content and in ensuring a high quality of user experience.

1.4. The focus of this report This report will focus on the benefits that can be gained from players in the mobile industry entering the advertising funded mobile content market. It will investigate the drivers and barriers in entering and sustaining the business strategies and outcomes of advertising funded mobile content, the market reception that has been enjoyed so far and how the market will alter. The report will critically analyse and examine the market for ad funded mobile content and will discuss and examine the methods and strategies currently in place and strategies that would be best employed for future development in the market. The main players in the market will be analysed as will their impact on the market. The separate and combining roles of the mobile advertiser, operator, and content provider will be discussed and examined and strategies and recommendations will be provided in the report. The report will evaluate the mobile ad funded content market as a whole and will discus the drivers and demands, and the barriers to the market place.

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Ad funded mobile content Chapter 2 What mobile content? The amount and variation of content available on the mobile continues to grow. The amount of mobile content being downloaded by mobile subscribers is also on the increase, with Bango reporting mobile content sales at 30% from its content providers in 2007, compared to just 5% in 2006. As the diversity of content increases, so does the need for adaptation for relevant advertising. It is crucial that the advertisements are appropriate to the content they are sponsoring, and that they are as relevant as possible to the mobile subscriber in order to generate maximum ROI (return on investment).

Chart 1. Bango mobile content sales 2006-2007

Source: Mobile Europe citing Bango

When considering the content to be sponsored by the advertisement in question, players involved should ensure that the adverts and content are age appropriate. Adverts for adult content or that are irrelevant to the general age group that the mobile content is marketed at, for example, may drive away the

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Ad funded mobile content audience. In order to ensure maximum user experience and a higher likelihood of subscribers responding to the advertisement, advertisers should ensure a relevancy to the content and the mobile subscriber. However, an advertisement that remains solely tied to its specialist area of content or audience, runs the risk of limiting exposure to potential new audiences and consumers, and this should be kept in mind. Deciding which kind of content to sponsor is also an important deciding factor, and this chapter evaluates some of the content on the market in its appropriateness for mobile ad funded content.

2.1. Which mobile content is most appropriate? In deciding which mobile content is appropriate for mobile advertising funding, content providers, operators and advertisers must factor exactly how a brand or product will enhance the service and how the content will enhance the reach of the brand or product advertised. The varying use of mobile content will also determine what kind of advertising is most appropriate to display and sponsor. The type of content may also determine the length of the advertisement, as longer more sophisticated mobile content may be able to justify longer advertisements. Video advertisements would be better suited with video content, and banner adverts with audio and text content. The size of the screen on the mobile handset will also have to be taken into account when considering what to offer for mobile ad funded content, and this can vary dramatically from handset to handset. This will also have an effect on the kind of content selected by the mobile subscriber and this will need to be monitored for advertisers and content providers to grasp the more lucrative market segments.

2.2. Mobile TV and video Mobile TV has been making a presence in the mobile market, albeit slowly. Mobile subscribers may be particularly wary of using this type of content due to the perceived slow data functioning on the mobile, the small mobile screen and the perceived high data charges that can be incurred on the mobile. However, as the amount of devices capable of supporting mobile TV increases and mobile handsets improve in terms of user interface, and the perception for high mobile charges falls, mobile TV will be able to

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Ad funded mobile content take a stronger place in the mobile market. The mobile market has seen an increase in the number of handsets with larger touch screens that are more appropriate for viewing applications that require a larger screen such as mobile TV, video and the mobile web. The sophistication of mobile devices and technology means that mobile subscribers are able to enjoy a variety of content through this medium, from music videos through a mobile web search to live TV. The market for mobile TV varies globally. The higher penetration for mobile TV is in Asia, particularly in South Korea, where 10% of the population use TV enabled handsets. In contrast, the number of users in Europe has been low. For example the highest penetration of this application in Europe is in Italy, where less than 1% of the population use TV enabled handsets. The market for such an application remains a small niche market in some areas, and if mobile ad funded TV content is to have any success in the European and US markets, serious issues need to be addressed.

Chart 2. Mobile TV handset penetration comparison

Source: Guardian.co.uk 2007

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Ad funded mobile content 2.2.1 Issues with Mobile TV One such issue that has been noted is the need for a standardisation of technologies to help enable mobile TV. This is a particular problem in the UK market. The European Commission is pushing for DVB-H (Digital Video Broadcasting-Handheld) to be a mandatory standard through its member states, which would allow greater interoperability for mobile TV between devices. DVB-H is one of the more prevalent formats for mobile TV and is implemented and enabled in handsets by a number of mobile handset providers, such as Samsung and Nokia. The technology is based on the DVB-T technology for broadcasting digital terrestrial television, and takes into account the limitations of a mobile device such as a lower power resource and roaming environments. There are planned launches in countries such as Spain and Germany. The UK has a problem in this area as the band that is required by DVB-H is UHF, and this band may not be freed until the digital switch over from terrestrial to digital TV is completed in 2012. This and any other delays in implementing a standard can seriously hamper the roll out and mobile subscriber awareness of mobile TV and its interoperability. 3G technology also provides mobile video and TV, although this is on a one-to-one streaming basis, rather than one-to-many, (multicast broadcast) which can lead to problems with overloading. In Korea and Japan the technologies used include TDMB (Terrestrial-Digital Multimedia Broadcasting) and ISDB-T (Integrated Services Digital Broadcasting-Terrestrial) which provide free-to-air mobile TV. While business strategies may suggest that there will be more to be gained in revenues from subscriptions for mobile TV, visiongain believes that free-to-air or ad-funded services will be more successful and will generate higher ROI in the long term. Visiongain believes that mobile subscribers will be more likely to watch mobile TV if it is free on their handsets, and will watch mostly short clips, such as news clips or music videos. We believe that mobile subscribers will be unlikely to pay for a service which

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Ad funded mobile content is often “free” on a home television set, and has a better user experience. Ad funded mobile TV will allow mobile subscribers to utilise mobile TV for free or for a very low charge, and the advertisements will be accepted by the subscriber as a part of payment.

2.2.1.1 Forms of Advertising enabled by Mobile TV Mobile TV would allow for more media rich forms of advertising, provided that the adverts are short, and do not detract from the content desired. Content providers must also ensure that the advertisements and content are age appropriate. This will require opting in and cooperation from the mobile operators in determining the age of the mobile subscriber. With the increase in the use of mobile search mobile subscribers could find themselves unwittingly exposed to inappropriate content, and content providers and advertisers will need to ensure a method of age verification without pushing its target audience away with a higher click distance. The genre of TV show should also have to match the advertising in terms of relevancy, in terms of being age appropriate. Music videos will be better suited to advertising other music content or products, whereas news clips could take on a more general kind of advertising. Advertising funded mobile TV has been seen to enter the market and some believe that it is one of the better ways to utilise ad funded mobile content. Visiongain believes that due to its media rich technology mobile advertisers will in turn be able to use more media rich advertisements which may have a higher impact on the viewer. Mobile advertising will also be utilised to push mobile TV further into the main stream mobile market, where up to now, outside the Asia Pacific market, it has had relatively little success. The use of media to allow the service to be used for free will drive consumer use. The affect has also been seen with the mobile web. The take up for the mobile web has been slow, due to the user experience and high data charges. However, improvements in the user experience, such as faster rates of connection and downloading,

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Ad funded mobile content the lowering of data charges and the introduction of flat rate charges, have improved the perception of the mobile web and will improve the number of users on the mobile web, which is now becoming more commonplace on the mobile. Comparisons can be drawn from this to mobile TV, improvements in the user experience and the quality of the content will drive up consumer use of this content, and a standardisation in technologies and the use of adverts to drive down costs will push this content further to mobile subscribers.

2.2.2. Subscriber take up As previously discussed, subscriber take up has varied in different markets, and remains low outside of Asia Pacific. There is also conflicting opinion as to what subscribers want from a mobile TV service. For example, the nature of the mobile device, in that the battery power will only allow for a certain amount of viewing, and the size limitations of the mobile screen, would suggest that the most appropriate content for mobile subscribers would be short clips and shows dedicated and moulded to the mobile handset. However, a ComScore study of 2007 showed that users would prefer to watch traditional mobile TV rather than content generated especially for the mobile. 56% of those polled would prefer to watch a whole show, rather than a version compacted for the mobile. There was also a preference to general content over focused content seen in the survey, with 53% of those polled preferring general content such as news as opposed to focused content such as extreme sports. This suggests that there is a market for longer shows which would justify a higher number of adverts to cover the cost. There are also suggestions that mobile subscribers would be particularly receptive to ad sponsored mobile TV. The ComScore survey showed that the greatest consideration and potential barrier to the subscription of mobile TV was cost, with 71% of all polled citing it as the primary consideration. In a consumer behaviour study by Ericsson and CNN mobile TV was the number one application that mobile users wanted on their handsets; with 34% saying that it was the most in demand application and 44% saying that they were to adopt it in the next two years.

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Ad funded mobile content In Japan there have been strong rises in the production of mobile TV capable handsets, with, according to a news report by advanced-television.com, "Cumulative shipments in Japan of mobile phone handsets with one-segment terrestrial digital broadcasting function topped 20 million as of the end of December (2007)" and NTT DoCoMo introducing new mobile TV capable handsets showing that the market in the Asia Pacific area is positive. The standardisation of technologies and higher bandwidth for mobile TV would also support this.

Chart 3. Mobile TV trends

Source: ComScore 2007

However, there is also dissatisfaction in this market. The low take up of mobile TV in the European market would prevent advertisers from sponsoring this kind of content locally. In Europe, the highest take up of mobile TV is in Italy, where less than 1% of the population have mobile TV enabled handsets, compared to South Korea where 10% of the population have mobile TV enabled handsets. The problem of gaining mobile TV subscribers is highlighted in the UK market where, according to M:Metrics in

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Ad funded mobile content Image 1. Sony Ericsson Bravia

H2 2007, 0.7% of the total UK mobile subscribers watched broadcast TV on a mobile handset at least once a month, and 0.9% watched any commercial programmed TV or video at least once a month. This is an extremely low proportion of the market and advertisers would be rightly wary of sponsoring such a market segment. However, there is room for improvement in the service which would encourage mobile subscribers to use the service and would dramatically reduce churn. In a survey commissioned by Tellabs when questioned as to why they abandoned mobile TV, subscribers stated that the service was too expensive (45%) and that there were issues with reliability (24%).

Source: Sony Ericsson

The issue of price can be solved by encouraging mobile advertisers and brands to sponsor the content, thereby lowering the cost to the end user with the potential to dramatically reduce churn. Mobile advertisers will be aware of the massive potential of

Image 1.2 Sony Ericsson Bravia

the mobile audience, with over 3 billion mobile subscribers world wide. However, the low penetration of mobile TV capable handsets outside of Asia Pacific limits the potential audience to advertisers, and this needs to be addressed before advertisers can truly support mobile TV. Standardisation is crucial in this area and the delays in the roll out of DVB-H in some areas of Europe need to be addressed to resolve this issue. The expansion of 3G networks which is underway in Europe will also help to drive penetration of mobile TV and potential audiences and subscriber numbers. The

Source: Sony Ericsson

implementation of flat rate charging on the mobile web has been seen as a positive step for driving mobile subscribers to use the mobile web and this would have the same effect for mobile TV. Estimates place the number of mobile TV users in Japan at over 7 million according to Europa. This and the South Korea market are clearly the markets which mobile advertisers can make the best use in sponsoring mobile TV content. In the US and Canada MobiTV, supplying broadband and mobile TV, has reported that it has 3.5 million subscribers. The US and Europe have to reach a unified standard in technologies and price setting before advertisers will be convinced that there is a sustainable business model to be had, and subscribers begin to take up the service in earnest.

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Ad funded mobile content Image 2. Nokia DVB-H handset

2.2.3. Prospective impact The impact of ad sponsored mobile TV will dramatically increase the likelihood of the content gaining subscribers, as the cost to the end user is one of the main barriers to the success of this particular media in European and US markets. Ad funded mobile TV will help to push mobile TV into previously slow markets for the content. Ad funding may also help the content providers reduce costs, and this may allow for more content at a higher quality, which will reduce consumer churn as mobile subscribers gain a higher quality of content with less of the costs passed onto them.

Source: Nokia

Operators will be able to gain revenue from ad sponsored content, which will help to counter falling ARPU. Visiongain believes that the market in Europe will see a positive response to ad funded mobile TV content, but that the Asia Pacific market will continue to lead the way, and that consumers with greater penetration of mobile TV capable handsets will provide the more tempting audience for mobile advertisers, and will therefore have a greater amount of access to ad sponsored mobile TV content. We believe that mobile subscribers across most markets will be more receptive to value added content when the pricing is driven down by advertising sponsorship, and will be willing to accept adverts on their devices for it. As content on mobile phones and the mobile web becomes more sophisticated mobile TV will be used by more subscribers, accepting that their mobile handset is much more capable than just making phone calls, but has become a multimedia device, which has been seen with the device convergence of handsets coming to include cameras and music players.

2.2.4. Live video streaming Live video streaming on mobile phones will increase due to the device convergence that has been seen in the mobile handset market and this is a relatively new area in which mobile advertisers can reach a targeted market segment. Qik is an example of software that has responded to the device convergence seen in mobile phones and allows users to stream video live from the user's handset.

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Ad funded mobile content Mobile advertisers will also want to respond to the alteration in the use of the mobile handset and in the increasingly "live" nature of mobile subscribers. It is becoming more common for mobile subscribers and non mobile subscribers to stay connected with an online community by updating a status on a social network page, by uploading photos, or as seen with Qik upload live video footage. Advertisers therefore have a specific market of technologically aware users, a specific demographic who can then be approached with targeted advertising relevant to the behaviour of the mobile user who wishes to transmit their daily lives over the mobile web. Mobile subscribers will want a method of transmitting live video content that is inexpensive and advertising sponsorship is a solution. For example, the user creating the video may give permission for adverts to be played on their video when it is watched by others; such is the practice of YouTube where users can earn a proportion of the advertising revenue by permitting this practice on their content. Qik is currently still in alpha stage at the time of writing and only supports Nokia phones but visiongain believes that live video streaming will grow popular on mobile phones as social networking moves onto the mobile handset and mobile subscribers gain access to handsets with greater capabilities in this area.

2.2.5. Mobile ad funded TV and video There are currently mobile ad funded TV models available to the mobile market. As discussed earlier the strongest market is in the Asia Pacific area but the market has opportunities in the US and the European market as more trials are taking place to test the reception for mobile ad funded TV. For example, Sony Pictures Television has launched its Minisode network in the US on Sprint TV, using Honda as the sponsor. A variety of mobile operators have launched mobile TV and video ad funded services and trials including Vodafone and 3. MobiTV supplies broadband and mobile TV in the US and Canada and has approximately 3.5 million subscribers. Outside of Japan and South Korea the market for mobile ad funded TV and video remains low due to previously

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Ad funded mobile content discussed problems with standardisation and perceived issues with quality and price. However, that is not to say that the market is not open in these areas. Consumers polled in various surveys suggest that mobile TV and video has the potential to be popular amongst mobile subscribers. There has also been a survey from ComScore that shows that the most likely demographic for mobile TV users (in America) is men aged between 25-34, giving mobile advertisers a clear indication of the market demographic allowing for tailored and relevant advertising which mobile subscribers would be most receptive to. The subscriber numbers for mobile ad funded TV and video have the potential to climb high as more subscribers upgrade to mobile handsets with a higher specification which will allow greater access to the mobile TV content in turn boosting advertising revenues that are sponsoring this particular content. If the European and US markets wish to aim for the 10% population penetration of mobile TV enabled handsets that is being enjoyed in South Korea, then the standardisation of technologies is essential to ensure a high QoS and reduce churn. Interoperability will also benefit the consumer and reduce churn.

2.3. Mobile MMS The use of mobile MMS is able to grow partly due to the increase in the technical sophistication of mobile handsets and the awareness of the applications across the mobile market. In the creation of ad funded networks, which be discussed in further detail later in the report, mobile advertisers have used MMS and SMS to push their advertising to the consumer in exchange for free content or network usage. The use of MMS has meant that mobile subscribers can receive advertising on their mobile handsets that is increasingly more sophisticated in quality and quantity. In March 2008, Vodafone announced plans to launch ad funded MMS newsletters in April which are free to subscribers on an opt-in basis. The quality of adverts that can reach mobile subscribers through this media allows for detailed targeted advertising and, with Vodafone's venture and with ad funded networks information will have already been gathered on the individual subscriber through opting in which will create targeted

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Ad funded mobile content relevant advertising which will be better received by the mobile subscriber and more likely to be acted upon. (i.e. higher conversion rate).

2.3.1. Converged handsets Previously separate functions and applications have now been merged on to mobile handsets as the mobile phone becomes the principal device that the mobile subscriber is rarely without. By converging cameras and music players on to the mobile handset, the mobile marketers and advertisers have a multimedia device through which a variety of advertisements can be made. MMS also gains by the sophistication of the mobile device, as mobile subscribers can create increasingly high standard media from their mobile handsets and use MMS to distribute them. By sponsoring MMS content, mobile advertisers can reach a high amount of mobile subscribers in a manner that is relatively unobtrusive, as users will often subscribe to the content for the advertisements or at least be fully aware that subscription to a service will result in a certain amount of MMS advertising.

2.3.2. Subscriber reach Since the majority of mobile subscribers will have access to MMS media, this places the subscriber reach and audience potential for the advertisers and content providers into the billions. With approximately 3 billion mobile subscribers world wide and many of these having access to a mobile device that has value added capabilities, thanks to its device convergence the potential audience for mobile advertisers and mobile content providers is extremely high, with the potential to form a lucrative market. With SMS and MMS, again mobile advertisers and content providers have a market demographic which can be specifically marketed to. The majority of SMS users are in the youth market, allowing those involved to directly target the youth market with appropriate advertising and content. The knowledge of the SMS market gives a basis for the MMS market, and it is likely that the same market segment uses MMS, again giving the advertisers a specific market segment.

2.4. Mobile social networking Social networking has enjoyed a boom over 2007 and this looks

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Ad funded mobile content set to continue over 2008. The success of social networking sites such as myspace and Facebook have propelled the application in to the media spotlight as their market value continues to grow. Social networking sites are becoming accessible on the mobile web. The fixed internet players and mobile specific entrants are coming in to the mobile market and are responding to the needs of the mobile subscriber to access information on the move. There has also been an introduction of mobile ad funded social networks, as has been seen with M3 Mobile, a social networking service and itsmy.com, an ad funded mobile social networking site. Mobile social networking reflects the mobility of the device, the mobile subscriber and demands of the mobile subscriber wanting their social networking PC experience to be relevant on the mobile web and to give them the ability to become truly social. Mobile social networking takes into account the rising capabilities and revenue potential of LBS (Location Based Services) and how LBS can increase the QoS of an application or advertisement increasing the likelihood of the mobile subscriber acting on the

Table 1. Examples of social networks available on the mobile Loopt M3 Mobile Facebook Myspace Dada Strands Itsmy Frengo Twango Shozu Britekyte Zyb Groovr Fon11 Flickr Twitter Source: visiongain

Wadja Utterz Dodgeball Peekamo Aka Aki Bluepulse Jaiku Jygy Mig33 Mocospace Treemo Meet now live Sniff Whrrl Xumii

advertisement, thereby driving up revenue for the advertiser and mobile operator. Mobile content providers can also make use of LBS as seen with mobile social networking and deliver a higher quality service and content. The amount of content in social networking is higher than in other single medium examined in this report. Social networking can include audio and visual content, as well as video and text, allowing for different forms of advertising to be utilised.

2.4.1. Global phenomenon The phenomenon of social networking has spread throughout the world, from the US, to China, Europe to Japan. This global reach gives mobile advertisers a strong incentive to invest in this area and sponsor mobile social networks with the aim of increasing brand and product awareness to a large and diverse audience. The value of social networking has been recognised by companies spending large sums of money to gain a place in the market. For example, Microsoft paid $240 million for a 1.6% share in Facebook in 2007 and 2008 saw the acquisition of Bebo by AOL for $850 million.

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Ad funded mobile content The nature of social networking makes it suitable for both targeted advertising and for large world wide brands. The global reach, while positive for advertisers in the potential audience size, may prove problematic when advertisers need to specifically target a market segment and create relevant advertising specific to the mobile subscriber, which is viewed as a necessity on mobile advertising and mobile ad funded content. However, there are methods being explored with varying degrees of success to create more targeted advertising on social networking sites. For example, Facebook launched Beacon which was intended to allow users to share purchase details with friends made on third party sites. However, this was met with a particularly negative response regarding users' privacy, and this could be a problem when it comes to advertising on mobile phones. In order to make the adverts compelling to mobile subscribers they must be relevant, and to do this certain information must be gathered on the mobile subscriber. Some of this can be done with registration details such as the location, age and gender of the subscriber, however, subscribers may feel this would infringe on their privacy and as a result disregard any advertising. Dialogue with the mobile operator who carries information on the mobile subscriber may also infringe on privacy rules. Mobile advertisers must ensure that mobile subscribers are aware of what information is being gathered and exactly how this can benefit them; otherwise adverts will be met with hostility.

2.4.2. Potential improvements and impact Mobile social networking will allow for a higher quality and relevance in LBS (Location Based Services) and LBA (Location Based Advertising) increasing the relevance of mobile advertising with the content and increasing ROI. Mobile subscribers using ad sponsored social networks on the mobile are more likely to be in the vicinity of an advert through LBA, ensuring that subscribers are targeted when nearest the product or services making the most efficient use of an advertising and marketing budget.

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Ad funded mobile content Mobile ad funded social networks will allow for a more personalised one-to-one advertising service. The improved relevancy of this advertising on social networking will boost revenue in this area, encouraging mobile subscribers to engage with the adverts and act upon them more than they would on a fixed PC social networking site. Mobile social applications and relevant ad sponsoring on the content will be able to push users from the social networking content to the recommended activities and web pages, increasing the brand awareness and consumer reach on the advert sponsoring the content. Social recommendation which is seen on social networking sites will also help to drive advertising on the mobile, when the sponsors are recommended by users having seen and acted on the advertising.

2.4.3. Exclusively mobile social networks Social networking is moving from the PC to the mobile. The portability of the mobile device allows mobile subscribers to become truly social, and allows them to communicate more effectively with friends on a social networking site. The move to mobile also recognises the culture in social networking of constantly updating a user's status. Being on the mobile allows the user to be more in touch with the statuses of their friends and to communicate their status throughout the day, which is part of the uniqueness of social networks. The feeling of mobility will encourage users to use friend finding services available on some mobile social networks, which will allow advertisers to reach their audience accordingly. Some friend finding mobile social networks do not allow advertising at present, however, ad funded social networks can make use of this mobility and reach their target audience with relevant targeted advertising based on behaviour, location and status.

2.4.4. LBA The use of Location Based Advertising in mobile ad funded social networking will vary depending on the specific brand or service sponsoring the social network. However, LBA has the potential to massively increase the relevancy and consumer engagement with advertisements increasing ROI. LBA allows mobile advertisers to specifically target potential consumers by the basis of their

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Ad funded mobile content location, reducing the potential marketing spend as the advert need only appear to the consumer when they are in the vicinity. This is particularly beneficial for smaller local businesses that may have a lower marketing budget than other enterprises. This also raises the standard for mobile subscribers, as local search and advertising is perceived to be the killer app on the mobile, allowing mobile subscribers to "discover" relevant information and advertising on their mobile handsets rather than be targeted with a high amount of irrelevant information and advertising, like the spam seen on the fixed PC.

2.4.5. Messaging The portability of the mobile device allows mobile subscribers to make more use of instant messaging services and messages posted on personal pages on social networking sites. This will also enable advertisers to target their prospective audiences more effectively; depending on the information users feel comfortable in giving the advertisers. Mobile subscribers have become used to using instant messaging on the internet for free, and will want a similar service on the mobile. Advertising sponsorship will enable this and visiongain believes that mobile subscribers will be willing to receive advertising for free mobile content.

2.5. Ringtones The market for selling mobile ringtones continues to grow, with ringtones advertised both on and off the mobile. Mobile ringtone providers have received some bad press regarding their charges. This is not exclusive to ringtone providers but it is one example where the costs to the end user have received negative attention and this is an area where advertisement funding would be beneficial to the business. Where mobile subscribers pay a high charge for mobile content like ringtones, advertising sponsorship could dramatically reduce or even eliminate charges to the end user. Myxer is one content provider that is using advertising sponsorship, supplying mobile content including ringtones. The option of creating branded content through this media allows advertisers to reach their audience through their choice of content, restricting the notion that the advertising may be blocking the

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Ad funded mobile content content that the mobile user is searching for. This method of ad sponsoring would be particularly useful for brands wishing to advertise film through theme music, and chart song releases.

2.5.1. Target market base The target market for content providers selling ringtones to is generally the younger end of the market, although differing styles of music for ringtones will appeal to different areas of the market. Content providers can provide advertising sponsors with the information necessary for the target markets of their ringtones, allowing advertisers to target their audience accordingly.

2.6. Music The music industry has had to battle to fiercely protect copyright of music, especially since the internet has allowed for greater ease in file sharing for music. Downloading music for a price on certain websites has helped to control copyright, but has not eliminated the problem as illegal file sharing still exists. As the mobile web becomes more closely related to the PC web experience it is likely that these problems will move on to the mobile web. Mobile ad funded music content has become present on the mobile and operators and content providers have been trialling ad funded solutions for music and music videos. EMI and T-Mobile are one example of these trials. The operator and record label joined and offered ad funded content launching a trial in the UK in 2006. There have also been trials from mobile operators such as 3, which launched its ad funded mobile video content with Rhythm NewMedia in 2008. The use of ad funded music helps appeal to a wide demographic, as the varying music genres will draw a wide audience. By sponsoring the content and lowering the cost to the end user, mobile music content providers are appealing to a wider audience and budget, and this also ensures advertisers a greater audience reach.

2.6.1. iTunes competitors One of the main competitors in supplying music for download is Apple iTunes. If other business models begin to offer music

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Ad funded mobile content content for cheaper or even free, this would represent serious competition for the label. The service from 3 UK saw a rapid uptake with 25% of 3 subscribers signing up to the service in the first six months, showing that this business format could represent a threat to iTunes. For iTunes the competitive differentiator will be cut price content versus brand loyalty. Apple has established itself in the mobile music market, especially with the release of the iPhone, but the price differentiator will be a competitive aspect in the mobile music market. Another issue that mobile music content providers will have to address is the issue of interoperability. With some music in the mobile market being only accessible or compatible with specific hardware, consumers will be pushed away from this service if they do not have the correct handset. This will reduce the audience scope for content providers and advertisers, limiting the revenue that can be gained from ad funded ventures. Apple was rumoured to be investigating entering the ad funded music content market, but lack of interoperability may well hinder its audience reach. Given the size in sales of Apple products such as the iPhone and the iPod, this may not at first appear to be terribly problematic for Apple. However, mobile subscribers may be pushed away from the lack of interoperability in a service. Also, the iPhone has not been shown to have sold as well outside of the US, which leads to the possibility of alienating a large proportion of the mobile market.

2.6.2. Market base The market base for mobile music is extremely varied. Therefore mobile ad funded music content providers will need to ensure that they can provide relevant advertising to their subscribers, gaining information that is not infringing on the mobile subscriber's privacy but gives enough intelligence to ensure targeted advertising. Mobile advertisers can use information from the content providers as to what music genre would denote which typical market, increasing relevancy of the advertising, thereby increasing the likelihood of the mobile subscriber engaging with and acting on the advertisement. Opting-in strategies would also give intelligence to ensure relevant advertising.

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Ad funded mobile content 2.7. Mobile search With the mobile web becoming increasingly accessible, mobile search was an almost inevitable following. On the mobile web, search is available through fixed internet search engines migrating on to the mobile web and through increasing numbers of mobile only search engines. While mobile search is not necessarily mobile ad sponsored content, it is nevertheless a form of mobile business that has become extremely successful, both on the fixed and mobile web while being funded almost solely through advertising. The mobile search market remains open for competitors and ad funded content and search providers remain an area that have been shown to be viable business structures by the search market.

2.7.1. Revenue The main search engine giants that have migrated on to the mobile web, including Google, Yahoo! and MSN Live search receive the majority of their revenue from advertising. Despite the weakening economy in the global credit crunch, Google has reported particularly strong profits, despite fears of a slowdown in online advertising spending, with a 30% jump in profits reported in April 2008. However, these fears in a slow down in online advertising spend are not unfounded and ad funded content business models would do well to assess the global economic situation when structuring their budgets and business models.

2.7.2. Ad funded models Mobile search engines gain their revenue from varying sources, some directly from the user, but most gain revenues from advertising. Google receives approximately 99% of its revenue from advertising and has the greatest search engine market share. Funding through advertising is clearly a sustainable business model for search engines, which can rely on high audiences using their search as an easier method of tracking information and services on the web. Mobile ad funded content may not be able to rely on the same amount of audience numbers to tempt advertisers, but will be able to boast a degree of market specification which will be beneficial to advertisers wishing to specifically target their markets.

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Ad funded mobile content Chart 4. US search engine market share June 2008

Source: ComScore

2.7.3. Killer app Mobile search, and more specifically mobile local search has been anticipated as the killer app on the mobile, and ad funded models will play a large part in this market demonstrating the reach of ad funded business models on the mobile. It should also be remembered that mobile search will be many mobile users’ first port of call when it comes to locating content on the mobile, including ad funded content. Mobile content providers must therefore ensure that their positions on search engine rankings are favourable by ensuring recognition of their home pages. (Although it should be remembered that advertisers cannot buy their way on to organic search results.)

2.8. Mobile Games Mobile games also have a place on the mobile ad funded content market and have been brought to the mobile market by content providers and mobile operators alike. Mobile ad funded gaming or "advergaming" have a targeted market demographic that will appeal to advertisers and content providers alike, and content

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Ad funded mobile content providers can mould the games to the market’s specification and can adjust the games to include relevant advertising and brands, encouraging the mobile subscriber to engage with the advertisement. However, visiongain believes that advergaming revenues will account for a minor part of the mobile advertising funded content market as users have been shown to be willing to pay for this content. It will however also open up the market for new entrants in reducing costs for games content providers.

2.8.1. Market base The market base for mobile gaming is as varied as the games available. However, advertisers have the ability to target specific markets through the specific games that a mobile subscriber chooses to download. By engaging in dialogue with the relevant mobile operators and subscribers, advertisers and content providers can assess what subscribers are downloading which specific content, depending on privacy rules. Encouraging dialogue with the mobile subscribers and an opting-in scheme, advertisers can assess which advertisements to send to target their markets, and can provide targeted advertising within the game itself.

2.9. Mobile content growth There has been support for mobile content over the years and there is evidence that the amount of content and revenues generated from mobile content will grow. The potential for growth and revenue in mobile content will vary from the differing forms and markets of mobile content. Mobile music will see a fall in ringtones due to the decline in polyphonic ringtones, and the growing demand for mobile music through music videos and music streaming. Mobile TV, while slow to gain subscribers outside of Asia Pacific will expand as standardisation increases in Europe. Mobile gaming in the US alone is reported to have had $566 million in revenue in 2006, demonstrating the popularity and potential in this paid content. The revenue will be beneficial for all concerned. Mobile operators will be able to reclaim falls in ARPU through sharing revenues with advertisers and content suppliers permitted on the network. Mobile content providers will be able to reduce costs in receiving funding from advertisers and mobile

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Ad funded mobile content advertisers will gain higher brand awareness and global audience reach.

Chart 5. Content used in EU and US

Source: M: Metrics Benchmark study April 2008

2.10. Conclusion The mobile content that will be best suited to being driven by advertising funding will evolve as the content available to mobile subscribers increases in the amount and as the standards gain in quality. New forms of content entering the market will have an effect on what advertisers will choose to sponsor as well as the forms that the advertising will take. Sales of mobile content are continuing to rise as the mobile handset becomes more capable of supporting more sophisticated content and greater memory. The mobile content which currently presents itself as being most appropriate for ad funding is mobile TV as this is the content, particularly in Western Europe and the US, that needs incentives to drive it into the consumer market. Content that has previously been seen as expensive and subscribers are unwilling to pay for would benefit from ad funding as free or cut price content will

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Ad funded mobile content drive subscriber use which in turn will push up the advertising engagement and revenues. The content over a mobile that will be funded by advertising will be varied and dependant on what the subscriber has proved willing to pay for. Interactive content and advertising will be driven through ad funding as subscribers become more relaxed about giving personal information in the receipt of free or cut price content.

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Ad funded mobile content Chapter 3 Implications of mobile ad funded content Mobile ad funded content will affect the costs and market demographic reach of all those concerned within mobile ad sponsored content. The use of advertising on content will allow greater reach for the advertising brand tapping into the 3 billion subscriber mobile market, which will also allow the advertisers to gain intelligence in marketing to mobile subscribers, which will give greater potential in future advertising campaigns. Working with mobile content providers and mobile operators, mobile advertisers and advertisers new to the mobile market will be able to gather intelligence on the mobile subscriber market which would aid them in future campaigns, both on and off the mobile. This would also come to benefit the mobile subscriber, in receiving advertising of a higher quality leading to a higher standard of consumer experience. Mobile content providers and mobile operators will have cost incentives for ad funded content, as allowing advertisement sponsorship will reduce costs, and revenues from advertisers can be shared. By providing mobile subscribers with competitive incentives, such as cut price or free offers, to choose their specific content, mobile content providers will gain a greater penetration in the mobile market and mobile operators will be able to reap the benefits found by content providers and mobile advertisers through their networks.

3.1. Mobile operators Mobile operators will gain through mobile ad funded content by allowing and promoting ad funded content on their networks, and by mobile ad funded networks entering the market themselves. Discussed below are the main impacts that will occur for mobile network operators from mobile ad funded content such as costs, subscriber reach and which content will be found on mobile networks to be most prevalent.

3.1.1. OPEX Mobile ad funded content gives mobile operators an opportunity to reduce their operational expenses through the sponsorship gained

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Ad funded mobile content through the advertisements. The implication of mobile operator costs will be determined by the kind of mobile ad funded content that is present on the mobile network. For example; an MVNO would dramatically reduce operational costs in deciding to fund its business from advertising sponsorship. MVNO Blyk has used this strategy and subsequently can offer its subscribers free calls and text messaging. However, the amount of funds present from such a business strategy may be reduced, and therefore may have an impact on the quality of the service, such as by offering a low amount of free calling, which may lead consumers to believe that the advertising does not justify the service. By allowing other forms of ad funded content on to the network, such as games and music, mobile operators will be able to share in revenues gained, which will help to offset the costs incurred.

3.1.2. CAPEX The capital expenditures of a mobile operator will affect the mobile operator in potential future advertising needed to fund differing content in the future. Some mobile operators may need to upgrade their networks and adopt certain standards to achieve the highest quality of content and advertising, or risk subscribers defecting to other networks for a higher standard in QoS. Investing in these areas may increase CAPEX for mobile operators, but will be necessary in responding to the market.

3.1.3. Ad funded MVNO The mobile market has seen the entry of ad funded MVNOs which will be discussed in further detail later in the report. The market has seen entrants including Blyk, providing ad funded networks to the market, offering mobile subscribers the option of free calls and SMS in return for accepting advertisements on their mobile handsets. Ad funded MVNOs face challenges in attempting to reach a targeted market segment, which has been identified as crucial in mobile advertising. In targeting specific market segments, as Blyk has done in targeting 16-24 year olds, the networks risk alienating other potentially lucrative markets and also alienating brands that would appeal to these markets. If the networks choose to offer networks individually targeting separate market segments costs will rise. If the network chooses to target

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Ad funded mobile content multiple market segments over the network then there is a risk of the subscriber receiving untargeted ads which take on the quality of spam, driving users away from the service. For smaller MVNOs like Blyk, there is also the danger that if main stream mobile operators should choose to offer ad funded networks this may well push smaller less well known brands out of the market.

3.1.4. Mobile subscriber reach and contact The mobile operators have the most contact and reach to the mobile subscribers and this gives them the opportunity to communicate with mobile subscribers and determine where the target markets are for the mobile content providers and mobile advertisers. Having the information regarding their individual mobile subscribers, mobile operators therefore have the intelligence to decide which content and which advert would be best suited to the mobile subscriber. If the mobile operators were to engage in dialogue with the mobile content providers and mobile advertisers then a higher standard of service would be passed on to the end user. Mobile operators would have relevant information regarding their subscribers to decide which ad funded content should be marketed to the individual subscriber, judging by personal information and previous behaviour. This method would help advertisers reduce unnecessary marketing costs, in advertising the ad funded content to targeted market segments. However, this method would have privacy issues, as many subscribers would be unhappy with their operators sharing their details with third parties. Strategies where subscribers are actively invited to opt-in to advertising in return for free or cut price content would be more transparent and trustworthy to mobile subscribers. Mobile operators, having more contact with subscribers would be more appropriately used for providing information to subscribers regarding available ad funded content based on their consumer knowledge and position to place content in the view of the mobile subscriber.

3.1.5. Network management versus content management Mobile network operators must decide what content to offer their subscribers and if ad funded content will be well received by their

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Ad funded mobile content subscriber market. Network operators must also determine whether they will be offering separate ad funded content or if they will provide an ad funded network when entering the mobile ad funded content market. When operators debate this there are several factors to consider: • Who will best target the subscribers? The operator, the content provider or the advertiser? • Is there a specific market demographic within their subscriber base which can be targeted by mobile ad funded content? • Which content(s) fits best with the networks brand? • What content would appeal best to their chosen market demographic? • Will the operator offer ad funded content or ad funded MVNO?

3.1.6. Off portal versus on portal When using the mobile web, subscribers have previously found themselves limited to their operator's walled gardens. The "walled garden" approach to the mobile Web has proved difficult on all sides. The walled garden approach restricts the user to a specific amount of internet space as defined by the mobile operator. This approach, while maximising revenue for the specific providers, limits the user experience. The Mobile Web could not become popular under these restrictions and internet access has subsequently been opened up on the mobile to some extent. The control over the mobile Web is not solely in the hands of the operators, but due to the nature of WAP and advertising, they have managed to retain some control. The operator portals are still viewed with the stigma of being restrictive and with the mobile web opening up, more subscribers will feel encouraged to search off portal for content, including mobile ad funded content. However, the brands that are found on portal will be trusted by the operator brand and can therefore be demonstrated as genuine and as content that can be trusted by the mobile subscriber. There are therefore arguments for keeping ad funded content both on and off portal. Visiongain believes that mobile subscribers will continue to search off portal, attempting to find an internet experience that better matches the PC. But searches often start

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Ad funded mobile content on the portal, and having the content available from the subscriber starting, limiting the click distance, their mobile web search would give the ad funded mobile content the greater reach to the mobile audience.

3.1.7. Mobile operator case studies Below are examples of mobile operators who have trialled and/or have launched mobile ad funded content. The promotion of ad funded content from substantial operators and market leaders demonstrates that ad funded content is viewed as a competitive strategy in the mobile market and that it has the potential to become more mainstream than we are currently seeing. The examples below show that mobile operators are choosing a variety of content to be funded by advertising, depending on what they believe the mobile subscriber will or will not pay for. For example, as evident from its strategy, Vodafone believes that free mobile video content will be the best strategy for getting mobile subscribers to try video content and after providing a high standard of user experience for minimal cost to the end user, Vodafone can minimise churn in this area. In the case of Cellcom for its trial, it chose to fund mobile games with advertising. Mobile operators believe that mobile subscribers will pay for certain premium content, and that others need to provide mobile subscribers with incentives to try the service with the aim of gaining customer loyalty on the service.

3.1.7.1. 3 UK In March 2008, 3UK launched the first ad funded commercial mobile music video service in conjunction with Sony BMG Music entertainment, powered by mobile advertising solutions company Rhythm NewMedia. The service is available to 3 subscribers through the 3 music page on the WAP site. The service was launched following a successful service of free mobile video in 2007 in which during the first two months of roll out, around 10% of the subscriber base of 3 UK had viewed video clips on the service. By October 2007, it was reported that 1 million users had registered for the ad funded service, demonstrating the customer satisfaction for the service. This has demonstrated that mobile subscribers, especially 3 UK mobile subscribers are willing to view

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Ad funded mobile content advertisements in return for free mobile content, and that 3 UK has found success in music and mobile video content for ad funding. In promoting mobile video through ad sponsorship, 3 UK is able to provide financial incentives for its subscribers to try the service, as there is little or no cost to the end user. From the earlier launch of ad funded video content, 3 UK has gathered from the successful take up that its subscribers are receptive to videos on the mobile that are short, and are willing to view adverts for the free service. 3 UK has applied this intelligence to the ad funded mobile music video service, which is appropriate to the subscriber behaviour. Music videos are generally short, and this ties in with the behaviour monitored by 3 UK in its ad funded video service. According to 3 marketing director John Penberthy-Smith (in an interview in Mobile Marketing magazine), 3 customers are "happy to watch the short video before the video clip because the ad is targeted at them" reinforcing the necessity of keeping the content and the advertisements sponsoring the content relevant and targeted to the appropriate market demographic. This presents the best opportunities for ROI for the advertiser and the best subscriber uptake opportunity for content providers and mobile operators.

3.1.7.2. Vodafone Vodafone has entered the mobile ad funded content market in several areas of Europe, including Italy, Spain, Greece and the Czech Republic. Vodafone has explored differing forms of content, including ad funded peer-to-peer SMS and games in Greece, Spain and the Czech Republic, while Vodafone Italia has launched ad funded mobile video content in Italy. The service Free Video was launched in January 2008, demonstrating the growing number of mobile operators who believe that mobile video content is the most appropriate form of content to fund from advertising, minimising the cost to the end user and providing an incentive for those who have never tried the service to sample the offering from the operator. Vodafone has partnered with Amobee Media systems to offer the ad sponsored content and it too is considering which content is most appropriate to fund with advertising and offer to its subscriber for free.

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Ad funded mobile content In an interview with mocoNews.net, Mike Eaton, head of content at Vodafone UK stated that while Vodafone had plans for the mobile ad funded video content market, that ad funded games would not be appropriate, as this particular industry was one in which users were happy to pay for the content, giving profitable revenues. This suggests that providing some mobile content, such as games, through advertising funding and offering them for free to the consumer may devalue the content and alienate a sustainable form of revenue. Mobile operators must therefore find the appropriate balance between enticing their subscribers onto a service by offering it for free and retaining a sustainable business model for providing content, in which users are charged. To do this operators must determine the popular content and which kind of content subscribers are most likely to pay for. In providing ad funded content, it is essential that mobile operators maintain strong relationships with advertisers to ensure a smooth running under the mobile operator brand. To this extent Vodafone uses Dada Ad, which is responsible for recruiting and maintaining relationships with mobile advertisers and running mobile campaigns. Through this method Vodafone can ensure smooth communication with advertisers while being able to manage its network.

3.1.7.3. Orange Mobile operator Orange has launched ad funded content in France and is also trialling ad funded content in the UK. In France, Orange has joined with Amobee and launched ad funded mobile games trial in H1 2007. This was reported to be the first mobile ad funded content trial in France and included sponsorship from advertisers including Coca Cola and Societe Generale, Saab and Mobifun. The objective of the trial was to determine the attitudes of the Orange France mobile subscribers in regards to ad funded games content and how consumers would react to advertisements in mobile content, on their mobile handsets. While other mobile operators have rejected mobile games as a source for ad funded content, Orange France have chosen to market this content to its subscribers. Research for the Mobile Entertainment Forum has estimated that in the UK ad funded mobile games will

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Ad funded mobile content be worth £600,000 in 2008 ($1,167,970) and £41 million ($79 million) by 2012. It is clear that some operators and analysts believe that ad funded mobile games represent an area of growth in the market and time spent by operators investing in this area would be worth while. However, visiongain believes that mobile video and TV is the area which holds more potential in the ad funded market, as subscribers have been previously shown to pay for mobile gaming content, whereas mobile video can provide a rich media experience for the advertisers and will drive subscribers onto a new medium, which can be difficult given perceptions of mobile data prices. Offering the service for free would be an incentive for the mobile subscriber. As discussed previously, ad funding in content such as mobile games where subscribers have been previously happy to pay for the content, providing advertising funding and allowing the content to be downloaded for free runs the risk of devaluing the content.

Chart 6. UK mobile games market worth

Source: Mobile Entertainment Forum

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Ad funded mobile content In the UK in March 2008, Orange announced that it would be trialling ad funded music content for 800,000 of its mobile users. The music will be offered in four different genres; urban, pop, rock and dance. Users can download the content from the Orange world internet platform. The trial is set to last three months and reflects a common download for mobile subscribers. As more mobile devices become enabled with devices such as Mp3 players and larger video screens the demand for music and music videos on the mobile handset will grow. Orange's UK trial reflects the growing trend in mobile handsets and mobile subscribers, and will be able to reach a growing number of consumers through this kind of media.

3.1.7.4. Cellcom Another mobile operator to have trialled ad funded mobile game content is Israeli operator Cellcom. In July 2007, Cellcom announced the completion of its ad funded games content with successful results. Cellcom reported a 44% click through rate demonstrating the effect ad funding can have on mobile content. The ad funded mobile games market has demonstrated success for the operator and shows that a substantial amount of the market reacts positively to ad funded mobile games content.

3.2. Mobile handset vendors Mobile handset vendors also have the opportunity to influence the mobile content market. Nokia, for example, is taking steps in the mobile TV market, and its mobile TV forum which endorses the DVB-H standard and has launched it in countries such as Taiwan. Mobile handset manufacturers have an opportunity to exploit areas in the ad funded mobile content market which would hold benefits for the advertisers, content providers and mobile subscribers. The mobile handset vendor has some direct contact with mobile subscribers and is therefore in a strong position to provide market intelligence regarding specified market segments which mobile content providers and advertisers can use in their campaigns to provide relevant and targeted advertising, identified as a crucial factor in mobile ad funded content. Mobile ad funded content providers may decide to base their choice of content

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Ad funded mobile content display on mobile handset vendors, rather than mobile operators. This may provide competition between handset manufacturers and operators, opening up the market.

3.3. Mobile advertisers The market for mobile advertising is extremely diverse. The market is open to large corporate brands and smaller local businesses. Advertisers on mobile ad funded content will have to ensure that their brands and advertisements are relevant to the user downloading the content. To some extent, the adverts could also be relevant to the content itself although this does not have to be strictly enforced. Some mobile content such as games can contain the advertising within the content itself, rather than using a "wrap around" technique. For example, in 2002 Daimler Chrysler used online gaming to advertise. The game, "Get up and go" featured Chrysler cars and was a passive way of advertising and encouraging gamers to engage with the advertising. Suzuki used a similar strategy in a mobile game in 2002. Mobile advertisers can use this strategy for mobile gaming products by placing their advertising brands and products within the content. With other content, such as music and video, the "wrap around" strategy would be more appropriate, allowing advertisers to promote their brand within their own context and allowing content providers to supply their content without advertising “piggybacking” on their content.

3.4. Mobile content providers Through mobile ad funded content, mobile content providers will be able to obtain a greater reach of audience and the ability to target market segments by complying with operators and mobile advertisers. Ad sponsorship will also help reduce costs and in a market where certain premium content, such as games and ringtones, are flooding the market and heightening competition, the ability to reduce costs will ease the pressure on some and create a more sustainable business model. Driving ad sponsored mobile content will help to push more applications and services onto a single platform, reflecting the level of physical convergence that has been demonstrated with mobile handsets. Amobee has recognised this, by stating that the

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Ad funded mobile content ad funded mobile business can drive content and services on to all handsets on the mobile platform. Amobee recognises that having mobile content accessible through a paid method is one of the major barriers to mobile content. Sponsoring mobile content with advertising is a way around this barrier, and that in offering greater consumer choice in this market ad funded mobile content can flourish.

3.4.1. Adult content When providing adult content, age verification will be necessary to prevent the content being viewed by inappropriate underage users. This will also apply to the advertising funding the content. Advertising on mobile content will need to reflect the age of the consumer and adult advertising will not be appropriate on mobile content that is not directly aimed at adults, minimising the risk of inappropriate advertising towards younger users. The adult content market has a strong place on the mobile due to the personable nature of the mobile handset and therefore content providers may wish to consider keeping it at a price to the consumer, as consumers have already shown a willingness to pay for such content.

3.4.2. Mobile magazine Hard copy magazines generally receive a large proportion of income from advertising, and the same can be said for mobile magazines, or "mobizines". Services are available for a subscription fee, and some are free. Ad funding is a potential business funding which may encourage a higher proportion of users to take up the service. Mobile magazines operate in a similar way to hardcopy magazines, in that ad funding is a dominant part of the business structure. The mobile magazine represents mobile entertainment ad funded content, following a trend of moving hard copy products on to the mobile, as seen with mobile directories and mobile maps.

3.4.3. Audio Audio content, such as music and ringtones, has evolved from the polyphonic ringtones to real music tones and music videos, combining the audio and visual market. The ringtones content market represents an older more established side of the market,

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Ad funded mobile content which consumers have been shown to be more willing to pay for as the market has been sustained and expanded. Mobile subscribers are now offered more sophisticated mobile audio content options which present themselves as being more appropriate for advertising sponsorship. Mobile ad funded music videos are being offered by mobile operators in the market representing a shift in market demands. Mobile subscribers now have access to more sophisticated handsets which combine calling and entertainment uses, such as video and music playing. This in turn increases demand for content such as music videos which are short and suited to a small mobile handset screen. Mobile subscribers have previously been cautious with regards to downloading large amounts of data onto the mobile due to perceived high data costs and low speed. These issues are improving and ad funding will also improve perception of these services boosting demand. The ability of mobile subscribers to download such content for free will encourage more users to use the content, vital in gaining first time users of the content.

3.4.4. Visual The heightened sophistication of visual content represents a newer market in mobile content, and demonstrates a market that is appropriate for advertising sponsorship. User generated video content and broadcast mobile TV have varying popularities in differing markets. The accessibility of user generated content and the perception of high cost for mobile TV drives subscribers away from the service, and ad funding would help counter this. The incentive of gaining mobile TV content for free would drive more first time users onto the service. A ComScore study revealed that price was the biggest barrier to mobile TV for subscribers, with 71% citing it as the primary consideration. Trials conducted by mobile operators with ad funded mobile video have concluded that subscribers will accept an amount of advertising on their mobiles in return for free content, demonstrating the potential in subscriber take up that mobile ad funded TV has. Other visual content, such as wallpapers and photos, have been in the mobile content market for some time and subscribers have shown a willingness to pay for them. However, with an increasing amount of

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Ad funded mobile content competitors emerging into the market the ability to offer free content through advertising sponsorship would offer valuable competition differentiation.

3.4.5. Market leaders Mobile ad funded content is a relatively nascent market in comparison to the other mobile markets. Trials for some operators and content providers are ongoing, and therefore establishing market leaders is difficult and subject to change. In the UK, mobile operator 3 has seen a positive subscriber take up of its ad funded content and the recent introduction of further content to the service demonstrates the previous and anticipated success in the service. Ad funded MVNOs are making an entry to the market, the first in Europe being Blyk, and the first in Asia being ümobile. In order to establish market leaders, this market will need to be watched closely over the next five years to establish stayers in the market and eventual leaders. While preliminary subscriber numbers for ad funded MVNOs may be small in comparison to more established operators, growth will be positive. Visiongain believes that content such as music and video will be popular in the ad funded market and these providers will demonstrate this with strong performances.

3.4.6. What will be best suited to being ad funded? Visiongain believes that mobile TV will be the mobile content that is best suited to being funded by advertising. From the evidence generated by mobile operators and content providers, mobile TV and video which is funded by advertising and can be offered to subscribers for free is a sustainable business model that can encourage first time users into the market place. While some operators have offered mobile games and other content to subscribers through advertising funding, visiongain believes that since consumers have shown a willingness to pay for this content, offering it for free may devalue the content. With mobile video and TV, advertisers will be able to offer more sophisticated forms of advertising, rather than banner advertising for example which advertisers may find themselves limited to on other content. Mobile subscribers downloading a mobile video or TV show will

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Ad funded mobile content be more receptive to TV ads, as this bears on the experience of traditional TV, and therefore subscribers would expect this kind of advertising, and would be more likely to engage with it.

3.5. Mobile subscribers The lack of take up for mobile TV outside of the Asia Pacific market would suggest a lack of demand for the service. However, with the removal of certain barriers to the service, consumer take up will increase. The awareness of mobile TV services needs to be increased as does the number of mobile TV enabled handsets available if the service is to gain traction in the global market. If mobile subscribers are to be persuaded on to ad funded content services then these services must market their benefits to the mobile subscribers and will need to be accessible from their handsets as early as possible. This will enhance the debate between the benefits of on or off portal services. The presence of ad funded content on a WAP page will give subscribers instant awareness and access to the content. However, the recent falls of operators' walled gardens has shown the eagerness of mobile subscribers to search for content off portal. Also, to gain a place on the operator’s WAP portal, the content provider would have to

Table 2. Benefits and detriments of ad funded mobile content for mobile subscribers Benefits •Reduction in content price •Raised awareness of brands and offers •Targeted advertising and content Source: visiongain

Detriments •Possibility of unwanted advertising •Limit to amount of “free” content

have an understanding with the particular mobile operator which may limit expansion on other networks and in other areas.

3.5.1. Mobile ad funded benefits to mobile subscribers Among the main benefits that mobile ad funded content providers can market to subscribers is a monetary benefit. Mobile subscribers who have previously been unwilling to use mobile TV or have given up using it due to price will be encouraged onto the service by ad funded models. The reach of content to mobile users will also be beneficiary through ad funded content. By reducing business costs through ad funding content providers will be able to target a greater reach. Also, content providers can use the branding within their content, as seen in games, to target the market segment of the particular brand as well as the typical market segment of the content, and vice versa. By using mobile ad funded content mobile subscribers will have access to specifically targeted content and advertisements. Rather than

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Ad funded mobile content receiving irrelevant advertisements subscribers will be more likely to engage with targeted adverts, which will feel more like a service, providing the subscriber with information that is welcomed, rather than ignored or deleted.

3.5.2. Targeted advertisements In order to effectively advertise to a chosen market segment, advertisers and content providers must utilise targeted advertising. In order to offer targeted advertising to mobile subscribers, mobile advertisers will need relevant information regarding their consumer base. This may mean that advertisers will require intelligence from mobile operators, although this may infringe on privacy rules, which will alienate potential consumers. An opt in scheme from the advertisers and content providers requiring information from subscribers would be a more open way for advertisers to gain information, giving consumers the ability to be aware of exactly what information they are providing and what benefits will be gained from it. Relevancy for mobile advertising can be gained from LBA, and the location of mobile subscribers accessing mobile content will allow mobile advertisers to target more effectively. However, some mobile content use may not be appropriate for LBA services. Mobile subscribers are unlikely to be physically moving while watching mobile TV (with the exception of being on transport) and therefore may have less need for location aware ads. However, other forms of content are more accessible on the move and the relevancy of LBA will increase the likelihood of subscribers following up on an advertisement, increasing QoS.

3.5.3. Free content The offering of free mobile content through advertising funding holds benefits and disadvantages to content providers. On the one hand offering free content maximises the audience potential by allowing users of modest monthly budgets to access the content, removing barriers to mobile subscribers and increasing the perception that mobile value added content is available across the market. However, there is also a risk that in offering content for free of devaluing the content. There are therefore barriers to mobile operators, advertisers and content providers to offering solely free content. The majority of content that will be offered as

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Ad funded mobile content ad funded mobile content will be that which providers need to provide incentives in order to gain consumer subscription in a market which has so far seen relatively little take up rather than in a market which has seen a consumer willingness to pay for content.

3.6. Mobile advertising Mobile ad funded content will allow advertisers to tap into an audience previously held by the mobile operator. The advertisers will be able to target specific market segments on what is a very personal device. Rather than irrelevant advertising which can be found elsewhere on the mobile, advertising through ad funded mobile content gives the advertiser the opportunity to identify a market segment and advertise accordingly. The varying content will define market segments and advertisers can identify their target markets on the mobile platform by communicating with the content providers and operators who will have information on the subscribers downloading the particular content. Advertising on the mobile by nature invades what subscribers have come to regard as an extremely personal item. It is therefore imperative that the advertising pushed on the mobile device is relevant and that the subscriber has wittingly opted in to the service. LBA has the potential to effectively target the 3 billion global mobile subscribers. The knowledge of a subscriber's location immediately narrows the selection of a target market for the advertisers and allows for location aware advertising, increasing the relevancy and QoS to the subscriber.

3.6.1. Targeted audience Mobile ad funded content will be able to target its audience more effectively with shared intelligence that can be gained through communication between the service providers. The mobile operator holds the majority of information on mobile subscribers, and mobile content providers and advertisers will be able to gain information on mobile subscribers from opt in policies, which will be beneficial as the mobile subscriber will be actively aware of the fact that they will receive adverts in return for content, indicating that they are willing to receive advertisements and will therefore be more receptive to them and more likely to act upon them.

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Ad funded mobile content Mobile advertisers will also be able to reach a more targeted audience by the intelligence gathered from the distribution of different forms and genres of content. Mobile subscribers who download specific types of content on a regular basis such as specific genres of music or games will denote a specific market segment that can be accordingly targeted by the advertisers.

3.6.2. Size of market base There are estimated to be around 3 billion mobile subscribers globally and while not every handset will be appropriate for receiving mobile content, the majority market base will be able to be effectively targeted by mobile ad funded content providers. The variations of mobile content will differ in market size in different markets. For example, mobile TV has a much larger market base in the Asia Pacific market than in the US or European market due to the number of mobile TV enabled handsets available. The availability of less sophisticated mobile content such as ringtones will be greater as there are a greater number of handsets on the market that can support the technology necessary for the content.

Table 3. Mobile ad funded content market trends Mobile TV

Mobile Games

Ringtones

Music

MVNOs

25-35 age bracket.

Age bracket will vary depending on the game

Youth market

Age will vary dependant on music genre

Niche/specialist markets. Age will vary depending on target market

Will appeal most to those who have a better understanding of mobile technology and their handset capabilities at first. Those with higher handset specifications will be more likely to enter into this consumer market

Mobile handsets with larger interactive screens will benefit mobile games

Suited to most variations of handsets

Mobile handsets converged with mp3 players will encourage this market

Ad funding gives a competitive differentiator in a heavily populated mobile market

As subscribers have shown a willingness to pay for mobile games it is unlikely that this will become a large part of the ad funded market

Source: visiongain

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Ad funded mobile content 3.6.3. Target market As discussed earlier, the target market will vary depending on the market demographic for the different types of content. The market will also vary depending on location, and the ability to effectively target these markets will be enabled by LBA specifying the advertising needed for the particular mobile subscribers. The type of content will vary the market demographic including age and gender, as shown by a study reflecting the age and gender of those most interested in mobile TV. This will allow advertisers to target market segments up to a point, but mobile advertisers must be wary of alienating other markets, which will drive subscribers away from the content and advertisements reducing ROI.

3.7. Conclusion The implications of ad funded mobile content will affect not only the mobile content providers, but the advertisers, mobile operators, the consumers and to some extent the handset manufacturers as well. As the market for ad funded content grows, mobile strategies in content and advertising will evolve to provide mobile subscribers with a targeted service. Mobile content providers will be able to distribute mobile content to a larger audience who will be encouraged by the fall in price of mobile content which will also drive repeat business driving revenues. The rise in revenues will allow for greater spend on content driving amount and quality. Mobile advertisers will be able to target a mass global audience with relevancy and accuracy through ad funded mobile content. Through offering the incentive of free or cut price content advertisers will be able to gain information on mobile subscribers on a new level. Where previously advertisers have been able to only target mobile subscribers through general advertising, ad funded content will gain an insight into the mobile subscriber and encourage greater engagement and action on mobile advertising. Developments in LBA and mobile search have helped to make mobile advertising more relevant and targeted and these methods will help to make mobile advertising in ad funded content all the more relevant to the consumer.

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Ad funded mobile content Mobile subscribers and handset vendors will also feel the effects of ad funded content. Subscribers will gain from content that is cut in price and advertising that is directly relevant to them. The element of choice will also be crucial for the mobile subscriber in deciding what and how much advertising is delivered to them. Mobile handset vendors will need to recognise the market changes in mobile content as greater numbers of subscribers explore the available content on the mobile platform. Mobile handsets that allow for greater interaction with mobile content, such as larger touch screens and greater memory capabilities, will appeal to subscribers interested in mobile content and ad funded mobile content. Ad funded content will have an impact accross the mobile industry as it drives content and advertising further into the pockets of mobile subscribers.

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Ad funded mobile content Chapter 4. Global market reach of mobile ad funded content The impact and reach of mobile ad funded content will vary depending on the dynamics of global markets. Factors that will affect the impact of mobile ad funded content include cultural differences, economic bands, language barriers and technological interoperability. Mobile content providers, operators and advertisers will have to overcome these barriers in order to effectively target specific market segments over the mobile platform. Advertisers will also have to consider the brand reach for their advertising campaigns to be connected with mobile content. The brands must have relevancy to the mobile subscriber and this will vary in different geographical markets. The technology available on mobile handsets in different markets will also limit the amount of content and advertising available to mobile subscribers and some markets will not yet be appropriate for this strategy. Before launching ad funded mobile content into the mobile market content providers, advertisers and operators must consider the drivers and barriers in the market and whether the reach of such content in the global market will uphold a sustainable business. Mobile advertising is becoming more commonplace and a greater amount of mobile subscribers are becoming aware of advertising on their mobile handsets. This coupled with a rise in premium mobile content opens up the market for ad funded mobile content.

4.1. Developed markets In the developed mobile markets, mobile subscribers traditionally have more disposable income to spend on their mobile phone. This would suggest that mobile subscribers would be more willing to pay for value added mobile content and that offering such content for free under mobile ad funded content would run the risk of devaluing the content. However, developed markets offer opportunities for mobile ad funded content as consumers have greater accessibility to mobile content, leading to a greater demand. In developed markets such as the US, areas of Europe and Asia Pacific, mobile subscribers have access to mobile

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Ad funded mobile content handsets that are technologically capable of supporting various kinds of mobile content, from music to TV. Again this varies when the markets are studied separately. Mobile TV has achieved greater penetration in Japan and South Korea in comparison to the European and US markets where interoperability of standards and availability of mobile TV capable handsets has hindered the development of this market. In developed markets, it can be assumed that the average mobile subscriber is able to spend more on mobile content and has been exposed to more mobile value added content than those in emerging markets and are therefore more aware of mobile content that is on offer in the market. This is a market therefore that is more likely to actively search for mobile content and this provides an opportunity for mobile ad funded content to market to this area. With paid for mobile content having become commonplace in the mobile market, offering free mobile content in the form of ad funded content would offer a valuable competitive differentiator in the market. Charges for mobile services, including calls and data downloads on the mobile web, are falling, and consumers will expect the same for mobile content. By offering free or cheap content on the mobile through advertising sponsorship, mobile subscribers will be encouraged to use the content services, furthering the reach of the content and the sponsoring advertising. The reduction in price will also help to reduce churn as subscribers find it easier to use and download mobile content without dramatically increasing their mobile spend. In developed markets, mobile operators who are struggling to keep up ARPU may find added revenues in serving mobile ad funded content. By allowing mobile advertising on to their networks, mobile operators are able to charge advertisers or share in the revenue received from advertising on the mobile platform. The recent global credit crunch will also help to drive mobile ad funded content. Consumers in developed markets, particularly the US, are experiencing tightening credit conditions and as a result this has reduced consumer confidence and will

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Ad funded mobile content limit consumer spending. By offering mobile content for free, or at a cut price, mobile ad funded content can provide a service for mobile subscribers which does not dramatically increase their budget and can even reduce it should the consumer choose an ad funded MVNO. In an economic climate where consumers find it necessary to limit spending, companies and business models that strive to offer consumers services and products that can save money in order to pay for rising food, fuel and mortgage costs will gain greater affinity with the consumer and will offer a competitive differentiator in the market.

4.1.1. Target market segments In developed markets, the target market will vary dependant on the type of content and the branding of the advertising that funds the mobile content. The market demographic for mobile content is varied, given that the scope of mobile content and the number of mobile content providers continues to grow. For example, mobile content types can be broken down into separate genres appealing to more specific areas of the market. For example, mobile wallpaper content may appeal to the younger end of the market in a broad sense. Content providers can then choose to offer wallpapers that appeal to a specific demographic, for example, wallpapers that reflect urban culture, narrowing the demographic allowing content providers and advertisers to specifically target a market segment. Mobile content providers and mobile advertisers will have to consider these options when creating a service for the mobile platform. Mobile advertisers will need to consider whether ROI will be higher if a generic brand to attract as broad a base as possible is used to fund mobile content or if the adverts should reflect the specific market demographic of the mobile content, which would provide relevant targeted advertising, but may risk alienating other parts of the market. Mobile ad funded content therefore has the potential to appeal to consumers across the market due to the reach potential of mobile content coupled with advertising. The general target market of mobile content would be to mobile subscribers aged between 16

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Ad funded mobile content and 35, being an age demographic with disposable income and more likely to have experience with mobile content. The factor in price will appeal across the market and will enable mobile subscribers who have had little experience in mobile content to enter the market and will allow newer forms of content which have had less of an impact to reach new audiences. The addition of contemporary advertising brands into mobile ad funded content, such as EMI, will help to drive ad funded content into the contemporary market. Specific ad brands being used, such as Disney, will also help to target specific market segments and when used within the content can drive the content towards their preferred market.

4.2. Advertisers using the platform A variety of advertisers will use the mobile ad funded content platform, and the kind of advertising will depend on the content and the audience that the content providers and advertisers are targeting. Large brands will be able to increase the reach of their brands on a personal device, increasing the consumer awareness of the brand and giving the brand a personable feel on a subscriber's handset, targeting specific market segments. Large brands that have previously found it difficult to target consumers on a smaller scale will find that on the mobile platform they are able to reach consumers in a more targeted way. Advertisers and content providers will have to cooperate with the mobile operators in order to effectively target the mobile audience and to gain access to mobile subscribers over the network and the mobile operator’s portals. Mobile operators own the channel and the pipes that transmit content to their subscribers and can be selective about what subscribers view in their portals. With the advent of off portal mobile web surfing mobile subscribers are able to access content that is not dictated to them by the mobile operator. However, by cooperating with the mobile operator mobile ad funded content providers can ensure a greater and more targeted reach to the mobile subscriber. By promoting brands on mobile content, advertisers are ensuring a global market reach that is more targeted to consumers than other forms of advertising in the market such as TV, PC and billboards.

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Ad funded mobile content 4.3. Emerging markets Emerging markets offer an area in which mobile ad funded content would provide a valuable service to mobile subscribers who have less in the way of disposable income to spend on mobile content. In emerging markets such as China mobile content is set to grow strongly, and the approximately 600 million mobile subscribers provide advertisers with an audience that can be effectively targeted and with a growing economy represent an audience with more to spend on content and on following up advertising. It has been recognised that emerging markets such as BRIC (Brazil, Russia, India, China) markets represent key areas for growth in the mobile market following saturation in developed mobile markets in the UK, US and Japan for example. The unique cultures of emerging markets will have to be considered when offering mobile ad funded content and advertisers must be aware of cultural sensitivities (this is not restricted to emerging markets) when offering advertising alongside mobile content. Emerging markets have been viewed by some in the mobile industry as an area for development and this gives positive signals for mobile ad funded content. However, due to more limited economic means available to some in emerging markets advertisers cannot expect the same kind of ROI as in developed markets and the business of mobile ad funded content may not be sustainable. While there may be a demand for cheaper mobile content and MVNOs in emerging markets, sustaining them through advertising may not be appropriate in some markets as many would not be financially able to act upon the advertisements presented to them in ad funded content. In BRIC markets where mobile subscribers are in a financially viable position to respond to targeted adverts, the use of ad funded content, especially MVNOs, would provide an area in which mobile subscribers could use to their advantage. While the financial benefits in ad funded content provide incentives to those in the emerging markets, the advertising is more likely to be utilised by those in developed markets. The sales of mobile handsets in developing countries such as Africa and areas of Asia has helped buoy a slowdown

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Ad funded mobile content seen by mobile handset vendors in the global economic slowdown of 2008. This surge of mobile handset sales in these markets suggests a growing mobile market in these areas, but mobile ad funded content has to perform in developed markets before it can be pushed in emerging markets. Mobile subscribers with higher spending capabilities will be reacting and acting upon mobile advertising, and while those in emerging markets would benefit from free content, advertisers may not view this as a sustainable investment. Cheaper content and networks are a philanthropic investment for those who need it in emerging markets but in uncertain economic times businesses feeling the pinch must consider their long term sustainability.

4.3.1. Reduction in end user costs One of the principal benefits that mobile ad funded content brings to the mobile subscriber in emerging markets is the dramatic reduction in end user costs. The use of advertising alongside content can also bring information to communities where the lack of a fixed line means that the mobile is the sole connection to

Chart 7. Costs reducing mobile data usage

Source: The Netsize Guide 2008

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Ad funded mobile content information and the advertising of local services, products and information could provide a vital lifeline in some communities. The reduction in costs of content through ad sponsorship will help to drive these areas of the market, previously untapped, onto the mobile content market. However, as previously discussed, advertisers may be wary of investing in this area due to the potential low ROI. The introduction of a free ad funded MVNO would provide competitive potential in the emerging market place, but sponsoring advertisers would be wary, given the unproven market in this field. The reduction in end user costs is not an exclusive factor to emerging markets. The cost of data is a principle barrier to data usage on the mobile in all markets which is where ad funded content could excel. A survey conducted by Netsize revealed the scale at which the perception of costs hamper mobile data usage (see chart 4). This survey result demonstrates that in reducing the cost of content, which ad funding would do, ad funded content

Chart 8. Age trends in mobile content

Source: Survey commissioned by Mobixell Networks

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Ad funded mobile content would be removing a significant barrier between mobile subscribers and content, increasing the use of content and driving revenues.

4.4. Click through rate Israeli mobile operator Cellcom showed a particularly successful click though rate with its trial on ad funded mobile games. Cellcom reported a 44% click through rate, demonstrating the consumer acceptance of advertising on mobile content and that consumers were actively choosing mobile ad funded content. In order to justify mobile ad funded content, the click through rate on the content must be increased, and successful trials from Cellcom and launches from 3 among others have demonstrated that mobile subscribers are choosing to click through on mobile ad funded content.

4.5. Age demographic As discussed previously the market demographic will vary widely with mobile ad funded content, and this includes the age demographic. The type of content will determine the age categories that advertisers will target. The type and genre of the content will determine the age group using or downloading it, and will vary with sub genres within content types. According to a study from Comscore, mobile TV’s most popular demographic in America is men between the ages of 25-34. Mobile ringtones will appeal to the youth market and other content will be equally variable.

4.6. Best content The mobile content that is best suited to be funded by advertising is open to debate. Some mobile operators and content providers have chosen to drive ad funded mobile games, while others believe that this method devalues that content. Others have chosen to push mobile TV, funded by advertising. Visiongain believes that ad funded mobile TV is a particularly appropriate type of content to push with mobile advertising sponsorship, especially in the European and US markets. By funding the content through advertising, the cost of the content to the end user will be dramatically reduced to the end user driving a form of

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Ad funded mobile content a content that is little used in these markets, gaining subscribers and reducing churn. There are, however, barriers to this strategy. In markets outside of the Asia Pacific, there is a lack of interoperability in network standards that would allow the mass roll out of mobile TV in European and US markets. The EU is pushing for the DVB-H standard, recognised as a global standard for mobile TV, with trials ongoing and launches complete in countries including Albania, Finland, India and Italy. There is also the issue of providing mobile TV capable mobile handsets, of which there has been greater success in the Asia Pacific markets than in others. However, the roll out of mobile TV capable handsets is a barrier that handset providers should be able to overcome, given the rate that consumers in developed markets upgrade their handsets. Deploying mobile TV handsets to consumers will be smoother if price is not affected and the benefits of such a service are well marketed, particularly if the service is ad funded and the mobile subscriber does not have to pay for it. By minimising any inconvenience to the mobile subscriber and encouraging interoperability, mobile TV can enjoy success in the mobile market, given that research mentioned previously in the report has suggested that mobile TV is a service that mobile subscribers actively wish to see on their mobile handsets. Visiongain also believes that ad funded MVNOs have a place in the market by appealing directly to a market base. Blyk has chosen to target students, but could expand to other target markets in an effort to gain maximum advertising revenue and avoid alienating potentially lucrative areas of the market. Trials in which other forms of content are offered on an ad funded basis such as games and other content that subscribers have been shown to be willing to pay for previously will demonstrate whether a sustainable business model can be achieved without devaluing the content. The success in Cellcom's trial suggests that the number of consumers viewing and downloading such content increased when ad funding was introduced, driving the service and increasing the reach of the advertising and content.

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Ad funded mobile content 4.7. Mobile content standards In order to maximise the reach of mobile content, standards in technology are required to allow a high QoS, reducing churn and encouraging loyalty to the service. The standards mentioned below have the potential to improve the speed and quality of service for mobile content, particularly that which relies on the mobile web. Speed and quality of content and data have been major issues when it comes to the mobile web, and has put off some mobile subscribers from using the mobile web and applications like mobile search, although this is starting to improve due to improvements in the service. Data costs have also been perceived as a problem by mobile subscribers, however, the changes in charging for the mobile web, such as flat rate charges and charges per download rather than for the amount of time spent on the web. Funding content through advertising will work towards removing the cost barrier that prevent some mobile subscribers taking up mobile content, which, when coupled with an improvement in the QoS will drive mobile content further towards mobile subscribers.

4.7.1. 3GSM The implementation of the 3G standard has provided the mobile user with a standard that allows the delivery of a range of multimedia services. Mobile subscribers who use mobile content will rely on this standard to allow the transmission of data needed when downloading certain mobile content. The roll out of 3G is more prevalent in European markets whereas, in the US for example, the EDGE network is more prevalent. However, the coverage of the network is spreading and, according to GSM world is available in over 200 countries and territories. This allows for greater interoperability of service, which will have benefits for content on the network as well if mobile subscribers are able to access the content in other areas, although charges will vary. The data speeds available on 3GSM allow for around 300 kbits, giving users fast access to mobile data, improving the consumer satisfaction and QoS and allowing for more sophisticated mobile content, such as music and TV, to be downloaded by mobile subscribers in a fast and efficient manner. As the content available to mobile subscribers becomes more sophisticated and requires a

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Ad funded mobile content higher amount of data, networks with higher data capability will become imperative to content providers pushing these higher quality mobile contents in order to ensure a high standard of service to their consumers and reduce churn due to dissatisfaction.

4.7.2 3G HSPA HSPA encompasses HSDPA (High Speed Downlink Packet Access), first commercialised in 2006, and HSUPA (High Speed Downlink Packet Access), which has seen major deployments in European markets over the course of 2007. With over 850 million GSM, WCDMA and HSDPA subscribers in HSPA-enabled networks worldwide in September 2007 according to GSA estimates, the potential impact of these technologies on mobile content and applications should in terms of quality and subsequent market adoption. HSPA technologies will enable operators to provide advanced multimedia and content services. In effect, MNOs hope that by enhancing the mobile broadband experience and facilitating the adoption of mobile data services, HSDPA will deliver on the original promise of 3G.

Table 4. HSPA-Enabled devices, September 2007 Device Type Available Handsets 124 Notebook PCs 59 USB modems 23 PCMCIA cards 38 Wireless routers 27 Embedded modules 21 ALL DEVICES 311 Source: visiongain

With theoretical download speeds of up to 7.2Mbps in the initial phase, HSPA allows for uplink and downlink speeds three times faster than the present UMTS networks, with typical real-world rates of 400-800kbps for HSDPA, although some vendors claim this will drop to below 400kbps once more users are added onto the network. HSDPA can also be deployed at comparatively low cost to 3G - HSDPA upgrades come to 10-15% of the cost of WCDMA network rollouts. Eventually, HSDPA will deliver 14.4Mbps of bandwidth by 2009. Throughout the course of 2006-2007, the spread of HSPA deployments has marked notable increases in the volume and variety of HSPA-enabled devices, covering both phones and PC connectivity modules such as embedded laptops, wireless routers, USB Broadband modems and PCMCIA cards. Table 4 shows the number and type of HSPA-enabled devices available in consumer markets around the globe as of September 2007. 79 ODMs produced the total of 311 commercial devices.

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Ad funded mobile content 4.7.3. 4G and LTE 4G represents the next step in mobile communications for the GSM network, which will have benefits for mobile and broadband communications. 4G is being tested in countries including in the US, Japan and Europe and initiatives surrounding 4G are being trialled by some mobile groups. The mobile standard of Long Term Evolution (LTE) was formed by Nokia, in collaboration with Sony Ericsson, NEC and Alcatel Lucent, pushing the evolution of 3G systems and creating a competitive standard for 4G. The initiative is also intended to compete with WiMAX and will provide a network standard with faster speeds that will continue to improve the speeds for mobile data over a greater distance.

4.7.4. WiMAX The evolution of WiMAX has experienced criticisms but has also been hailed as the basis for the future of communications providing a competitor to 3/4G networks. By adding competition in the area consumers will benefit by networks competing to offer the better service, giving greater speeds and QoS which will also benefit mobile content. The ability to increase the distance of wireless communication through WiMAX will also help those in markets where terrain is hostile enter the mobile market and allow greater transfer of mobile content.

4.7.5. Mobile TV standards There are a number of alternatives in the market and a lack of wide scale roll out in some markets is making the adoption of mobile TV slower than in other markets. Aside from broadcasting over the cellular network, a list of mobile TV standards include: • DVB-H (Digital Video Broadcasting for Handhelds) Available in the US, Europe, South Africa and Asia • S-DMB (Satellite Digital Media Broadcast) Available in South Korea and Japan • MediaFLO Launched in the US, trialled in the UK and Germany • DAB-IP (Digital Audio Broadcast) Available in the UK • ISDB-T (Integrated Service Digital Broadcasting) Available in Japan

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Ad funded mobile content • STIMI (Satellite Terrestrial Interactive Multiservice Infrastructure) Available in China • T-DMB (Terrestrial Digital Multimedia Broadcast) Available in South Korea and Germany. Until a standard is accepted in wide scale markets where mobile TV has been slower to take off, such as Europe, mobile TV will struggle as subscribers will want ease of use and some level of interoperability as well as low price.

4.8. Location aware advertising LBA has been identified as a key factor in mobile advertising as it offers advertisers the opportunity to effectively target mobile consumers by having awareness of their location and of the services in the location that can be advertised to them. As discussed earlier in the report, some types of mobile content may not be appropriate for LBA due to the nature in which the mobile subscriber uses that content. However, LBA could allow smaller businesses with more modest marketing budgets to have a place on ad funded mobile content, targeting consumers who are using or downloading mobile content when they are in the appropriate area. With the arrival of mobile social networking and ad funded mobile social networks, LBA will have a significant part to play on the mobile and ad funded content can gain targeted and relevant advertising from this area which would increase consumer satisfaction.

4.9. Conclusion The bulk of ad funded mobile content will gain traction in developed markets, notably Western Europe and the US. In areas of Asia Pacific, free-to-air mobile TV may well negate the need for ad funded TV and other forms of content will have to be utilised in this market. Advertising on content will be best suited in a geographical market where disposable income is high to ensure a positive response to advertising, but will also be well received by subscribers wanting to cut their mobile costs due to smaller disposable incomes. In this case, ad funded MVNOs will gain traction and popularity. Other more luxury forms of content that are funded by advertising will gain more traction amongst

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Ad funded mobile content subscribers in more developed markets at first, and will then move to emerging markets as the low price allows subscribers to indulge in what may have been content previously viewed as too expensive.

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Ad funded mobile content Chapter 5. Mobile ad funded content available While ad funded content is still a relatively young market, there are various examples of ad funded mobile content available in the mobile market. Various kinds of mobile content are emerging as ad funded business models with varying degrees of success, with advertisers, content providers and operators choosing different types of content to promote and support. Web 2.0 applications are making an impact on the mobile web and what mobile content is available, and this has reflected on the entry of mobile TV and mobile social networks into the ad funded market, and visiongain believes that this will continue to be the case as we see more examples of ad funded mobile content coming into the market.

5.1. Ad funded mobile MVNO With the price of calling continuing to fall, mobile operators are looking for methods to combat the fall in ARPU. One particular method that would combat this and give a competitive differentiator in the mobile market is that of ad funded MVNOs. As mobile operators face increasing competition from low cost calls from other mobile operators and cheaper or even free calls from VoIP services such as Skype, lowering their respective prices to keep up with the competition will have a detrimental effect on their revenues. By funding the network through advertising, mobile operators are able to keep a sustainable business through charging advertisers for space on their network and even a share in the advertising revenues as well as offer mobile subscribers a competitive service. This is extremely true in the current mobile market where even the VoIP services are often subjected to some charge or subscription over mobile phones. There are however, drawbacks to the service. The number of free minutes and texts offered to a mobile subscriber over an ad funded MVNO can be limited and when subscribers go over they are charged at a normal rate whereas other services offer a large bundle of free minutes, texts and data downloading and VoIP service offers can be unlimited. Also, some ad funded MVNOs on the market tend to limit their

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Ad funded mobile content target market to one specific segment which risks alienating potentially lucrative areas of the advertising market and high spending mobile subscribers. There are clearly areas in which the ad funded MVNO needs improvement if it is to offer a truly competitive service, but there is strong potential for the service to compete amongst other mobile operators in a variety of markets.

5.1.1. Blyk Entering the market in 2007, UK MVNO Blyk offers mobile subscribers a package of free minutes and texts in return for the subscribers receiving and responding to adverts sent to them on their mobile handset by Blyk. The MVNO uses the network from Orange to offer its service and when consumers have used their free minutes and texts bundles, the call pricing reverts back to Orange's pay as you go pricing. In 2008, Blyk intends to move into the European market (Spain, Germany and Belgium) with the aim to reach the 40 million young subscribers. As of April 2008 Blyk has signed up over 100,000 subscribers which, according to their press release, is six months ahead of schedule, demonstrating that, so far, the service can be viewed as a success. The success for the MVNO is also a success for its advertisers, with whom it is tied in, as the advertisements receive exposure to a targeted audience increasing the chance for higher ROI. Blyk functions as an invite-only MVNO, allowing only those between the ages of 16-24 to join. The subscriber can request an invite, or can be invited in one of the tours that Blyk has taken around universities to target their market. On joining the subscriber receives a free SIM card, Blyk does not sell mobile handsets and the subscriber will need an unlocked phone to use the SIM, and on the SIM the subscriber receives 217 free texts and 43 free minutes to any network per month. In return, the subscriber opts in to an advertising campaign provided by brands selected by Blyk on the basis of the subscriber information provided. The subscriber receives up to six advertising messages per day through MMS which pay for the subscriber's free calls and text messaging over the network. By targeting a specific market and having an opt in strategy by which the subscriber provides

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Ad funded mobile content their information, Blyk has ensured that their subscriber is fully aware of the advertising that they are likely to receive and are less likely to regard this advertising as a nuisance and are made fully aware of the benefits. Blyk also works on a social scale as when a mobile subscriber has joined Blyk they can invite others to join.

5.1.1.1. Blyk strategy This strategy taps in to the social networking experience that has experienced a boom online on the PC and on the mobile. The popularity of social networking and the market of 16-24 year olds will be particularly well linked in order to encourage as many as possible from the desired market onto the Blyk network as the market of 16-24 year olds is likely to be especially in touch with the social networking culture that Blyk is harnessing to drive up subscribers. The offer of free voice minutes and text messaging will appeal to the younger market that may have less disposable income due to constraints of a university education or an early career, and will find relief in a free mobile network. By restricting the amount subscribers need to spend on mobile calls and text messaging, Blyk is allowing extra cash in its subscribers pockets to be used on responding to its advertising rather than having to pay for mobile calls. By freeing up consumer cash, Blyk is able to receive the cash through a different source through the consumers responding to the advertising.

5.1.1.2. Drawbacks to strategy There are however, drawbacks to the service. In order to achieve the highest quality strategy for advertising on the mobile, Blyk has ensured that its advertisements are as targeted and relevant as possible by targeting a very specific market, allowing only 16-24 year olds to sign up to the service and by running the service as an invite only service. While this may increase the popularity of the network by adding a feeling of exclusivity, it also alienates other areas of the market and brands that may not wish to limit themselves to a single market. This risks alienating potentially lucrative areas of the mobile advertising market and could weaken the network as it becomes associated with providing a service to only a singular market. There is also an issue with the amount of

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Ad funded mobile content minutes offered on the network. The subscriber is offered 217 free text messages and 43 free voice minutes. The number of voice minutes is extremely low and when the subscriber goes over the subscriber can top up on the tariff used by Orange's pay as you go, at £0.10 ($0.19) per text and £0.15 ($0.29) per minute for voice calls. While Blyk has estimated that compared to the average pay as you go tariff for the 16-24 year old market where the mobile subscriber can save over £280 ($554) per year, this does not take into account the fact that contract mobile network offers offer a much higher number of "free" minutes and texts for a fixed charge, with lower charges per text/minute outside of these bundles. While Blyk is able to offer the competitive differentiator of offering truly free minutes in exchange for advertising, other operators are also offering competitive bundles on contract, and subscribers on contract may not be swayed by a low number of free minutes per month. Blyk is therefore more competitive to those on a pay as you go package, and to the areas of the youth market on a strict budget.

5.1.1.3. Blyk branding The brands that are being used by Blyk are given the flexibility to target mobile subscribers who are more likely to be actively interested in their brand or message due to the 100% opt in strategy used by Blyk. This gives advertisers for large corporate brands such as Boots and L'Oreal the opportunity to target individuals whereas with other methods of mobile advertising, a large corporate brand message may bypass the mobile subscriber due to an ambiguous message and limited reach. The advertising brands used by Blyk will also need to be flexible enough to expand as Blyk plans to launch in Europe in 2008. This will be particularly beneficial to larger brands with a global reach, and by gaining subscriber knowledge as has been the case in the UK brands will be able to continue to target specific markets. The relevancy of the advertisements means that Blyk is able to boast a 29% average response rate, in comparison to 4.5% of mobile advertising pushed by SMS without profiling the subscriber. There have also been higher response rates on Blyk's advertising campaigns. For example, when Penguin Books advertised the

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Ad funded mobile content release of the novel "Slam" by Nick Hornby the campaign received a 67% response rate, demonstrating the effect that targeted advertising can have on the mobile, and that advertisers will gain an engaged audience with the potential for higher ROI and revenues.

Table 5. Examples of Blyk case studies Brand Boots: To generate awareness of brand and christmas fragrances

Total response 1st campain 13 % 2nd campain 14%

Blyk solution Blyk sent subscribers MMS messages over two campains during christmas shopping peaks

Results Approximately 70% agreed to receive follow up offers from Blyk

Natwest: To increase customer base for adapt account for 11-18 year olds and 18+ student account

34%

Blyk sent 2 part MMS dialogue to relevant age group with information

1 in 6 responded to adapt account and 1 in 3 responded to student account MMS

JJB Sports: Enhance awareness of brand and new footwear

62%

Blyk sent MMS messages asking subscribers their favourite brand of footwear, then sending back relevant information and JJB stockists

84% men and 82% women agreed to further messages

L’Oreal: Drive new product and brand

40%

Blyk sent initial MMS and follow up competition offer

66% responded to completed MMS and 70% the competition

COI Connexions: Investigate scale of bullying among 16-19 year olds

36% Blyk sent SMS messages on days away from work and school to relevant age group

1 in 8 Blyk respondents visited the Connexions website that day

Source: Blyk

5.1.1.4. Future for Blyk Due to the nascent nature of ad funded MVNOs, it is currently difficult to predict whether they will become a popular service or if they will remain a niche in the market. Visiongain believes that the competitive differentiator of offering free calls will help to make the service more popular but in order to achieve higher market penetration the service must offer a greater number of free minutes, and that the markets targeted will have to be expanded.

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Ad funded mobile content The networks may wish to keep targeting separate markets, but they will have to offer more markets the chance to use the service (i.e. not just the youth market in this case) and target these markets accordingly with relevant advertising through separate networks, which will mean that the service avoids alienating rich areas of the market.

5.1.2. Xero Mobile Based in the US, Xero mobile aims to bring together advertising and the mobile platform, a service that will be aimed at targeting the college student market, aiming at an age range of 18-24, which Xero mobile estimates to hold 17.3 million subscribers. Like Blyk, Xero mobile plans to offer a free service to its subscribers by funding the service through targeted advertising to its consumers. Xero mobile harnesses mobile advertising in the form of TV, mail and messaging. Subscribers will also be sent extra incentives in the form of coupons and vouchers, adding to the financial benefits of the service. The service was in talks with ROK Entertainment, with the aim of being purchased by ROK, but in H1 2008 the talks were abandoned. If the service is able to launch into the 17.3 million subscriber market of college students in the US then Xero mobile has the potential of tapping into a lucrative market, given the market size. The style of the advertising solutions that Xero is offering, such as vouchers on the mobile that can be presented to participating stores on the mobile handset and TV advertising, will allow relevant advertising to be targeted directly to the relevant consumer. However, the MVNO has yet to launch and visiongain believes that it will miss the narrowing window for entering the market. Also, the recent loss of ROK Entertainment as a buyer placed doubt on the MVNOs future, and little or nothing in the way of development has been heard of since.

5.1.3. MOSH Mobile MOSH Mobile, based in the US, offers mobile subscribers the option of receiving adverts in return for free wireless services aimed at the youth market between 18 and 24. Like Blyk, the service invites subscribers onto the network, but offers

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Ad funded mobile content subscribers rewards on other mobile applications and material goods. For example, the subscriber can earn reward points for Apple iPods, iPhones or Visa gift cards. Like other ad funded MVNOs subscribers are required to fill in a survey upon joining to ensure that the advertising is as relevant as possible. To ensure customer satisfaction with the service, MOSH allows subscribers to earn reward points quickly, with 50 points available for a dialogue. Subscribers are given choice and control which will increase the popularity of mobile advertising and reduce the possibility of the advertising becoming regarded as junk mail. Subscribers can choose specific times as to when they receive advertisements and can request more if desired. MOSH claims that their reward points never expire, so the subscriber can deactivate the service and come back at a later time if they so wish. Choice and control will be imperative in gaining support from mobile subscribers for ad funded content, and MOSH has recognised this in giving control to its subscribers.

5.1.4. Ümobile Ümobile is the first ad funded mobile network service to be launched in Asia. The service has been launched in H1 2008 in the Philippines and, like others on the market, has targeted a specific age group in order to allow advertisers to target specific market segments. The network is open to 18-35 year olds on an invite only basis. On joining, members fill in a questionnaire giving advertisers valuable information ensuring that advertising is relevant, increasing ROI. The MVNO is owned by SMART telecommunications and to drive subscriber take up the MVNO is offering deals to subscribers who sign up between June 1 2008 and August 31 2008. Benefits to subscribers signing up within this time frame include: • Free PHP100 load every month for the first six monthsfinancial attributes continue to appeal to the ad funded MVNO customer • Mobile VoIP (Fring)-VoIP allows the network to provide its subscribers with a solution that can be low cost as well as high quality and competitive

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Ad funded mobile content • National coverage-Allows the network to compete in the local and national market improving the QoS for the subscriber • Rewards scheme-The subscriber can claim rewards through the advertising offered through the network, increasing the competitive differentiator of the MVNO • Mobile broadband access-Access to boradband enhances the communication package and again gives the MVNO a competitive standing in the market • PC calling with a virtual phone-This is not yet available on the service, but will enhance the communication as a package that the network is offering The introduction of an ad funded MVNO in Asia represents the growing acceptance of adverts on the mobile phone in return for free or cut price content globally. The MVNO has taken into account the differing standards of handset that will be used by subscribers in the market, as the SIM can function on handsets that use GSM, 2.5G and 3G. Ad funded content over this MVNO will appeal to a market that will want to reduce their outgoing mobile costs, and will also appeal to a young market. Ümobile has recognised its target market and will be able to advertise accordingly. The drive to pull in as many subscribers as possible through the June to August offer drives up a sense of urgency, as well as exclusivity to the network appealing to the youth market which will in turn drive up the advertising revenues.

5.2. Mobile ad funded social network Social networking has been extremely popular on the PC and has migrated onto the mobile web, where subscribers can become truly social with the aided mobility of a mobile phone. Mobile social networks are particularly well placed strategically for mobile advertisers, partly because of the large audience numbers that they have been enjoying on the PC that will migrate onto mobile which is especially the case for social networks like myspace and Facebook. Facebook alone has over 60 million registered users and Myspace over 100 million registered users. The audience potential for mobile social networks is a serious incentive for mobile advertisers to target this market, and with the

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Ad funded mobile content information that subscribers give on social networks advertisers will be able to target their audience effectively. Mobile advertisers will also be able to make use of the mobility that mobile social networking has to offer as location aware mobile social networks come in to the market. Mobile social networks that actively track a subscriber or their "friends" location, as is the case with mobile social network Loopt, will also be able to strategically advertise to the subscriber using LBA. While Loopt is not advertising on its network social networking sites can use this technology to fund their service through advertising and offer their subscribers a targeted and relevant service.

Chart 9. Ad funded content in mobile social networking

Source: The Netsize guide 2008

Ad funded content is believed to be a significant contributing factor in mobile social networking. In a survey by the leading mobile communications and commerce enabler Netsize (see chart 6), the majority of respondents believed that ad funded content will dominate in this area. This survey demonstrates that ad funded content will be significant in one of the strongest growing online applications that is social networking. By gaining

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Ad funded mobile content dominance and traction in this area ad funded content can gain stability and revenue potential in a strong area on the mobile.

5.2.1. M3 Mobile An example of an ad funded mobile social network is M3 Mobile. Currently still in Beta stage, the service allows mobile subscribers to make connections with others on the network and for adverts to appear that are deemed relevant to the user in that the product or service is in the vicinity of the subscriber or their "friends" and subsequent offers conjoining the product can be made. Based on the interests of subscribers shown on the network and the networks groups, advertisers can effectively target their market segments and use location to further narrow down the target market which can help to lower costs if advertisers are paying only when their ad is displayed. Mobile ad funded social networks such as M3 Mobile have the advantage over ad funded MVNOs and other forms of ad funded mobile content in that LBA is able to add much more relevancy on this kind of content, as the mobile subscriber is most likely to be using the content, and engaging with the screen when on the move. The nature of location aware social networks on the mobile denotes that the subscriber may be using it to locate friends while on the move, and therefore adverts that appear on the screen are likely to be relevant in both location and time. In the case of an ad funded MVNO adverts which are relevant are sent to the user throughout the day, without necessarily having relevance to the users location. With other forms of content such as games and mobile TV, the subscriber is less likely to be physically moving while using the content, due to the physical difficulties that this would incur. Mobile social networking is therefore an appropriate type of content for mobile advertisers to fund using LBA which would increase the relevancy of the advert and increase QoS for the content.

5.2.2. itsmy.com A mobile only social network, in April 2008 itsmy.com announced that it had 1 million users. The service is mobile only, and the company behind it, Gofresh, has pushed the service on to the

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Ad funded mobile content mobile platform, off portal, and allows users to view and create mobile content. The creation of user generated content encapsulates the control given to mobile subscribers which will help drive the success of ad funded mobile content. By making subscribers absolutely aware of what they will receive in return for advertisements that subscriber can choose whether or not to receive the advertisements and the content. UGC echoes this in allowing subscribers to create their own content on the mobile.

5.3. Mobile ad funded gaming Some operators and content providers have chosen to supply ad funded mobile gaming to mobile subscribers, which can provide advantages for mobile advertisers and content providers. Mobile gaming has been present in the mobile market for some years now and subscribers have shown a willingness to download and pay for this content. Some believe that offering mobile games to subscribers for free as ad funded will devalue the content. However, there are examples of mobile ad funded gaming providing some success. One such example is that of Cellcom's trial, where a click through rate of 44% was experienced. With mobile games, the brand and product of the advertising can be woven into the content itself, further ingraining the brand into the mind of the subscriber. The brands can choose how their content is used and in what game, thereby engaging with the audience, increasing the likelihood of the subscriber remembering the brand and acting on the advert.

5.4. Mobile ad funded TV Visiongain believes that mobile TV and video is one of the more appropriate types of mobile content to be funded by advertising, as it offers a strategy to get content which has not achieved the same consumer penetration in European and US markets as it has in the Asia Pacific markets. When offered as ad funded content, mobile TV will be able to achieve a higher response from mobile consumers since it will be dramatically reduced in price, although other issues regarding interoperability and quality will have to be addressed as discussed earlier. An example of ad funded mobile TV is that of GoldSpot, providing ad insertions solutions for mobile TV, which has launched a trial for mobile ad

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Ad funded mobile content funded TV mobile platform. In January 2008, it was reported that GoldSpot received $3 million in series A funding. In April 2008 GoldSpot announced its "trial in a box" with the aim for advertisers on the mobile TV platform to be able to test the platform and determine the market available to them. GoldSpot Media has recognised that advertising funded models are a key strategy in driving mobile TV and that the advertisements must be targeted according to the market demographic. As demonstrated by other ad funded mobile content solutions seen, targeted advertising is a key factor in gaining the attention and retaining the subscription of mobile subscribers, allowing for the best revenue potential for mobile advertisers which will also be beneficial to the content providers and operators sharing in the success.

5.5. Mobile ad funded content providers Mobile content providers are looking to ad funding to subsidise and to target a booming industry of online advertising which is migrating to the mobile. Established brands are looking to advertising funding in order to gain a higher mobile audience and revenues from advertising. For example, in September 2007 Myspace launched an ad funded mobile service in an effort to push the brand further to mobile audiences and gain in mobile advertising. In order to provide some competitive differentiation in the market where the amount of content available is high, mobile content providers are able to provide free services to mobile subscribers through advertising funding, which will have different reactions in the market depending on the content. Below is a selection of examples that have provided ad funded content in differing forms.

5.5.1. Pitch/PlayPhone As reportedly the first mobile content provider in the UK to provide advertising funded content, the company provides mobile content in varying forms. The content covers mobile entertainment and, in May 2008, a merger with/acquisition by PlayPhone was announced which Pitch described as an effort to increase the subscriber base and increase the reach of Pitch's mobile entertainment content.

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Ad funded mobile content In 2006, Pitch announced its intention to offer free mobile content which would be funded by advertising. The content on offer from PlayPhone is currently available at various subscription prices. The content available allows mobile subscribers access to content spanning from games to video. By combining mobile marketing and entertainment, Pitch (and Splash mobile entertainment, a name under which the company also trades) are ensuring a global reach for advertisers and content.

5.5.2. Myxer Founded in the US Myxer provides mobile content including wallpapers, ringtones, games and videos that are funded by advertising. The service extended into the UK in January 2008 and the amount of content available to mobile subscribers continues to grow. According to Myxer nearly 4 million people use Myxer to download mobile content from the internet, from over 250,000 pieces of content. The method of ad funding for Myxer content is not limited by location and through the cost incentives and variety of content available will be able to appeal to a broad

Chart 10. Trends in mobile internet users.

Source: Dynamic Logic for Greystripe, cited on MobiAd

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Ad funded mobile content market base. According to a study in the UK the MEF found that ad funded mobile entertainment is set to produce $286 million in revenue by 2012. There are clear indicators that ad funded content and content that will be well suited to advertising funding have growth potential in uptake and revenue, as demonstrated by these figures. Myxer, in offering ad funded content in a variety of media, therefore has the potential to capitalise on this growing market. In expanding from the US to Europe, Myxer can take advantage of the growing use of mobile content and more sophisticated mobile content such as mobile TV in these markets.

5.5.3. innerActive Smart Media Providing a platform for ad funded mobile entertainment, innerActive Smart Media is responding to the growing global demand of mobile subscribers for entertainment on the mobile device. The mobile handset has become a multimedia device and as such is capable of supporting content such as entertainment that subscribers are utilising in forms such as video, music and games.

Table 6. InnerAcvtive Smart Media Advertisers include: Adidas Calvin Klein Domino’s Pizza ebay 20th Centuary Fox Sony Pictures NME What’s on TV

Pick me up Paramount Motorola

Source: innerActive Smart Media

In June 2008, the content provider announced that it would be teaming with Buongiorno, number one in mobile entertainment, which also provides ad funded entertainment over the mobile. The combination of these two providers demonstrates the positive response that ad funded content has received from mobile subscribers, which has also been seen by the positive clickthrough rate experienced by innerActive. Brand owners on the platform have experienced approximately 40% click through rates. Such positive results show that subscribers are not only willing to receive adverts on their mobile handsets for free content but will also actively engage with and respond to these advertisements. InnerActive Smart Media enables content providers and advertisers to directly target their consumers through its products in games, video, music and WAP targeting mobile entertainment in forms that have proven acceptable to the mobile consumer. The platform has delivered advertisements for games content

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Ad funded mobile content providers including Jamster, gauging the click through rate for its ad funded games (39%). Visiongain believes that consumers have proven willing to pay for mobile games and that ad sponsoring this content may cut off a lucrative market. However, innerActive has found that 78% of its games players were new users, demonstrating that ad sponsoring this content draws in a high amount of users that previously would not have used the content due to the price. Mobile content providers, advertisers and platforms providing areas for ad funded services will have to judge whether a particular form of content will be approporiate for advertising sponsorship. In deciding this factors will include the value of content. Mobile entertainment has been indentified as a market in which mobile subscribers are receptive and free content through advertising sponsorship offers a valuable competitive differentiator.

Chart 11. Mobile internet film advertising trend

Source: Dynamic Logic for Greystripe, cited on MobiAd

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Ad funded mobile content 5.6 Greystripe In January 2008, it was announced that Greystripe and Opera would partner for ad funded mobile games. Greystripe's Adwrap method is used by twenty distributors, and Opera is the latest to join. Greystripe describes itself as "the world's first in-game mobile ad network and the world's first ad-supported mobile game distribution platform" and has the ability to reach millions of subscribers through its distributors and the portal GameJump.com. Greystripe delivers adverts that are wrapped around mobile content, encouraging consumer engagement with their content and advertising. A recently announced campaign result for Yahoo! on Greystripe has demonstrated the effectiveness of Greystripe's methods. The two month campaign, running from May 2007 to July 2007, revealed a click through rate of 4.2%, compared to WAP advertisements which yielded a click though rate of only 1-2%. A campaign for New Line Cinema regarding the film The Golden Compass in November 2007 revealed a click through rate of 5.6% Placing advertisements alongside mobile content therefore not only increases the amount of content downloaded due to it being free or reduced in price, mobile advertisers can also expect a higher click through rate on their advertisements leading to a higher ROI, as also demonstrated by the Cellcom trial. Mobile advertising campaigns also have a beneficial effect on promoting brands and brand awareness which has also been seen by the Greystripe campaign. In a study for Greystripe following the results of The Golden Compass campaign trends among mobile internet users were revealed which could be used in further ad funded campains. Chart 10 demonstrates that use of the mobile internet is higher among subscribers who frequently patronise cinemas and films than those who do not. The study also revealed the proportion of mobile users who used their mobile handsets to watch film trailers and search for film times (see chart 11).

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Ad funded mobile content This study carried out for Greystripe demonstrates trends that can be exploited by mobile advertisers in mobile ad funded content. By gaining an understanding of mobile users actions on the mobile web and in mobile advertising campaigns, advertisers can provide better advertising that the mobile subscriber is more likely to use. By gaining knowlege that regular film goers are more likely to search for film times on the mobile web, advertisers can target their audience accordingly. By gaining a knowledge of the amount of mobile subscribers using the mobile internet and that market demographic, advertisers and content providers have a better knowledge of their market. This allows ad funded mobile content to be more targeted and therefore more welcomed by the user driving up engagement with advertising and ROI potential. Ad funded content represents a compelling format for mobile operators, advertisers and content providers and the campaigns in Greystripe's ad funded content demonstrate the potential for success for those involved.

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Ad funded mobile content Chapter 6. Branding and advertising in mobile ad funded content As demonstrated by various mobile advertising campaigns, mobile ad funded content is a useful tool for advertisers wishing to expand the reach and recognition of their brand. The 3 billion mobile subscribers that represent the market potential in targeting the mobile market can be reached on a device that is extremely personal. Therefore the advertising must be targeted and relevant and this offers the opportunity for large brands to reach consumers on a more personal level than other forms of advertising increasing the consumer engagement with the advertising while maximising the ROI potential. Brands are able to make the best use of mobile space by utilising wrap around advertising, or advertising within the content itself. The advertising used can vary as mobile data capabilities grow. Video and banner adverts can be used on the mobile, a rise in data speeds and in the number of handsets with large touch screens allows for more detailed visual advertising on the mobile. Consumers can also engage with mobile advertising through SMS or MMS advertising on the mobile. One such example, as seen on the search engine 4INFO uses a "teaser ad" via text message to gain the users attention, when the user responds the advertisers can be sure that the consumer is actively engaging with the advertising and sending the remaining advert gives the likelihood of higher ROI as the advertiser is already assured of the consumers interest in the product or service. Mobile content funded by advertising gives mobile advertisers the opportunity to push brands and services further into the pockets of mobile consumers by encouraging consumers to use content with advertising by offering it for free or at a cheap price. Consumers who have actively chosen to receive advertising with their content are made aware of the benefits and are requested to opt in providing details which the advertisers can use to effectively target their audience. The type of content offered varies, and advertising methods can be dependent on the content. Below is a selection of branding examples from various ad funded mobile content providers.

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Ad funded mobile content 6.1. Branding examples 6.1.1. Blyk: Penguin Books In order to promote the novel "Slam" ,Penguin Books advertised through the Blyk network, the UK's only ad funded MVNO, to reach mobile subscribers using a variety of advertising methods. Blyk was able to specifically target its audience due to its opt-in policy where all subscribers must submit details to allow Blyk to advertise to them more effectively. The subscribers of the Blyk MVNO (which operates on an invite only basis) are aged between 16 and 24, although subscribers who go over the age while subscribed to the network are allowed to stay on. This allows Blyk to narrow down its subscriber market from the start, giving brands vital information as to what market they can realistically target using the ad funded MVNO and which products or brands would be most suitable. The opt in requirements give Blyk the information relevant to an advertising campaign, and the responsive nature of its subscribers towards its adverts also gives the advertisers the opportunity to produce engaging adverts that produce the opportunity for higher ROI. For the Penguin campaign Blyk used text, visual and audio advertising over the mobile via MMS to give maximum exposure to the novel being advertised, and to keep the brand fresh in the subscriber's mind, even those who responded "No" to wanting further information on the novel were sent a website address for Penguin Books. In advertising the novel to subscribers, Blyk created a two part MMS dialogue encouraging subscribers to accept an audio reading of a celebrity reading an extract from the novel. Subscribers were also offered the option of saving a "Slam" wallpaper to their handset, promoting the brand and the product. According to Blyk, the use of audio clips to promote a book was "a media first" and the click though rate of the advertising demonstrates the effectiveness of using different varieties of media in mobile advertising. The total response to the advertisement was 67% and of those, 51% requested the audio clip offered. Blyk was also able to determine the best times in the day to advertise to their audience and reach their target market, identifying the times between the hours of 11am and 3pm,

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Ad funded mobile content targeting students or those at work typically on a lunch break, ensuring a time of optimum attention from their subscribers. From information gathered on their subscribers in preliminary registration, Blyk would also already have knowledge on the likelihood of certain subscribers being receptive to advertising regarding this novel increasing the likelihood of a response and the subscriber following up the advert with a purchase. The publishing brand of Penguin has enjoyed the success over the ad funded MVNO by making use of varying mobile content. The audio content allows subscribers an insight into a published work that they may not ordinarily receive from the traditional forms of mobile content, expanding the advertising methods that can be used on ad funded content as well as expanding the brand and products that can be advertised. Blyk also made use of more traditional mobile content by offering mobile wallpapers to promote the product, ensuring that the advertising covered an array of mobile content accessible by as many subscribers as possible.

Table 7. Blyk’s Penguin campain stats Brand aims

Blyk strategy

Response and outcomes

The aim of the Penguin advertising on the Blyk network was to:

In order to target as wide a consumer base as possible while keeping the advertising relevant Blyk employed the following strategies:

•Total response: 67%

•Drive consumer awareness amongst Blyk subscribers of the launch of the novel “Slam” •Increase awareness of the brand Penguin and its website www.penguinbooks.com as the primary destination for consumers for new and the latest book releases

•A two part MMS message was sent to subscribers offering an audio clip •Those who replied yes were sent an audio clip of the opening chapter of “Slam” read by a celebrity

•”Yes” response 51% •”No” response 49% •Book buyers 16% more likely to respond • Book lovers 35% more likely to respond

•Those who replied no were sent an message detailing the address of Penguin’s URL • Subscribers were also given the opportunity of downloading a wallpaper for the novel

Source: Blyk

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Ad funded mobile content 6.1.2. Greystripe: New Line Cinema In November 2007, Greystripe launched an advertising campaign for New Line Cinema to promote the release of the film “The Golden Compass.” Greystripe used its "Adwrap" solution to push its advertising of the film to potential film goers downloading Greystripe's ad funded mobile games, which resulted in a 19% increase in the subscribers’ awareness of the film and a 9.5% increase in those interested in seeing the film. During the campaign, Greystripe was also able to compile additional information which would be beneficial for future advertising campaigns alongside mobile content. For example, it was found in a subsequent study that 35% of users polled would use their mobile phones to show film times, and 29% of users polled said that they would download film advertisements onto their mobile handsets. This study demonstrates for Greystripe that mobile subscribers who are interested in film are likely to download content onto their handsets, demonstrating a revenue source for both the mobile content provider and the mobile advertiser. The campaign by Greystripe demonstrates that using ad funded mobile content can raise awareness of a brand and of a specific product which will boost the revenue for the product advertised creating a positive reputation and ROI for the advertisers and the mobile content.

6.2. Market demographic The market demographic that mobile advertisers have in the mobile market in extremely large and diverse. Given that there are approximately 3 billion mobile subscribers globally advertisers have both the bonus of a large global audience and the danger of creating advertising that is not targeted enough in trying to reach as many consumers as possible. In response to this content providers and advertisers operate opt in schemes through which valuable information on the mobile subscribers can be gathered which allows the advertising funded mobile content to be targeted and relevant to the subscriber, which in turn increases the QoS of ad funded content, increasing consumer satisfaction and reducing churn. The market demographic for ad funded content remains diverse, but by using the opt-in schemes advertisers can narrow down their target markets and deliver targeted advertising.

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Ad funded mobile content 6.3. Display of mobile advertisements As the content varies so too will the method of display for mobile advertising with mobile ad funded content. As discussed earlier, adverts must remain short to justify their placing and to keep the attention of the mobile subscriber, and certain forms of advertising will be more appropriate to specific types of content. The ad funded MVNO Blyk has demonstrated that it can use a variety of advertising methods due to the ubiquitous nature of the mobile network. The network is constantly connected to the mobile subscriber as the mobile phone is almost always with the mobile subscriber. Advertising sent to the subscriber can therefore be varied as it is linked to the network and handset as a whole, rather than a more specific style of content such as ringtones or wallpapers.Idle screen advertising over the mobile has also been proposed as a method that presents a competitive advantage for mobile advertising. The idle screen of the mobile is the first view point for the mobile subscriber and therefore advertising on this space increases the reach of brands. The subscriber is offered advertising without having to request it, and can remove it if needed with minimal interruption to the mobile user experience. Longer and more complex adverts will be better suited to content that is also longer and more complex in order to justify its presence and avoid consumers feeling that advertising is taking over the content. Mobile TV and video content will be able to justify video advertisements while ringtones may be more acceptable with banner advertisements. Providing that the advertisements are short, most formatting will be compatible with differing varieties of content, avoiding the content being swamped by advertising.

6.4. Who will buy mobile ad funded content? It is generally believed that the age range of those downloading mobile content will be between 16-34. This is reflected in the age restrictions of subscribing to some ad funded content, such as Blyk's age range of 16-24. The younger end of the market is generally targeted by mobile content and ad funded content, although the age range climbs for differing content. Mobile content is able to appeal to a wide range of ages and tastes. Mobile TV

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Ad funded mobile content will appeal to a broad market depending on the content shown, as TV programmes placed on the mobile platform will attract their own market base. Content such as games will have a more fixed market in terms of age, but the differing genres will appeal to a broader market base. In Western Europe and North America mobile content will continue to be a popular feature, and with mobile operators expanding into emerging markets it can be expected that mobile content will also move into these markets.

6.4.1. What will mobile subscribers want from ad funded mobile content? In order to entice mobile subscribers to use mobile ad funded content, providers must ensure that the content is of high quality, that the advertising is relevant, and that the cost to the subscriber is either minimal or that there is no cost to the user. In accepting advertising on a personal device, the mobile subscriber must also be assured that they are receiving a high quality deal in terms of content. In accepting advertising in return for content, subscribers have been shown by some cases to be happy to receive the advertising in return for free content, and in these cases the advertising has been relevant and targeted according to previous demographic investigations. In investigations discussed earlier in the report, mobile TV has been identified as the top application that subscribers in the US want to see on their mobile handsets. Mobile TV in developed markets is the content that mobile subscribers will demand when a standard has been agreed upon, particularly in Europe, and when the penetration on mobile TV capable handsets grows.

6.5. Conclusion Brands that previously found it hard to target a large audience over the mobile with relevancy will benefit from ad funded content due to the opt-in nature of the content. The size of the mobile audience can be capitalised upon by mobile advertisers in ad funded mobile content due to the information gained from subscribers in opting-in to receiving the content and advertising.

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Ad funded mobile content Chapter 7. Market potential The market potential of ad funded mobile content represents an opportunity for advertisers to tap into a subscriber market numbering 3 billion with adverts that are relevant and targeted, and thereby more likely to produce higher ROI. As mobile content becomes more sophisticated the advertising offered in or alongside it will also become more sophisticated, and give a higher standard of service incorporating technologies and displays that are superior and can give a high standard of user experience. The UI of mobile devices has continued to improve and this will also drive mobile content and mobile ad funded content to mobile subscribers allowing for content and adverts that are easily accessible with an experience that is on a par with more traditional forms of advertising, and in some cases an improvement. The market potential of mobile ad funded content is linked with the development of 3G and 4G networks as well as the standardisation of connection and bandwidth for mobile TV. In emerging markets where 3G and related content are starting to make an impact, such as China and India, mobile ad funded content will be able to grow rapidly as these markets hold a large amount of subscribers, giving advertisers a large audience to market to. In India, there are over 260 million mobile subscribers as of July 2008 and China has approximately 600 million mobile subscribers. These markets represent large and fast growing markets that mobile advertisers and content providers will be able to target with sophisticated and targeted advertising, allowing for relevant advertising in a large market that would be unavailable through more traditional advertising. The market potential of ad funded content is dependant on the standardisation of content and the relevancy of the advertising. Advertisers sponsoring mobile content will be reluctant to allocate high budgets until a standard is reached for aspects of mobile content. This is particularly relevant to mobile TV in areas of the US and Europe where a standardisation in mobile TV is needed. In Japan and South Korea, free-to-air mobile TV will be more appealing to advertisers, subscription mobile TV models may gain

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Ad funded mobile content fewer subscribers due to economic reasons and advertisers will need to reach as large an audience as possible. The market potential for ad funded mobile content offers some lucrative opportunities but issues on the mobile will need to be addressed to truly unlock this opportunity such as user experience, standardisation and audience participation and acceptance.

7.1. Mobile advertising spend The spending on mobile advertising will continue to grow, and different areas of mobile content will see varying increases in spend on advertising. Visiongain believes that annual global mobile ad spend will hit the $1 billion mark by the end of 2008 due to encouraging signs seen from ad funded MVNOs in which subscribers have reacted positively to targeted advertising and the growth of the mobile web. Due to these positive attributes emerging from the mobile content market, visiongain feels that the projected total ad spend will be at $1 billion by the end of 2008. Emarketer has predicted in the past that mobile ad spend will be $1.7 billion by 2008, and other analysts have predicted that the total spend on mobile advertising will be over $1.1 billion by the end of 2008. However, visiongain believes that this figure may be too optimistic as mobile advertisers may remain reluctant to allocate large budgets to mobile advertising while the standard of user experience on the mobile web and with mobile content remains low. Until the user experience can be altered, mobile subscribers will not be persuaded onto mobile content after a negative experience and valuable audience numbers will be lost. For this reason visiongain believes that spend on mobile advertising will be more cautious during 2008, closer to $1 billion or possibly falling just under. This is less than some analysts are predicting but annual ad spend will pick up speed and traction in the market over 2009. The mobile phone is the place for advertisers to market to their audience, meaning that spend in this area will grow as more advertisers recognise the size and potential of audience that can be reached through the mobile device. For this reason ad funded mobile content will become a lucrative area for advertisers to

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Ad funded mobile content market to their audience and spend in this area will grow to $10 billion per year by 2013.

Chart 12. Mobile ad spend forecast

Source: visiongain

7.2. The market landscape in 2013 By 2013, the ad funded mobile content market will have grown outside developed markets and into BRIC markets where the emerging 3G networks and growing number of mobile subscribers will drive demand for mobile content. The growth in BRIC (Brazil, Russia, India and China) markets will drive demand and usage of mobile content as these are considered to be the mobile markets growing at speed. As the subscribers in these markets gain access to faster and cheaper networks and more sophisticated handsets (the iPhone is to be sold in India by Vodafone and Airtel), the demand for mobile content will grow, and the availability of cheap or free content in emerging markets where disposable income may be less will be particularly relevant. The BRIC markets also provide an extremely large population for advertisers to target with relevant and location aware advertising.

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Ad funded mobile content This will be a crucial factor in creating and perpetuating the success of mobile ad funded content on a global scale. In order to prevent advertising on mobile content becoming resented by mobile subscribers as an invasion of privacy or related to junk mail, mobile advertisers must ensure a relevancy that will include location awareness across the globe. In BRIC markets, access to the mobile web will be used instead of the fixed line PC access to the internet where this step of fixed line access may be skipped in favour of a mobile option. In these markets, the mobile web will be a vital link and advertisers will be able to use this to connect to their audience through relevant content. In other markets, ad funded mobile content will gain traction in areas of Western Europe where 3G networks have gained a strong foothold. In Japan and South Korea, free-to-air mobile TV will provide mobile advertisers with content that is growing in popularity and accessibility to mobile subscribers. In the US where the EDGE network has a more dominant position, handsets that are improving the user interface on the mobile web will encourage mobile subscribers to make a greater use of mobile content and ad funded mobile content. Advertising on the mobile is becoming more accepted by mobile subscribers in the US, where approximately 23% of mobile subscribers have been exposed to mobile advertising over a thirty day period, according to Nielsen, half of which responded to the advertisement. Advertising on the mobile is becoming more commonplace in developed markets and subscribers are showing a willingness to accept and respond to advertisements over the mobile, particularly when free content is provided by the advertisements. It is therefore expected that ad funded mobile content will gain traction worldwide, from developed markets to BRIC markets in 2013.

7.3. Market demographic in 2013 Currently, the market demographic for mobile content remains at the younger end of the scale. Mobile subscribers aged between 16 and 34 are more heavily targeted by ad funded content and MVNOs, as seen with Blyk. Mobile subscribers aged above 16 and below 35 are more likely to download mobile entertainment content and can therefore be expected to have handsets that are

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Ad funded mobile content capable of supporting content. This market demographic is also more likely to have financial constraints (i.e. students) and would therefore welcome the opportunity of receiving mobile content for free and be more receptive to the advertising sponsoring said content. The market in 2013 is likely to be similar, with mobile content and ad funded content appealing to the younger end of the market. However, with the emergence of niche MVNOs, it is also likely that niche ad funded MVNOs will be launched that will target other areas of the market, offering advertising that will appeal to a specific market segment, whether that segment is related to age or interests. Mobile entertainment that is funded by advertising will remain popular with the youth market and the increasingly sophisticated handsets that are entering the market will enable for greater viewing and interaction with the content. The youth market will provide a lucrative base for advertisers, although in expanding to other markets, advertisers will be able to specifically target their markets allowing for a higher ROI.

7.4. Advertisers in 2013 Mobile advertisers and content providers will face greater challenges in 2013 as they will have to market strategically on a global scale. Relevancy and targeted advertising and content will be needed and on a global scale, this presents further opportunities and challenges. The emergence of BRIC markets and the ability for advertisers to reach their audience on a global scale means that advertisers will have to evolve further in order to advertise on a relatively new platform and to make that advertising both relevant and far reaching. The opportunity to advertise to a potential of 3 billion mobile subscribers worldwide represents a potentially lucrative opportunity. Location will be a crucial factor in advertising for ad funded mobile content as this will dramatically increase the relevancy of the advert, increasing the likelihood of the subscriber engaging with and responding to the advertisement, increasing the ROI potential. Mobile subscribers are becoming increasingly aware of the value of their location and are therefore more likely to respond to adverts that are more relevant to their location.

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Ad funded mobile content The heightened success of the advertisements of the platform will reflect on the content as the advertisers will be able to spend higher budgets on sponsoring content allowing the content to be driven to a wider market. This will also help to drive ad sponsored mobile content into a more diverse market while still allowing adverts to remain targeted and relevant to the consumer. By targeting their audience by location and information gathered for opt-in mobile content, mobile advertisers in 2013 will have a greater knowledge of their market and will be able to advertise accordingly giving a higher standard of user experience to mobile subscribers.

7.5. Content in 2013 In 2013, we believe that mobile content, and ad funded mobile content in particular, will become much more interactive with the mobile subscriber and that this will enrich the content and improve the user experience enormously. Mobile subscribers will be encouraged to opt-in to using ad funded mobile content which will encourage the subscriber to engage with the content and advertisement. This will also allow advertisers to gather information on the subscriber increasing the relevancy of the advertising. The content will involve more audio and visual as mobile TV, video and music make a greater impact in the mobile content market. Free-to-air mobile TV will increase in popularity and visiongain believes that it is this model that will particularly appeal to advertisers sponsoring mobile content, as consumers will be more willing to use free-to-air mobile TV rather than pay a subscription to mobile TV. As the bandwidth improves, mobile TV across Western Europe and the popularity of mobile TV will grow as the market is already seeing handsets that are capable of displaying mobile video.

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Ad funded mobile content Globally we expect the popularity of mobile ad funded content to be ranked in the following order by 2013: • Mobile search and social networks • Mobile TV and video • MVNOs • Music • MMS The development of mobile content seen so far, such as the penetration of mobile TV in the Asia Pacific market and the launch of ad funded MVNOs in Europe demonstrate that ad funded content is being accepted by mobile subscribers and will increase as advertisers and subscribers grow in confidence in the advertising and user experience capabilities of the mobile platform. Mobile search remains a killer app on the mobile handset and this will create a lucrative opportunity for mobile advertisers. Mobile social networks capitalising on mobile web 2.0 applications will also drive advertising revenues. Mobile TV and video will be the content that mobile subscribers will actively participate in advertising campaigns, increasing relevancy and revenue potential.

Table 8. Ad funded mobile content Strenghts, weaknesses, opportunities and threats Strengths

Weaknesses

Opportunities

Threats

Proven consumer acceptance of ad funded content in trials

Targeting niche markets drives away other potentially large markets

Large market base to target

Possibility of overzealous advertising being regarded as “spam”

Potentially lucrative funding source

Revenue must come from subscribers acting on advertising which cannot be guarunteed

Targeted advertising through opt-in strategies

Ad funding brings in market that previously may not have paid for content

Devaluing of content Potential saturation of content market

Cost saving benefits for consumers

Source: visiongain

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Ad funded mobile content Chapter 8 Conclusions and recommendations To conclude, it has become clear that the mobile is the new platform for advertising. Mobile content sponsored by advertising is one avenue in which advertisers can push their brand and products to the mobile audience, while avoiding being viewed as junk mail or an invasion of privacy. Advertising funded mobile content will drive mobile content to a wider audience as it becomes able to target specific market segments, grow revenue and budgets to allow for a greater distribution of content. Mobile content providers will be able to distribute content to a wider audience, and will also be distributing content that is more interactive and sophisticated than some of the content currently in the market. Operators have the greater share of knowledge regarding mobile subscribers, including locations and activities, and can be encouraged to share this knowledge in order to provide a service that is as relevant to the consumer as possible. Privacy concerns that mobile subscribers will have in this area will need to be addressed. Mobile advertisers will make a greater use of the mobile subscriber's location when advertising on the mobile, increasing the relevancy of the ad and driving up potential revenue. Encouragement of subscribers to opt-in to ad funded content will also increase the knowledge of mobile subscribers interests thereby allowing advertisers to target their market as specifically as possible. Handset manufacturers and vendors will also have to recognise the altering market in mobile content, as a greater mobile audience becomes aware of more sophisticated and interactive content available. Mobile handsets with larger interactive screens will increase in popularity as access to mobile content grows. All those concerned in the mobile content market will have to recognise the emergence of ad funded mobile content when considering their future strategies.

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Ad funded mobile content 8.1. Mobile content providers Mobile subscribers will come to expect more sophisticated content over their mobile handsets, particularly as the mobile web becomes more accessible. As the bandwidth for certain types of content improves and mobile subscribers gain greater access to the mobile web, competition for mobile content and ad funded mobile content will be driven up. Mobile content providers should: • If not already doing so, mobile content providers should look to gaining sponsorship from relevant advertisers, which will dramatically cut costs that are passed on to the mobile subscriber, driving up usage and revenue potential from advertising. Mobile users who would have previously been unwilling or refused to pay for mobile content represent a new market that can be opened up by ad funded mobile content. • Engage with operators regarding the current interests of mobile subscribers where possible. Content providers can also discuss with operators the possibility of positioning their content at as early a viewing point to the subscriber as possible, such as on the WAP home page. • Encourage an opt-in strategy to advertising funded content to provide tailored services and encourage engagement of the mobile subscriber with the sponsoring advertisement. • Ensure that content is age appropriate and consider the safety of younger users. This can be helped by an opting-in strategy. • Consider making content available on both the PC and the mobile, allowing mobile subscribers to bookmark content for use on both devices. • Ensure the content is accessible and that the click distance is low. This is especially important when considering the speed and user experience seen so far on the mobile web.

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Ad funded mobile content • Consider providing niche content, such as niche MVNOs which can be funded by advertising and appeal to a specific target market.

8.2. Mobile advertisers The relevancy of the advertising sponsoring mobile content will be crucial in the future success for ad funded mobile content. With this in mind, mobile advertisers sponsoring mobile content should: • Consider the importance of the location of the mobile subscriber. The presence of GPS on mobile handsets is becoming more common and this should be utilised by mobile advertisers as a means to making advertisements as relevant to the mobile subscriber as possible. • Ensure through opting-in policies that enough information is gathered on the mobile subscribers to make the advertising as relevant as possible. • Mobile advertising can take a variety of forms, but this must be kept relevant to the content that is being sponsored by the advertisement. Content that is purely text, for example, would not be appropriate to be sponsored by a sophisticated video advertisement. • Advertising on ad funded content should be kept relevant to the market demographic of mobile content purchasers. • Adverts must not overshadow the mobile content, or subscribers may feel short changed. • Location on a local and national basis must be considered when advertising over the mobile platform, and is especially relevant in keeping advertising relevant when sponsoring mobile content. In this context, language and currency must be interoperable across different countries. This is especially important to brands who advertise on a global scale.

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Ad funded mobile content 8.3. Mobile operators Mobile operators will control much of the space in which ad funded mobile content is presented to the subscriber. Because of this, cooperation will be needed with mobile operators in order for the mobile subscriber to receive a tailored service. Mobile operators can also gain revenues from allowing advertising and ad funded content on to their networks. Mobile operators should: • Investigate allowing certain information of their subscribers to be used to provide a tailored service in ad funded content. However, privacy issues will be delicate here. • Mobile operators should use location information of their subscribers to allow for a relevant advertising service. • Look into investigating what specific mobile content would be best suited to their market of mobile subscribers over their networks.

8.4. Mobile handset manufacturers Due to the increasing sophistication of mobile content handsets will be required to handle varying amounts of content. Mobile handset manufacturers and vendors should: • Ensure that their handsets allow for simple navigation when on the mobile web in order to allow mobile subscribers to access mobile content more easily. • Drive standards in mobile handsets that allow for content such as mobile TV to function on the handsets. • Large screens will be particularly important for the viewing and interactivity of mobile content. Mobile handsets will need large screens particularly in the wake of the growing popularity of visual content.

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Ad funded mobile content

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