Mobile advertising and the telco success factor in the value chain

The recent evolution of telecommunications technology has paved the way for m-advertising to become an increasingly important element in the marketing mix in the coming years. Despite all the attention paid to m-advertising, only a few operational models have provided useful insights into this area. This may derive from the fact that the m-advertising market is in its infancy.

Researchers have not even agreed whether the focus should be on internet-based advertising in the wireless
devices (PDAs, WAP) or in the telecom sector (ads delivered via telecom networks). In the US the researchers have mainly focused on the wireless internet-based advertising whereas in Europe m-advertising has merely been understood as SMS and MMS based telecommunication (such as Add2Phone, Enpocket , mmCHANNEL, etc). These two views form very different basis for business models, for instance.

We are currently supporting a client which aims to cast light on the future directions of m-advertising value chain. With that purpose in mind, we are evaluating its success factors and developing a model that helps the operator to better understand the critical components of this value chain. The following slide provides insights into the conceptual discussion of m-advertising and the telecom role. Operators need to understand and indentify the main players and their roles in m-advertising and the content distribution value chain to outline the main findings and implications to both theory and, most importantly, practice.

At first glance, one might consider that two different and quite distinct industries constitute the m-advertising industry: advertising and telecommunications.  Looking more closely at the industry, we see that the emergence of m-advertising has been mainly driven by mobile marketing companies and technology providers. Traditional advertising players such as ad agencies and media agencies are ignorant of effective utilization of mobile channel at the moment. While traditional advertising and telecommunications are well established and have their own ‘best practices’ and revenue models, the m-advertising has failed to integrate these two different industries.

To analyze the m-advertising market, it is necessary to understand who the key players are. The main players in the m- advertising value chain are the advertisers, the m-advertising companies, the media owners, the traditional advertising agencies, the network operators / carriers, the technology providers and the customers. The advertisers are the one of the most important players in this value chain. The revenue that flows through the value chain is based mainly on payments that the advertisers make to the m-advertising companies for implementation of the m-advertising campaign.

Traditional advertising industry is focused on generating revenues from commissions and fees paid by advertisers, but in m-advertising those players are excluded in most cases. Media owners play an important role in this value chain. They own the databases of permission- based mobile numbers which is a prerequisite for delivering m-advertising in the area of the European Union (EU).

The network operators have an important role in the value chain by controlling the distribution channel. Modern and innovate technology provides glue to the value chain. The m-advertising technology must be seamlessly integrated into the telecommunications ecosystem (e.g. location based services) and all the time cope with an increasing set of different protocols (SMS, MMS, WAP, J2ME, etc.), a wide variety of handsets, high capacities and availability. However, it is valuable to understand that customers’ acceptance is the main factor that defines the future of m-advertising. Without consumers’ willingness to receipt the messages, m-advertising will not survive.

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