Is Mobile the next advertisement heaven?

I’m thinking about Erik Schmidt, CEO of Google, who says that mobile advertisement will be the next thing. Actually, he says it a little different:

First: There is still a lot of revenue in search – as we get the technology better or as we can do more targeted ads. There is no limit for search marketing. People assume that there is a limit, but we have many more ideas about technology. Second: The most obvious large space of advertising is the mobile internet. Every German has a mobile phone. Just take the success of the iPhone: It has the first really powerful web browser on a mobile device – and many more are still coming. Nokia has one coming, Blackberry has one and Motorola has one. They are all supposed to be released this year. By these products, the advertising gets more targeted because phones are personal. So targeted ads are possible. And that means the value of the ads will grow. The next big wave in advertising is the mobile internet.

It’s interesting to see the thinking pattern of Google on this. The first thing Erik says isn’t about the mobile phone being personal. He starts out by saying that there are so many of them (already 3.3 Bln according to this post). I like that. Google seems one of the few companies that never stops thinking in terms of huge. While most web 2.0 companies are trying to claim their own space on the web, Google just takes the entire space for granted (the web) and works on that as their walled garden. Right now, they are the only ones even remotely capable of managing such a large walled garden. Not only do they own important data centers all over the world, but they also own a large part of the infrastructure and data pipes the web runs on.

I’m pretty sure that it is precisely this thinking that has lead Google to start the Android initiative. They saw the impossible and futile platform wars on the mobile devices and realized there wouldn’t be a clear winner. These platform wars are a major cause of the lack of innovation in the field and penetration of mobile services. Google came with Android and they potentially have the power to open up this space filled with technologically disconnected devices. If Android can overtake these platforms and create a major open source platform for development then we will probably see an enormous speed of innovation arise in the mobile world.  It’s pretty smart too, because Google would then hold a similar position in the mobile domain as they do on the web. They are everywhere and it will allow them to continue to think huge and come with advertisement services that will be difficult to compete with.

He goes on by saying that since the mobile phone is personal, the advertisement can get more targeted. And targeted ads lead to more value. This sounds like the new Walhalla for advertisers. What if we could get our message across every mobile phone, the most personal device on the planet? But it always makes me think about the user. What about him. What is in it for him?

Advertisement on mobiles might work, but it is even more difficult to be successful than it is on the web. Remember, the mobile phone is a personal device. It is our remote control to my life. We use it for the most important things in life. Communication with family, friends, co-workers etc. Not only phone calls. According to Toni Ahonen, SMS is used often everywhere in the world with the exception of the USA, who are lagging behind. We use it to make pictures, or sometimes to record a video. We use it to listen to music. And slowly, we are also using it to browse the (mobile) web and for localization services.

Personally I think that before mobile advertisement has a chance of becoming successful we need to fix a few things that inhibit mass adoption of mobile browsing. I wrote a post on that a while back called “The mobile web experience needs fundamental rethinking” For the sake of the argument we will assume that developments such as Google’s Android and the iPhone will deal with most of these issues. We are then left with the mobile operators that run the largest walled gardens in the world!  With their access monopoly, simlock schemes to enforce which device can be used on their network, impossible to comprehend calling, roaming and data plans and worthless custom Mobile Web portals, the user is left with total confusion over the services and costs involved.

Most of these hurdles have inhibited the mass adoption of the mobile device as an Internet device. SMS rules (100 BLN in 2007!), and mobile data revenues are growing at a much slower rate. But the 3.3Bln devices out there form an incredible potential. Not just for advertisement, but for anyone that wants to set up a business  with healthy revenues. In my opinion advertisement on mobile will have to follow similar rules to the web to be successful:

  1. Do not get in the way of my interactions with friends. I can’t stress that point enough. When I’m interacting with friends advertisement is trespassing.
  2. Don’t even think you can be successful with bannering or display ads. Have you seen the size of a mobile device screen? There is no room for bannering on that. Sure, everyone tries it, but it’ll just be an annoying flashy little thing that clutters a space that is too small to begin with. If you want to get users annoyed, try using banners.
  3. The advertisement in itself has to provide the user with value. To me that means the advertisement itself needs to be contextual, localised and personal Example. I’m in a bar with some friends and I’m showing them a picture I took earlier and posted on the web. Showing me an ad that tells me to drink Heineken beer will be more than annoying. Providing me with a bar code that lets me buy a next round of Heineken beer with a discount in this very same bar we are at is pretty cool.
  4. The possibilities for advertisement are endless. But the point remains that advertisement works best when I’m either looking for something or planning to buy something (which is just another way of saying I’m looking for something). I might be using a mobile version of search, I might be looking at locations or maps, I might be on some e-commerce site like eBay, those are the moments when advertisement can provide both the user and the advertiser value. For the rest, just leave the user alone and let him interact. BTW I’m not discussing branded activities here, just advertisement.

Mobile advertisement may be the next big thing. But it is probably much harder than advertisement on the web. And we already suck at that (unless you are Google). It’s a pretty big gamble with high investments, high risks, and potentially high revenues. I’m sure there are lot’s of entrepreneurs out there working on it already. It’ll be interesting to see what will happen. What do you think?

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This entry was posted in Android Mobile OS, Google, mobile advertisement, Mobile Internet, remote control of life, Toni Ahonen and tagged , , , , , , . Bookmark the permalink.

7 Responses to Is Mobile the next advertisement heaven?

  1. Meryn Stol says:

    I think mobiles lend themselves more than anything for paid services. You’re already paying lots more than a landline (skype calls are free) for the convenience of mobility. Mobile phones are about speed. You don’t want to have anything between you and what you’re looking for.

    An ad-free mobile experience could be a perfect source of income for free web services. People who want mobile access to those have certainly more to spend than the average user. Perfect price discrimination.

  2. @Meryn I am betting we will see the opposite first (which won’t work as well). You get a free service and have to deal with ads. But I like your suggestion better for most services ;-)

  3. Meryn Stol says:

    It may depend on the type of service. Casual usage will certainly be supported by advertising. But I think the luxury of (say) mobile twitter or friendfeed could demand a premium. People are already paying big bucks for their data plans.

    I think business travelers would certainly pay for a non-biased, social, local, mobile search service.
    The times I’ve been in the center of a strange town I would have certainly loved to have a rich view of where I was.

    Have you heard of Blippr yet? I think it has huge potential. https://www.blippr.com/

  4. Robin Cannon says:

    Yeah, I think mobile has more potential for being able to justify paid services than the web in general.

    It’s when we’re away from our usual connection that we’re prepared to pay for a service. Whether that be an internet cafe, a paid for wireless connection in a hotel (although this is less justifiable now, at least in US hotels), etc.

    Similarly I think that a paid model for service provision on mobiles will work, with a smaller audience. I don’t think there’ll be a point at any time soon where mobiles are primarily or even regularly used for web related stuff. So you’re targetting a niche market of mobile phone users, and many of them will, I think, be prepared to pay a premium (…they already did for their iPhone!).

  5. @Robin, Meryn, good comments. Enriched views might be a good way to go, but I wonder how advertisement can play a role in that (besides the obvious “discount” type of message when you are within the vicinity.

  6. Meryn Stol says:

    Alex, actually I don’t think advertising fits in with those “rich” views. It would “impoverise” the service.

    As a tourist, I’d love to be able to pay 5 or 10 bucks to have full access to an unbiased, social database without advertising, 100% focused on usability. I’d probably also would have paid for a map, and fold out maps are a nuisance, and not nearly as searchable.

    Business travelers (that is, iphone owners…) will happily pay a subscription fee, I think.

    The non-mobile version of the database could be regularly ad-supported. I think it’s just a matter of time when the established players start being serious about their mobile offerings.

  7. Meryn Stol says:

    As a tourist, there’s a big chance you’re going to spend lots of money in a night, so you want to base your choices on what’s actually hot. That’s a social matter. You don’t want to be lured into the venue of the highest bidder. You want a quality experience.

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