MEF talking points/blogs MEF members share their views Thu, 19 May 2011 16:30:21 GMT Ad-funded mobile entertainment ? a ?brandtastic? opportunity? As handsets and networks evolve, the mobile phone is offering a richer consumer experience and is turning into a media channel in its own right. Given that every other media channel relies on advertising to some degree, it?s hardly surprising that interest in advertising as an additional revenue stream for mobile entertainment services is on the increase. 

While it appears true that mobility carries a premium which end-users are willing to pay, the industry also recognises that end-users? wallets will only stretch so far. Advertising presents an opportunity to generate revenues from a new source while simultaneously bringing in new users.

Mobile has the potential to become a very attractive channel for advertisers. As a personal device, there?s the opportunity to closely target advertising, reducing the ?wastage? that TV- or radio-ads bring.  The phone is also primarily a communications device, which means interactive features can bring a far more immersive experience than other advertising media.

These factors make mobile an attractive opportunity for brands, but the advertising industry is not yet used to this form of more advanced advertising and, crucially, not set up to take advantage of it.

MEF Member Survey Results

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In a recent survey of MEF?s membership, industry executives were extremely positive towards the impact of ad-funded mobile entertainment (AFME).  An overwhelming 81% felt AFME offered a growth opportunity for the industry and only 19% thought it would be destructive, while none viewed it as a threat.

Furthermore, 45% of respondents considered mobile advertising an important priority, while it?s a top priority for 11% and ?on the roadmap? for a further 21%.

Nevertheless, the industry believes consumer payments will continue to be important going forward and, despite the enthusiasm for advertising, respondents on average expect that only one-fifth of mobile entertainment revenues will come from advertising in 2010.

Click here to view full survey results

Can the AFME model work in various forms of content?

The mobile entertainment sector comprises a range of services, from ringtones to mobile TV or SMS-based content to streaming video. Some of these services, such as ringtones, are uniquely mobile, while others bear the hallmarks of content from other platforms.

It appears that most content types would be suitable for ad-funding. Some, however, are viewed as more suitable than others. For example, mobile TV and video streaming would be an obvious choice, as it reflects a regular TV experience where viewers expect to get ads inserted in programmes. These content types may become ad-funded ahead of others and may also be paid for through advertising to a greater degree than others.

Console games have traditionally not been ad-funded and the mobile games business has garnered a certain degree of commercial success. This means there is a greater risk that advertising could undermine existing revenue streams. However, advertising could work in various ways in the games space ? including splash screens as games load, in-game advertising or branded gaming.

The music industry has always been somewhat sensitive to price erosion of their core product of music owned by the end-user. On the Internet, however, iTunes has forced the per-track-download price down to a level below what record labels would like to see.

Mobile has been viewed as a chance to increase the price given the additional convenience of mobility. Services such as music streaming, which is akin to radio, might be more easily accepted as an ad-funded platform.

Although SMS has so far been the dominant channel in the mobile marketing space, with Text-to-win and similar efforts using SMS as a feedback channel, it is a trickier proposition for ad-funded entertainment mainly due to the character limitation of the technology. Therefore, it seems that the main opportunity for ad-funded entertainment content in SMS would be a ?sponsored by? type message. On the other hand, adding an advertising revenue stream to MMS messaging, which has long been criticized for carrying too high price points, could be an important driver to reduce or eliminate MMS charges and help drive take-up.

How will AFME impact the business model?

Both end-user and industry acceptance of advertising business models is likely to be affected by how advertising is used to fund a content type on other platforms. If a certain type of content is paid-for elsewhere, this revenue may be compromised if it is available for free on mobile.

As mobile media is a new advertising channel, there is a need to establish mere fundamentals of how business is done, results tracked and how much is charged. Currently, it is even uncertain who owns various pieces of mobile advertising inventory. Finding a workable business model is crucial.

Revenue from advertising can be used in a variety of ways. For example, advertising may be the major source of revenues, as with free-to-air TV, with no payments due from the end-user for the basic TV service. Or, as in the case of magazines, advertising is a major revenue contributor, but consumers are also expected to pay.

It can be argued that currently some mobile content fulfills a marketing function while simultaneously being revenue generating. An example is content around films or artists. However, the revenue-generating capability of such mobile content is typically also helped by the brand it carries and price points are often higher than non-branded content rather than set at a promotional level.

Brandtastic benefits for all?

It is clear that mobile is competing with many other media channels for the consumer?s attention and, crucially, their spend. Lower prices, or free, high-quality content, is likely to grow the number of users that access mobile content. If advertising is added to the mobile entertainment mix in a way that takes the end-user?s sensitivities into account, it should be good news for all parties involved - ie the content providers, operators and consumers as well. 

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