Smartphones: the need for a new mobile advertising model

By Patrick Courtemanche

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“Web 2.0 is made of 600 million unwanted opinions in real-time.” -Paul Moore

 Last Monday, I attended a Mobile Mondays Montreal (MoMoMo) conference about mobile analytics and how data affects mobile consumers.

 I had never wondered about the impact web 2.0 could have on network infrastructures.  Wanted or not, the millions of web 2.0 opinions and rich media sharing seem to be taking its toll on mobile operators … and the rest is yet to come.

 François de Repentigny, Product Marketing Director at Neuralitic, presented the tough challenge the mobile industry will go through.  In the next 5 years Neuralitic expects a 300x increase in data volume whereas expected mobile operator revenues should increase 3x.

This growing gap between data volume and revenues will increase costs and possibly lead to shrinking profit margins.  Who will pay for all this?

You?

Me?

Mobile operators?

All of the above

Mind the gap

Author : Stef (Wikipedia Commons)

Mobile operators will definitely have to mind the gap.  How can this issue be addressed?

Someone at the MoMoMo conference mentioned using Wi-Fi connections as a low cost solution for heavy bandwidth users.  Wi-Fi is a workaround, but lacks the one essential component for mobile users…

Wi-Fi is not mobile.

Why should a mobile user search for a Wi-Fi connection, and sometimes go through gruelling login procedures, when there is a mobile connection at hand from a mobile operator?

At the moment, early adopters are ready to pay the data volume plans mobile operators are offering to stay 100% mobile.  Smartphone penetration in Canada is at 17% according to Krista Napier, Senior Analyst at IDC and growing fast.  Will the rest of us be ready for the data plan price tags once smartphones are really into the masses?

Costs will increase.  Either way you look at the problem, it is a simple question of supply and demand.  As bandwidth demand continues to grow, operators will either have to invest in their infrastructure to increase supply or increase costs to regulate demand.

Signs are already out there that mobile operators are starting to struggle with smarphone success and the demand for data bandwidth.  Regulating demand has started.

• AT&T in the U.S. and O2 in Great-Britain announced data download limits this week (see related article from Businessmobile).
• AT&T in the U.S. just recently dropped its “one size fits all” rate plan and added tiered plans based on bandwidth use (see related article blogs.forbes.com).

 Canadian mobile operators have offered a wider range of bandwidth plans, but will it be enough to regulate supply and demand?

A solution to fill in the supply and demand gap would be a possible sharing of advertising revenues between advertisers and operators.

Advertisers are eager to tap into the mobile market.  Several models are out there (Foursquares, sponsored apps, text messaging ads), but things are going so fast that trial and error seems to be the way to test these advertising models.  One should be wary.  Mobile advertising models have not always worked out (see related article Cyberpresse).

At the present time, mobile advertising revenues are not necessarily going through to mobile operators where the real direct costs are leading to serious problems.

If advertising help cover costs, mobile operators will want to have their say in the matter. 

Ultimately, will a mobile advertising solution be accepted by the consumer?  Consumers now have the means to avoid and be picky about the advertising they are exposed to.

A first step would be to understand how smartphone users are using all this bandwidth.  Operators have massive database of what people are doing, but how many are seriously undertaking data mining to try and bridge the widening gap between supply and demand?

All this secondary data could be used to determine the best way to finance these costs either through mobile plans or through targeted advertising strategies with the least inconvenience to the consumer.

If things continue as they are, soon we will all have to mind the gap.