Google CEO Eric Schmidt sees a bright future for mobile advertising. In fact, he’s so optimistic about the market that he predicts his company eventually will make more money from mobile advertising than from its desktop business. That’s a powerful prediction coming from one of the internet’s most successful business leaders. And, he’s not the only one seeing dollar signs. Industry analysts predict skyrocketing growth as well. eMarketer forecasts that advertisers will spend $3.3 billion on mobile advertising by 2013, up from $648 million in 2008.
Why all of the excitement? Three words sum it up – reach, personalization and targeting. With mobile devices outnumbering laptops, PCs and TV sets, no other medium can top mobile’s potential audience numbers. And, with consumers increasingly relying on their mobile devices as their primary communication mode, advertisers have the ability to build highly targeted, personal relationships in a way that has never been possible with traditional media.
While this should be great news for operators, it’s important to note the caveat regarding mobile revenue potential in Schmidt’s comment – eventually. In fact, his exact words were, “…not now, but over time.” Many media experts view the next two to three years as a critical trial period for operators and advertisers as they begin their venture into the new medium.
A number of potential stumbling blocks stand in the path to success. The most obvious is technological. Mobile broadband coverage is not ubiquitous. Until 3G and 4G networks are more widely deployed, operators will be forced to interwork multi-technology networks and resources well into the foreseeable future.
Then there’s the issue of handset compatibility. With more than 2,000 models on the market, screen sizes and hand-set capabilities are fragmented. There is no standardized ad format; each must be optimized for the particular end device, a time consuming and expensive proposition for advertisers.
The greater challenge for operators is adapting to a completely new business model. In the voice industry, providers have operated in a relatively closed environment, controlling the relationship with their subscribers and revenues. Mobile advertising will make that model obsolete. With advertisers as customers, operators will have to take on new roles as consultants, advisers and partners. The mobile ad value chain will introduce a host of new players – advertisers, ad agencies and content providers – all vying for access to subscriber data and a piece of each advertising dollar. If providers do not maintain control of the subscriber experience and a significant share of the revenues, they face the real danger of simply providing the pipe that pumps content.