The Operator Advantage
Smart phones make it easy for ad networks to bypass the mobile operator. A major bonus for advertisers is that this eliminates the cost of sharing revenue with mobile operators. A major bonus for technology providers is that it eliminates the effort to integrate with a mobile operator’s infrastructure.
As anyone who has worked on mobile telecommunications networks can attest, carrier grade services can be a huge effort to design, test, and deploy. When a banner ad fails to appear quickly on a web page, a consumer seldom blames his ISP, but when an ad slows the presentation of a WAP or mobile web page, the operator is the first to be blamed. This is why operators enforce “carrier grade” requirements on all services associated with their name.
Given all that, why would anyone want to integrate an advertising platform tightly within a mobile operator network? Here are some good reasons:
New ad delivery channels. A mobile operator can open up channels that are otherwise inaccessible. Text ads can be appended to network-generated SMSs, such as missed call notification (MCN), billing top-ups, and welcome messages. Audio ads can be inserted in IVR portals or personalized ring-back tone (PRBT) services, such as Turkcell’s Tone & Win.
On-deck applications and portals. Let’s face it: only a small percentage of the world’s mobile subscribers use iPhones and Androids. The rest rely on traditional handsets, often supplied by the operator, with operator-selected applications and portals. Tomi Ahonen makes a convincing argument that the importance of iPhones and Androids — with respect to the world outside the U.S. — is often overestimated.
Cross-channel campaigns. Working with the operator makes it much easier to deploy campaigns that span multiple channels. Our system, the Sigma Mobile Advertising Platform, is currently used by a large Asian operator to deliver initial text ads with embedded short codes that link to audio response IVR that then sends follow-up information via push SMS. Many other combinations are possible.
Ad-sponsored services. By integrating with the billing system, an operator can offer ad-sponsored services — for example, a ring-back tone service that is subsidized by occasional ads, or a rebate for calling minutes if the user opts to listen to an audio ad before the call.
Dropping charges for ad delivery. A serious problem with mobile advertising is that a subscriber is often charged for the delivery of the ad and responses to the ad. Any interactive advertising based on SMS ad delivery and interactive SMS responses runs into this problem. The only solution is reversing or dropping the charge and this can only be done with the cooperation of the operator’s billing system.
Demographic data. Operators are the trusted keeper’s of their subscribers’ demographic data and if privacy protection is in place, this information can be accessed by an ad platform. Privacy protection is the key.
Behavioral data. One of the most interesting and most valuable sources of targeting data is subscriber behavior, and calling behavior is accessible only through the operator. I’ve written previously about the value of calling behavior.
CRM. The best customer of a mobile ad platform can be the mobile operator itself. Some operators have realized that their ad platform can also be a CRM platform. If they can perform a data mining analysis to determine the customers most likely to churn, they can target those customers not with ads but with offers and promotions enticing them to stay.
What’s holding up mobile operators from jumping into ad delivery? One problem is sensitivity to brand perception: a mobile operator that associated with unwanted ads loses subscribers quickly, and getting and retaining subscribers is what the mobile industry is all about. The message here is that mobile ad delivery must be designed carefully and thoughtfully.
Another problem is simply mobile operator culture. It’s long been a joke that every mobile operator wants to be the second operator in their market to launch a new service. The success of ad networks might change this mindset.
The Sigma Mobile Advertising Blog 
Great article.
Operators are slowly being cut out of the revenue stream for mobile when they were once kings. Think about how much the iPhone has cannibalised additional revenues for operators – payments, app sales, ad-serving, notifications etc – that is making Apple and others hundreds of millions without the telcos taking a cent.
You can see that finally companies like Orange (Orange Shots) and O2 (O2 More) are opening up their customer data to brands, but it’s kinda feels too late here in the UK. There is no question the operators have epic amounts of behavioural, demographic and location data that would be the envy of many however they are still limited to the same old channels – SMS, MMS, Web (banners etc). Apple and Google own the hardware and the ad networks so it is conceivable they will make new forms of ad-units and mechanics that can utilise technologies on the phone only available to them.
What would you do if you could start mobile advertising from scratch? That’s the opportunity they have. Push advertising can become completely un-intrusive if you didn’t have to deal with the limitations of things like SMS. There is no reason why most of the things you’ve suggested can’t be done by manufacturers in one way or another.
I know reach is important but working daily with brands and looking at the spending habits of people with iPhones, Android and RIM you have to honestly ask yourself who is more likely to go out and spend money on or engage with what you’re advertising (and then tell their friends). And even if you do decide to go with reach the experience compared to iPhone and Android will be degraded and then you could be left with a feeling of resentment. Imagine all you got on your 6230i was a MMS or Java App and I was sat next to you with my badass accerometer powered branded iPhone app.
And finally, operators need inventory – no point of having all this amazing user data and all you’ve got is 20 top brands. There’s only so much McDonalds and Gap ads someone can take. They don’t seem to realise that you can’t just keep trying to get consumers to spend money, there has to be some added love, free stuff, great info, etc. Imagine how lame Adsense would be with only premium brands.
Murat
February 11, 2010 at 09:52
[…] major part. The Ad networks have largely chosen to go it alone. Mark Westling of Sigma argues that engaging operators into the advertising platform has its advantages and the potential to deliver far greater […]
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