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Service Provider Mobility: MobileAdvertising – The Operator Holds theAdvantage

Posted by Brian Walsh Sep 15, 2009

The online advertising market is forecasted to exceed $40 billion in the U.S. and $52 billion globallyby 2011, representing the fastest growing segment of the overall advertising market (Piper Jaffray& Co.). Mobile Advertising is the fastest-growing segment within online advertising and is expectedto exceed $14 billion globally in 2011 (Strategic Analysis). And mobile advertising is effective! Multi-channel ad campaigns have demonstrated that a mobile ad component delivers a disproportionatelylarger percentage of campaign traffic, click-through rates, and other call-to-action behaviors thanfixed line online advertisements.

An Imbalanced Ecosystem

Mobile operators have a unique opportunity to insert themselves into – and gainrevenues from – the online advertising ecosystem. In the fixed broadband internet,a small number of players have dominated the market, leaving service providersstruggling to gain a meaningful share of advertising revenue. But in mobile, theadvertising market is still nascent, and operators have the opportunity to clearlyestablish a role as a compensated player in the value chain.

The mobile advertising ecosystem is made up of multiple players: advertisers, advertising networks,agencies, publishers and mobile operators. Advertisers contract for an ad campaign with anadvertising agency, who works with online publishers and advertising networks to place ads (via webbanners, Flash-based ads, text links, or embedded video) over mobile operator networks into the adinventory on web pages. In the existing ecosystem, the mobile operator receives very little revenuefrom mobile banner or display advertising delivered to its subscribers on smartphones or laptops/netbooks with mobile broadband dongles/aircards.

Service Provider Mobility: Mobile Advertising – The Operator Holds the Advantage

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Challenges to Mobile Advertising Targeting

Selection of ads for delivery on a web page usually starts with contextual advertising,which involves the placement of ads based on the content and theme of the visitedweb page. However, contextual advertising has limited effectiveness because while thead insertion might have relevance to the web page, it isn’t necessarily relevant to theindividual user accessing the web page.

Traditional methods for improving online ad targeting have relied on tracking of web browsingbehavior with cookies, which are used by advertising networks to track web preferences and usagepatterns. However this approach is often unreliable because many savvy users regularly deletecookies or set their browsers to a privacy mode to block them. Other approaches to track usersbased on behavioral targeting techniques have been opposed by consumer privacy groups in somecountries.

Operators Can Uniquely Improve Mobile Advertising Effectiveness

Missing from today’s approaches is the role that mobile operators can uniquely play toimprove the performance and efficiency of mobile banner and display advertising. Advertisers,online publishers, and advertising networks are willing to pay operators for accurate and reliabletargeting information to improve the delivery of campaigns and thus command higher CPM ratesfrom advertisers. Operators have additional subscriber information such as location, user devicetype, bandwidth speed, etc., which can enhance the effectiveness of online advertising campaigns.The challenge for operators is to provide this type of information and protect subscriber privacy whilestill providing high value to the advertiser.

Service Provider Mobility: Mobile Advertising – The Operator Holds the Advantage

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A new and interesting approach that Cisco is developing with partners and operators providesthe participants in the online advertising ecosystem with anonymous demographic data that canbe used to effectively target advertising without compromising subscriber privacy or tracking thebehavior of individual users. Using a high-speed, low-latency application blade on theCisco 7600 Series Router, the operator inserts an “identifier” into the HTTP headersof selected IP data streams, and shares these encrypted identifiers with trusted onlineadvertising partners. These operator-controlled identifiers are correlated with demographicdatabases which can only be accessed by advertising partners registered to theoperator’s advertising ecosystem. Information is delivered in real-time to the advertisingnetwork partner describing the source of a web request in general terms (locality,demographic segments, etc.) without tracking user behavior or directly identifying thesubscriber. With such data available, a highly relevant advertisement can be insertedfrom the ad network in real-time onto the retrieved web content page. By using onlyanonymous demographic information, the solution never handles any personallyidentifiable information (PII), which avoids privacy concerns that have arisen with otheronline advertising targeting approaches.

The types of subscriber data that the operator can provide to advertisers anonymously with thisHTTP header insertion approach include:

· User locality Information – the subscriber’s postal code can be correlated withcommercial databases to create geo-demographic profiles based on local income levels, householdsize, voter data, and other population data

· User Device and Access Information – e.g., access network bandwidth, user'sroaming status, type of subscriber device, etc.

· Other third-party data – further refinement can be gained with additional data suchas local weather, “store locator” information for restaurants, hotels, or retailers whowish to advertise promotions or offers to targeted demographics.

Operators could further leverage their customer relationships to include additionalvoluntary opt-in information from subscribers – perhaps in return for free, ad-fundedservices – that could be used by advertisers to uniquely personalize online advertisingand marketing campaigns.  Lastly, with very transparent subscriber Opt-in privacypolicies, mobile operators might further enhance targeted advertising with subscriberlocation information from the operator’s network.

Service Provider Mobility: Mobile Advertising – The Operator Holds the Advantage

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This new approach to Mobile Advertising can provide new revenues for mobile operators, moreeffectively marketing campaigns for advertisers, and more engaging experiences for subscribers whowould receive more relevant advertising and content.

Stay tuned to hear more about this new break-through approach in the near future.

712 Views Tags: mobile_internet, mobile_monetization, targeted_advertising, mobile_advertising

Oct 27, 2009 1:25 PM David Almstrom

the only problem in this equation is I that most operators are not capable of managingthis type of service. You are spot-on with the opportunity that the operator has in terms ofknowing the exact location of the user, handset capabilities, etc. However, giants like Googleis running faster and is already leveraging this type of information.

If you have downloaded the very handy Google for Mobile app (which I have on my E71),when I start it, the first thing the apps does is to determine the location (postal code). TheApp already knows which type of device I have and if I have a cookie in the browser, Googlewill also know my gmail-address (e.g. iGoogle services) and is far better placed to offervalue-added highly targeted ad services.

However, ad-funded free services is the way to go for operators in the future to reach outand create higher value services, such mobile mail (free data, free subs, etc.) and/or freemusic download/streaming. Cisco's approach is quite interesting in how to provide relevantinformation to the ad networks. But from my experience talking to the ad/agency industry,they know little to nothing about how to target a mobile user base and offer different types ofservices/freebies.

Nov 6, 2009 10:07 AM Brian Walsh David Almstrom in response to

David you are right that operators haven't yet shown that they have the business or adindustry knowledge to "insert" into this market. Mobile advertising is a complex ecosystem,and operators are going to have fit into those rules of engagement while deliveringsubscriber/network-based value that ultimately leads to improved targted advertisingcampaign results.

The mobile ad market is still early days though, so operators do have a chance to craft amonetized role in the value chain, but as you say, Google is already moving quickly!

Service Provider Mobility: Mobile Advertising – The Operator Holds the Advantage

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