Mobile Advertising:

Buy In or Lose Out

An Oracle White Paper
September 2008
 Mobile Advertising: Buy In or Lose Out

INTRODUCTION
Throughout the history of mass media, technology and the advertising industry
have been inextricably linked. The development of faster and more efficient
printing presses in the 19th century led to the popularity of newspapers and
newspaper advertising. The radio boom in the 1920s led to a new genre of
advertising, despite early pressure to ban direct advertising from the radio airwaves.
As the price of television sets came into reach for the average household in the
1950s, television became a powerful medium for the advertising industry, which
now had to learn how to target consumers via images versus written or spoken
words. And rapid adoption of the Internet over the last decade has driven a
booming market in online advertising, ranging from simple banner ads to more
sophisticated advertising that leverages online communities such as Facebook.
Rapid advances in wireless technology have made mobile devices the latest frontier
in mass media. For advertisers, the mobile phone represents an opportunity that
they don’t have with other forms of media, including:
• One-to-one access: Advertisers can target the specific user, as opposed to
the larger household associated with the service
• Device attachment: Consumers tend to be more attached to their wireless
devices than to other mediums, keeping them with them, and switched on, at
all times
• Customer data: Wireless operators maintain a treasure trove of information
on their subscribers, including data on customer usage, location, and
demographics.

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In a Vanson Bourne survey of global brand-name companies conducted Fall 2007,
71% indicated that they planned to spend a greater proportion of their marketing
budgets on mobile campaigns within two years’ time. However, there is an onus on
operators to develop mobile advertising environments that enable them to:
• Attract and satisfy advertisers by providing a standards-based, open mobile
advertising platform and customer data that advertisers can use in developing
targeted campaigns
• Monetize the mobile advertising value chain by fairly pricing the assets
that each entity brings to the table and enabling alternative revenue sharing
models
• Maintain a focus on the overall customer experience by marketing to
subscribers in a way that offers them value without violating their privacy

THE MOBILE INDUSTRY: PRIME FOR ADVERTISING?

The mobile phone’s shift from communications device to media vehicle has
occurred in the context of phenomenal industry growth over the last several years.
On the network technology side, upgrades have resulted in higher capacity, faster
data rates, more seamless connectivity and improved quality of service. Facing
pressures created by churn and declining average revenue per user, mobile
operators are now exploring alternative business models.
Mobile advertising is one business model that holds promise as its success on the
web is brought to the mobile web. It’s an avenue that advertising agencies have
already begun to explore. Major advertising conglomerates such as GroupM and
Publicis Groupe have launched mobile divisions, joining a glut of startup mobile
marketing and advertising firms that do everything from producing mobile
advertising to acting as intermediaries between brand advertisers and traditional
agencies to hosting and managing the actual mobile ads.
Fueling the market is the fact that consumer acceptance of mobile advertising
shows early promise. According to a recent Yankee Group survey, more than half
of adult active mobile web users indicated that they have encountered advertising,
and a significant 23% of users indicated that they clicked through that ad.

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In Figure 1, we see that a significant percentage of mobile web users are as likely,
more likely, or very likely to click on a mobile banner ad, and those acceptance
numbers continue to move upward.

Figure 1: Consumer response to banner ads

(Source: Yankee Group Anywhere Consumer: 2007 US Web/Data Survey)

These results are validated by early mobile advertising successes, including the
following:
• Luxury brand Dolce & Gabbana launched a mobile advertising campaign
targeted at teen and young adult customers in which clicking on a banner ad
on the mobile handset leads to a downloadable game, branded wallpaper and
a catalog. The click-through rate for this campaign was reported at 10%,
significantly higher than average click-through rates for Internet banner ads.
• A mobile advertising campaign for the New Line Cinema film “The Golden
Compass” played full-screen ads to consumers downloading mobile games,
increasing awareness of the movie by 19% and raising interest in seeing the
movie by 10%.
• A display ad for Hampton Hotels on Weather.com’s mobile WAP site
resulted in a 14.6% increase in message association, a 13.2% increase in brand
favorability and an 11.4% in stay consideration.

Mobile Advertising: Buy In or Lose Out Page 4

MOBILE ADVERTISING MODELS
Up to this point, mobile web display advertising, in which a banner or interstitial ad
is displayed on a mobile Web site, has been the most common format for mobile
advertising, as advertisers seek to replicate tried-and-true models from the Internet
advertising world.
As illustrated in Figure 2, Yankee Group believes that the market for mobile web
display advertising will reach over $1 billion in the United States by 2012 and
similar investments around the globe will be propelled by a more rational mobile
advertising ecosystem, greater visibility into performance and overall growth in
mobile web users.

Figure 2: Mobile Web Display Advertising (Source: Yankee Group, 2008)

While the sophisticated browsers on next-generation mobile devices such as the

iPhone are being touted as a key driver behind mobile banner advertising, other
mobile advertising models that rely on WAP and SMS enablers, remain at the
forefront. These models include:
• Direct message marketing, in which a text message is sent directly to a
subscriber’s phone, possibly based on the subscriber’s location, time of day or
web browsing activity—for example, an advertisement and a coupon could
be pushed via WAP to a user passing a restaurant at midday. When combined
with customer information such as preferences or history, direct message
marketing can be highly effective, but is the most likely form of mobile
advertising to raise concern about privacy issues, making it critical that this
form of advertising be permission-based

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 • In-message advertising, in which advertising is inserted into text messages
that are sent between subscribers, potentially as part of an ad-funded SMS
service in which users accept ads in exchange for free text messaging—a
model particularly well-suited to the cost-sensitive youth market.
• On-device portals (ODPs), which are clients that reside on the mobile
handset to provide a richer user experience than traditional interfaces. ODPs
enable consumers to browse and view content—including advertisements—
while offline, then executes searches and refreshes the interface when the
handset connects with the network, so users do not feel as though their
airtime is being used up with ad downloads.
• Interactive services, which incorporates mobile advertising with voting,
polls, contests or other community- and brand-building exercises, enabling
the advertiser to create a relationship with the user. One example leverages
advertising that is tied to mobile social networking applications, or WAP site
that is created around a specific brand that includes games, messaging and
content.
• Brand and product placement in mobile video games or video clips, similar
to product placements in movies and television shows. This approach holds
promise as being a less invasive but still highly effective form of advertising.

WIRELESS OPERATORS: BUY IN OR LOSE OUT

Mobile advertising creates a similar challenge to that of mobile content delivery
ecosystems where mobile operators have seen their customer base acquire 18% of
their mobile content off-deck. The most obvious way for mobile operators to
monetize and stay relevant in the mobile advertising opportunity is via their own
branded portals, which for many subscribers are still primary “destination sites” on
the mobile web. However, as mobile users become more web-savvy, they will begin
exploring the broader mobile internet and use of operator portals will decline.
The better, more future-proof solution is for mobile operators to leverage their
unique characteristics to build third-party advertising and marketing relationships,
and thus ensure that they are able to maintain a spot in the value chain. These
characteristics include:
• Ownership of customer data
• Control over mobile web adoption
• Distribution control
• Value-added capabilities
• Ability to create revenue relationships
The following sections describe each of these characteristics.

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• Ownership of customer data: Unlike other media devices, mobile phones
tend to be specific to their users. Telecom operators are a wealth of
information about their customers, including data on usage patterns for voice
and data services, including tracking of mobile WAP sites that customer visit
and content downloaded; billing data; network utilization information;
subscriber location information; data from the CRM system; plus any external
demographic data they may have purchased.
Combined, this information is a gold mine to advertisers looking to target
specific customer segments or tailor their campaigns. Mobile operators’
primary value to advertisers—or indeed any third-party content provider--is
their ability to collect, analyze and segment that information for use in
delivering highly targeted, personalized messaging to the end user. The
delivery of that information can then be monetized, creating an additional
revenue stream for the mobile operator.
• Control over mobile web adoption: Ultimately, the success of mobile
advertising depends on the overall success of the mobile web, a phenomenon
that wireless operators can influence by offering web-enabled devices at
reasonable prices and offering economical, user-friendly data plans.
• Distribution control: Mobile operators own the network, which is the
essential medium that connects the advertiser to the end user. While the
success of the iPhone has spurred more interest in sideloading as a content
delivery model, the dynamic nature of advertising makes a direct delivery
model the best alternative, and the significant investments that wireless
operators have made in their networks have only made them more valuable
by improving speed, quality and bandwidth capacity, thus enabling a better
experience for the customer.
• Value-added capabilities: Mobile operators are deploying IMS- and SDP-
based enablers such as presence, location and device awareness, which can
support more targeted and/or situational advertising, such as a coupon that is
sent to the subscriber based on his current location, or a video clip that is
optimized for the type of wireless device being used. When implemented in
conjunction with policy rules, the advertiser can also tailor messaging based
on criteria such as subscriber preferences or time of day.
• Ability to create revenue relationships: Operators are now starting to free
themselves from the constraints of antiquated billing systems by leveraging
advanced billing technologies and SOA. Mobile operators have the capability
to offer billing models to monetize relationships across multiple criteria based
on clicks, downloads, hits, and thresholding thus making them more
attractive to multiple types of mobile advertisers.

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While all of these characteristics can help mobile operators maintain their relevance
and ensure that they receive a cut of the mobile advertising opportunity, they must
understand the limitations of their role. Operators may prefer to keep advertising as
part of their own portals as a way to maintain control over its relationships with
customers and advertisers, including the revenue generated by any ads, but that
approach will ultimately limit the range of opportunities available to them. Mobile
advertising, like mobile content, represents a complex ecosystem with multiple
players; in order to ensure their continued relevance in that ecosystem, operators
must be willing to accept different revenue-sharing models, including those in
which they step back and play a supporting role by supplying—and being
compensated for— their value-added capabilities.

CREATING AN ADVERTISING-FRIENDLY ENVIRONMENT

Mobile operators recognize that being able to provide innovative content to their
subscribers is a valuable tool in their efforts to boost ARPU and improve customer
loyalty. However, they also recognize that they may not be the best source of that
content, preferring to rely on an ecosystem of third-party content partners to offer
that capability. This realization has spurred interest in the concept of the service
delivery platform (SDP), a standards-based architecture for the creation and
delivery of services.
Mobile advertising is essentially a more dynamic form of third-party content, and as
such, the environment required to support a mobile advertising initiative is
extremely similar to parts of a service delivery platform. These essential common
functions include the following:
• Real-Time Advertising Revenue Management: If a video clip is
downloaded, the mobile operator must share the revenue generated by that
download with the developer of that content, plus possibly additional third
parties, such as a content aggregator. Along the same lines, if a mobile
advertisement is delivered to a subscriber, revenue associated with that
transaction—both the cost of placing that ad and possibly any revenue
generated by a response to it—must be distributed among multiple parties,
including the operator, the advertiser, the advertising or marketing firm, and
so on. This requires a real-time billing platform with the following features:
• Support complex new revenue models, including third-party content,
mobile advertising, etc.
• Manage a 360-degree view of all revenue relationships, including
consumer, business-to-business, wholesale and other partner relationships,
as well as any advertising or royalty payments.

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 • Pre-integrated business process flows from concept to cash to care that
guarantee the integrity of information as it passes among systems, enabling
faster time to market while lowering total cost of ownership.
• Standardize via secure Web services-based APIs that enable secure third
parties access and integration to the operator’s other internal systems.
• Policy management: Policy management capabilities for the network and
the consumer become particularly critical when it comes to understanding
and managing ecosystems. It is critical that the carrier recognize and
proactively address how subscribers want to be approached and targeted.
While some customers may be amenable to receiving ads via their mobile
phones, particularly in exchange for coupons or discounts, others may want
only certain types of information, or simply not want to receive ads at all. The
policy management system must proactively wed subscriber information and
preferences with network behavior in order to ensure that customers receive
advertising that is in line with their comfort levels and/or any privacy
limitations that may be in place.
• Business intelligence: As noted earlier, mobile operators own a wealth of
information about their customers, but generally lack the ability to tie that
data together and use it to create marketing that is more relevant. The
solution to this challenge is a centralized business intelligence solution with
predictive analytics capabilities that enables operators to integrate disparate
data points to create a single view of the customer that it can then make
available to its advertising and marketing partners.
• Secure exposure of network elements: Sophisticated advertising
capabilities rely on next-generation network enablers such as location and
presence servers; yet operators are understandably concerned about making
to make those enablers available to third parties without compromising the
security of their networks. A third party applications environment could
provide access to those network elements via Web Services or Parlay APIs
while maintaining the integrity of the underlying network.

Mobile Advertising: Buy In or Lose Out Page 9

 Advertising Repositories

OSS/BSS Mobile Advertising Framework

Real Time Secure

Fulfillment Policy Business
Revenue Exposure of
Management Management Intelligence Network
Assurance
Ad Ingestion and Subscriber Data Device
Management Management Transformation Management
Billing

Next Gen Legacy

Networks Networks

Figure 3: Mobile Advertising Functional Components

Operators’ mobile advertising initiatives should be deployed hand-in-hand with

their larger content strategies. While the current surge of interest in mobile
advertising has spurred the development and marketing of multiple “mobile
advertising platforms” from startups, operators run the risk of implementing a
point solution that address just one form of content –advertising—that cannot then
be integrated with any other content management solutions. A better solution is a
single, flexible content delivery platform based on industry standards such as SOA
that enables mobile operators to evolve their mobile advertising strategy as part of
their larger initiatives around creating, delivering and managing all types of content.

CONCLUSION
The emerging mobile advertising opportunity is a growing but complex opportunity
that is currently being addressed in a highly fragmented manner. The risk that
mobile operators face is that they will wind up with yet another operational silo to
handle their mobile advertising initiatives, which will preclude them from doing
convergent marketing or advertising.
Mobile operators must also view mobile advertising as another opportunity to
strengthen their relationships with their customers in an increasingly competitive
market. As noted earlier, operators possess a wealth of information about their
customers, from network usage to location information to demographic data;
mobile advertising provides them with the opportunity to create sticky relationships
with subscribers by providing them with another category of highly personalized,
useful content.
Ultimately, mobile advertising should be managed hand-in-hand with the mobile
operator's overall content management and delivery strategy. As web-based models
continue to be delivered into the telecommunications environment, mobile
operators are best suited by finding a strategic partner that understands the
intersection of those two spaces.

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Mobile Advertising: Buy In or Loose Out
September 2008

White Paper Inquiries:

Brian.Kracik@oracle.com

Oracle Corporation
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