By Tony Fish – member of Gerbsman Partners Board of Intellectual and principal at AMF Ventures. Visit his blog at: http://blog.mydigitalfootprint.com
Summary
Virtually unlimited mobile usage tariffs means that advertising is perceived as free from the users perspective, as there is no additional cost of bandwidth to the user. These tariffs have lead to an unprecedented growth in mobile applications and the emergence of a new eco-system. However, “all you can eat” pricing models for mobile have become increasingly risky with the advent of new devices and operating systems from Apple and Google. With the prospect of a return to a pay per something, users may change their view of “free” advertising and this could lead to a change in behaviour, as they will be un-willing to pay for the bandwidth for the advert. Whilst this may seam ridiculous to anyone who understands, explaining to the user they have the wrong perception or that this is not the reason for a significant monthly bill, could be difficult. This viewpoint therefore opens the debate; “Could some selfish business decisions be destroying the mobile eco-system that has just been created and what scenarios are worth considering?”
Unlimited Growth
We have all benefitted from the introduction of unlimited mobile tariffs. Voice, SMS and data usage has exploded. Economically it made sense to the operator as they had spare capacity and in reality “unlimited” has caps but these caps are set so high that a user was unlikely to reach them.
Mobiles (smart phones) have evolved and today, web site and applications (inc games) for mobile are now built with an advertising model in mind and with this has come the download requirements of, in some simple cases, banner ads to some thing complex such as video and multimedia. With network improvement, the ability to deliver a near web experience, advances in connection management and now the iPad, users can find it easy to get close to, or pass their “unlimited” data caps.
Mobile applications driven by adverts work and the application method of delivery made up for a number of early shortfalls in network constraints and mobile web browser capability. However, due to the improved experience and performance of the mobile there are now less reasons for a Brand to have a specific mobile version. However, in this move adverts are also served in full form from the web to the mobile. This transition will become more important as Apple looks to force applications to use their own iAd serving technology and analytics. These forced change are likely to speed up the migration from mobile specific application to webapp – just adding a web address and icon to the mobile desktop and also removes the dependence on apps stores as the controlling point.
So what has changed?
Apple launched OS4 with a 7th temple, which is the ability to deliver a fabulous advertising experience as “most of it sucks”. The move is to deliver emotion and interactivity as this will help the developer community who want to build advertising revenues in exchange for free apps. This advertising experience does come at a cost – bandwidth. OS4 also introduces background processing (multitasking), “yippee!” says the developer. However this means that the phone can hack thought the battery really quickly and chat to the network constantly. Pushed updates become streaming.
Changes to the OS and how much data phones require for a great experience mean that the unlimited data package become very attractive to the user and advertiser as they don’t care about bandwidth, developers love it as they can deliver the real time applications and services they want for mobile. However, for the operators who are already struggling with capacity, this becomes a real headache and introduces value chain conflicts.
Implications
If the operators choose, and the evidence is currently pointing to this fact, to remove from the market unlimited packages, or such a high cap it is perceived as unlimited and lean back towards some form of pay-by-how-much-you-eat model then there could be some significant changes to the market as the users, device and applications guys try to reduce a swing to a doom loop scenario.
Here’s the crunch. For those reading this we can find arguments why all of the above is not a concern, however, the issue may not be the reality of the situation we find ourselves in, but from the user perception, it could be very real. If the user believes that there is a cost, irrespective of reality; they may change behaviour!
The simple newspaper headline that reads “Your paying for advertising” is difficult to counter with the argument that informs a user how big an advert is in bytes and that there is a trade for free services. If the reason for adverts is interactivity and engagement then a technical explanation may not be that useful or that someone is exploiting your data to sell you more.
Behavioural or targeted adverting depends at some level on understanding the user which is an output from the analysis their data – My Digital Footprint. If users find that the real monetary cost of sharing that data is too high, it kills the input. If users find that the real monetary cost of engaging with ads is too high, it kills the value.
Given that eco-systems require trusted players who can balance risk and reward together and be reliant on complex inter-dependences; mobile is no different. However, it would appear that some of the players are trying to play for themselves rather than the community.
Scenarios to ponder over coffee
- Restrictive – in this scenario the user decides to restrict their use and applications to focus on a few that are a priority and will not experiment or discover. This could have a significant impact on social media tools and applications.
- Blockers – in this scenario the user decides that they are unwilling to pay for the bandwidth and introduces a blocker service to prevent their costly bandwidth being used. This in turn destroys the fee advertising model and an outcome could be that the user ends up paying for applications.
- Selective – in this scenario the operator decides to become selective about which handsets can have unlimited (capped) data plans and which handsets are forced to have a PAYG data pricing model. This forces users into a choice and device manufactures start to work with the operators to produce devices in tune with the network to gain a competitive advantage.
- Side-Load – in this scenario PAYG could lead to more applications being downloaded by sideloading on the PC or by WiFi. If so, developers could be affected in ways that are hard to predict. But it may affect apps being advertised on the device.
- Doom loop – in this scenario the operator changes the pricing and this in turn creates all the dis-benefits for the advertisers, device guys, applications developers and users. Mobile slows and mobile operator valuations dive.
- Intelligence – in this scenario the middleware and platform companies work with the operators and seek out methods and processes to compress, reduce, focus, profile and select data and services that should use the limited wireless network, that is expensive. Can data/ ads be cashed locally on the device and selected as needed or side load them using wifi or other alternative networks, or put on hold until bandwidth cost is not an issue.
- Advertising pays for the bandwidth – a somewhat difficult scenario to comprehend, but in this scenario the advertiser takes on the cost of the bandwidth. However this is full of complex conflicts such as – I want to deliver the best ad, but it costs to much.
- No change – in reality – this is not a scenario.
Reality check
Those reading this know that ‘most’ mobile advertising is very bandwidth lean, as it a blend of:-
i) an invitation with the consumer to interact, normally in the form of a banner. The reality being that for most consumers most of the time, this is likely to be negligible in terms of cost across a month.
ii) a landing page, which they land on if they click on a banner – again negligible.
iii) call to action at the landing page, which unless it involves rich media (eg video), is also likely to be small in terms of bandwidth
We know that users respond differently to ads and services on a mobile to the web but it is possible that the Apple OS4 interruption of advertising will be heavier on bandwidth, however, over 50% of iPhone ads are viewed over WiFi (2010) probably driven by speed as opposed to cost reasons. One could postulate that this trend would therefore be accelerated with the re-introduction of pay-as-you-go pricing!
All that said, users are users and their perception is how we need to live our business life – from their view point not ours. Reflecting on the original question; “could consumer ignorance hurt mobile advertising?”, one could say this is the wrong question and it should be “is the mobile eco-system strong enough to defend itself against selfish desires of certain key players?”
If you would like to chat about the opportunities that digital footprint data brings, especially from the perspective of mobile and real time feedback, please contact me at tony.fish@amfventures.com. The book is free on line at http://www.mydigitalfootprint.com/ or you can buy it direct from the publisher at the web site. There is also a summary and a eReader/ Kindle version.
We hope that our Viewpoint improves awareness, raises questions and promotes deliberation over coffee. We will respond to e-mail, text, twitter or blog comments. http://blog.mydigitalfootprint.com
Kind regards,
Tony Fish
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