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Could consumer ignorance hurt mobile advertising?

Posted in Board Of Intellectual Capital, internet, Investments, Market research, Mobile, mobile 2.0, Mobile Phone Usage, Strategy, Technology, Wireless, Wireless 2.0, tagged , , , , , , , , , on July 6, 2010| Leave a Comment »

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

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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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Google puts Apple on notice over mobile ads

Posted in Board Of Intellectual Capital, Community, Economy, Gerbsman Partners, google, Investments, Market research, Social Networks, Strategy, tagged , , , , , , , , , , , , , , , , , , , , on June 10, 2010| Leave a Comment »

Here is an article from SF Gate.

“Google Inc. executive Mike Steib is courting customers such as Progressive Corp. and touting tools that let marketers create the snazzy, interactive ads that rival Apple Inc. has been using to snatch mobile-ad business.

“We have a significant investment in mobile, and competition is going to push us to be really, really good,” Steib said in an interview the day Google closed its $750 million acquisition of AdMob, which places ads on mobile programs and Web pages.

As Google’s head of mobile advertising, Steib leads the effort to build his company’s next $1 billion business from sales of ads on wireless devices – and lessen its dependence on Web-search ads. With a team based in a former cookie factory in Manhattan’s Chelsea neighborhood, Steib is striving to persuade advertisers they will win over more consumers by working with Mountain View-based Google than with Apple.

“It’s safe to say Google will respond to iAd and respond very strongly,” said Michael Collins, chief executive officer at Joule, a mobile-ad agency that’s part of WPP Plc. “They have too many assets to pull from, too many arrows in their quiver.”

Staying ahead may not be easy, now that Apple is luring advertisers to iAd, a service that places ads inside applications that run on its iPhones and other mobile devices. Apple has sold more than $60 million in advertising on iAd since it was announced in April, CEO Steve Jobs said at a conference Monday. That represents about half of the mobile display-ad market for 2010, according to JPMorgan Chase & Co.

Tension between the companies escalated Wednesday when AdMob accused Apple of barring developers from using Google ad services to create ads for the iPhone – a move that may threaten AdMob’s ability to get revenue from the device.

This year, AdMob and Google together may generate more than $100 million in U.S. mobile-ad sales, according to IDC in Framingham, Mass.

Apple won business as Google awaited a green light from the Federal Trade Commission for its $750 million AdMob acquisition, announced in November, Joule’s Collins said.

Introducing iAd “gave Apple the opportunity to suck all the oxygen out of the room,” he said. “Apple is on a tear these days with the iPhone, iAd, the iPad.”

As sales of smart phones rise, more users are viewing ads on handheld devices in addition to – and sometimes instead of – computers or televisions. Spending on mobile ads in the United States is expected to reach almost $500 million this year, from $220 million in 2009, according to IDC.

In the next three years, as much as one-third of global digital ad spending will be devoted to mobile, according to Alexandre Mars, who oversees mobile ads for Publicis Groupe SA.

“You’re seeing advertisers who see mobile marketing as a significant business driver,” said Steib, who joined Google in 2007 from NBC Universal. “This is a big part of the conversation.”

Google’s strategy includes creating tools that help developers embed videos and make ads more interactive, similar to what Apple’s iAd can do. Google also wants to sell more ads tied to a user’s location and deliver coupons for nearby deals, said Steib, Google’s director of emerging platforms.

The company is keen to make money from delivering coupons for nearby businesses and selling ads alongside a tool that lets customers take photos of an item and search for it on the Web, said Steib.

That way, a bistro could offer free appetizers to a nearby customer who’s searching for a place to eat, and the user could later see where to buy a bottle of the wine paired with dinner. The restaurant and wine seller would pay Google for the ads.

Google and AdMob together had 21 percent of the U.S. mobile ad market in 2009, said IDC analyst Karsten Weide. Quattro Wireless, which Apple acquired in January after losing out on AdMob to Google, had 7 percent.

‘Short-term disruption’

Steib says iAd may create “short-term disruption.” Still, Google can contain the fallout in part because it has experience letting customers manage campaigns on multiple Web sites and it can change ads on the fly based on performance, said Steib, who himself is an avid user of Apple products. He owns about a dozen iPods, iPhones and the new iPad.

Bank of America Corp. went from buying an occasional mobile campaign to paying Phonevalley, the agency run by Publicis’ Mars, a $1 million annual retainer. Google’s AdMob is among the ad-placement companies used by the financial institution, the largest U.S. bank by assets.

“We did take a hard look at iAd and we passed on it,” said Kathryn Condon, a vice president of digital marketing at Bank of America. She said she’s not convinced it will provide more value than AdMob and the other companies the bank uses.”

Read more here.

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Apple’s wealth has made it a monster

Posted in Board Of Intellectual Capital, tagged , , , on June 5, 2010| Leave a Comment »

Its not a given that bigger is better. Let´s see how Apple cope with being no. 1. Here is a article from SF Gate.

“When Apple Computer Inc. overtook Microsoft Corp. in terms of market cap last week, it quickly became known, in press parlance, as the “500-pound gorilla of the technology world.”

So, what would you call the Cupertino company now that it’s the world’s third-largest company by market cap? Maybe not King Kong or Godzilla – those would be reserved for the world’s top two, PetroChina Co. Ltd. and ExxonMobil Corp. – but how about Mothra or Rodan?

When the Financial Times put out its annual list of the world’s 500 biggest companies by market cap last week, Apple was actually ranked No. 5, up 28 places from 2009, as of March 31. Since then it jumped over Microsoft and the Industrial & Commercial Bank of China and is holding on to that spot with a valuation of $263 billion at Thursday’s closing bell.

Steve Jobs swears otherwise, but, given the hubris the heroic CEO occasionally exhibits, could world domination be in the cards?”

Read more here.

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Apple passes Microsoft as top tech company

Posted in Uncategorized, tagged , , , , , , , , , , , , , on May 27, 2010| Leave a Comment »

Here is a report from SF Gate.

“Apple, long the scrappy but innovative challenger to dominant Microsoft, has passed its rival in market capitalization, becoming the most valued technology company in the world.

The shift in fortunes became official at the close of the stock market Wednesday, when Apple’s market capitalization – the sum of its outstanding shares multiplied by its stock price – finished at $222.07 billion, ahead of Microsoft’s at $219.18 billion.

Though the distinction is merely a milestone, it culminates an amazing turnaround for Apple, which was given up for dead in 1997, when Apple founder Steve Jobs returned as CEO. Apple is now the second most valuable company in the United States after Exxon Mobil.

“This has got to be not only one of the greatest comeback stories, but success stories of the last 20 years,” said analyst Tim Bajarin, president of Creative Strategies. “You see companies coming back from the dead, but not to the point where they achieve this staggering financial position.”

Since September 16, 1997, when Jobs returned as CEO and Apple shares traded at $5.49 per share, the stock has surged 4,346 percent and now trades at $244.11 per share. Over the last five years, Apple’s stock has grown about 600 percent while Microsoft’s managed a modest 5 percent growth.

The shift validates Apple’s strategy of focusing on smart phone and tablet technology, which is on track to eventually outgrow the traditional PC business.

Michael Mace, who worked at Apple for 10 years prior to Jobs’ return, said Apple held the upper hand in the rivalry with Microsoft before being passed in the early 1990s. He said after that point, most employees gave up any hope of rivaling Microsoft financially.

“When a company runs away from you, you usually don’t get a chance to run them back down,” said Mace, a consultant with Rubicon Consulting. “But what Steve (Jobs) has managed to do is produce a series of seminal, meaningful, market-changing products.”

Apple found new life by remaking itself as a mobile company. While it continues to snag more PC market share from Microsoft’s Windows operating system, it is setting the pace of innovation in mobile devices.

Starting with its iPod media players in 2001 and more recently with the iPhone in 2007, Apple has become a leader in building the kind of portable devices that appeal to users. Apple’s iPods command more than 70 percent of the digital-player market, while the iPhone represents a quarter of the smart phones in the United States.

Now, with the iPad tablet selling a million units in its first month, Apple is leading that market as well.

“Apple is sitting on a gigantic business that’s just taking off,” said Leander Kahney, editor of the Cult of Mac blog, who’s written several books on Apple.

Meanwhile, Microsoft has struggled to grow beyond its roots in PC operating systems and applications. Its Zune media player and Windows Mobile operating system are not clicking with consumers. On Tuesday, the company announced a management shakeup in its gadgets and games division.”

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IPad prompts VC firm to double iFund for apps

Posted in Uncategorized, tagged , , , , , , , , on April 5, 2010| Leave a Comment »

Here is some intriguing new opportunities for iPad developers.

“Venture capital firm Kleiner Perkins Caufield & Byers said Wednesday that it is doubling a fund that focuses on the iPhone and iPod Touch to $200 million to include new applications for the upcoming iPad.

Partner John Doerr said Kleiner Perkins has exhausted its original $100 million iFund that it began two years ago. Now with the iPad coming, he said the application boom that began on the iPhone will extend into a new wave of iPad apps that transforms the way people interact with computers.

“We will move beyond spread sheets, word processors and Web sites limited by a browser to an interactive, connected world with incredible speed and fluidity,” Doerr said during a press event near its headquarters.

The public support from a respected venture capital firm lends more momentum to the launch of the iPad this Saturday and gives developers more incentive to develop dedicated iPad apps. The fund could help seed a new generation of iPad app companies that help define the device much the way early iFund recipients led the way for the iPhone.

The original iFund supported 14 companies, including the well-known Ngmoco, Pinger, Shazam and Booyah. The companies have collectively made more than $100 million and accounted for more than 100 million downloads.

Doerr said those companies have more than 20 iPad specific apps in the works with at least 11 to be released Saturday when the iPad goes on sale.

Many of the iFund companies have had a chance to work with the iPad. Some executives on Wednesday talked about how the device will create more engaging and longer experiences that require more thought and can lead to more profitable and memorable apps.

“We’re really trying to take advantage of the added real estate, and we’re trying to leverage the way users want to use the device,” said Neil Young, CEO and founder of gaming company Ngmoco, which is bringing three new games to the iPad. “The iPad has the opportunity to revolutionize gaming in the home in the same way the iPhone and iPod Touch revolutionized gaming on the go.”

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