Last week RIM announced new functionality that will enable developers to include advertising within their mobile applications (http://bit.ly/aOvbcs). Revenue from these ads will be split 60% to the developer and 40% to RIM; standard terms for the industry and a pretty good deal for RIM. Not content with just this, RIM is rumored to be considering a mobile advertising acquisition of their own (http://bit.ly/aYOCOM). If (some say “When”) this happens, it will be the latest step in what appears to be a rapidly consolidating industry. Microsoft kicked off the festivities with its acquisition of Screen Tonic (5/2007) followed by the purchase of aQuantive, AdECN, Rapt, and YaData, all of which have been rolled into their Microsoft Advertising division. Other high profile party goers include Google with their purchase of AdMob (11/2009), Apple with their purchase of Quattro (1/2010) and the ensuing absorption of that business into iAd (9/2010), and Opera with their acquisition of Ad Marvel (1/2010). (For additional background see the SLA Mobile blog entry from January 2010.)

The fact that acquisitions take place is nothing new; large tech companies tend to purchase smaller tech companies. What makes these acquisitions somewhat remarkable is lack of maturity of this market. Mobile advertising is still young and has only taken its first steps. Consolidation at this level is usually reserved for a market that is up and running.

What is the story behind this race? Experts have demonstrated with gusto the potential for mobile advertising. Statistics show that people spend increasing amounts of time looking at their mobile devices, but that advertising spend continues to go to “traditional” off-line mediums (http://bit.ly/9V9gh4). The experts tell us that we can expect a correction to take place as advertising spend moves to where the customers are, so the theory goes.

However, simply throwing ads on a mobile platform is not enough. An intimate knowledge of customer demographics and psychographics, where they are and what time it is there, what device they use and how often they use it; these pieces of data that will drive the success of mobile advertising. We believe that this type of targeted advertising will soon become the industry standard. And the wireless carriers that can server up this information to advertisers will lead the way.

In the the last few months we have seen significant merger and acquisition deals in the Mobile Advertising space.

Last November Google announced an agreement to acquire AdMob for $750m. At the start of this month Apple announced the acquisition of Quattro Wireless for $275m and Opera Software acquired AdMarvel in a deal reportedly worth $23m ($8m cash and $15m earn-out). 2007 was also a busy merger year.  AOL acquired Third Screen Media and Microsoft acquired ScreenTonic both in May 2007, and Yahoo acquired Actionality in August the same year.

Both AdMob and Quattro are well established advertising networks with good market share.  A recent IDC report stated that AdMob had 11% and Quattro Wireless 7% respectively of the US market based upon the number of ad impressions served.  So although significantly different in scale, what do these recent deals signify for the Mobile Advertising industry?

Google’s focus has traditionally been around SMS and search related mobile advertising – the addition of AdMob brings web and application display ads.

Their view is that despite the tremendous growth in mobile usage and the substantial investment by many businesses in the space the mobile web is still in its early stages. Pundits have been saying for some time now that the revenue from mobile inventory is going to be larger than that from the fixed web, and although it’s estimated that AdMob is generating approximately €60m of annualized revenue, it probably has the largest inventory of mobile advertising placement space and the largest network of partners.  It could, therefore, be concluded that Google’s excitement around the AdMob deal is based on the fact that it believes that great mobile advertising products can encourage even more growth in the mobile ecosystem.

Quattro Wireless serves a full spectrum of mobile marketing solutions, including display advertising, SMS/MMS/shortcodes, rich media, video and custom programs in more than 100 countries and across thousands of mobile web sites and applications.  One of Apple’s key strategies is to make Quattro the preferred platform for serving ads into iPhone apps.  This should offer developers a simple way of creating and monetising in-app ads and, by brokering that space to publishers and advertisers, be able to take a share of that revenue as well as the revenue from app purchases.

The AdMarvel deal is more of a technology play.  It appears that nearly 50 million people who access the web use Opera on their mobile phones and, together with AdMarvel, Opera might play an important role in the evolution of mobile advertising. AdMarvel’s product suite includes a number of management and analytics tools for mobile ad publishers. The company website states that they ‘strive to make mobile advertising work better’, by better transparency of results, simpler management of ad traffic and higher revenue return.  A key differentiator from AdMob and Quattro is that they are not an ad network – but they partner with ad networks to deliver better results for publishers.

The last few months have resulted in industry consolidation – but there is still competition in the market with Millennial Media and Jumptap still owning significant percentages of advertising revenues. I am not so sure they can now keep up with the giants of Apple and Google, but let’s see how things unfold.

In this post we try to de-mystify mobile advertising and to explain how our own mobile advertising platform works… (download the data sheet)

Mobile Advertising – What’s The Opportunity?

Mobile phones outnumber TV sets by over 3 to 1; PC based internet users by over 4 to 1; and the total laptop and desktop PC population by nearly 5 to 1. It’s hardly surprising that advertisers in many international markets consider the mobile network as a big media opportunity. Although some networks are ad-free there is no uniform picture across the world. Consider these numbers from a Wikipedia article on mobile advertising:

“In Spain some 75% of mobile phone owners receive ads, in France 62% and in Japan 54%. As mobile advertising matures, as in the most advanced markets, the user involvement also matures. In Japan 44% of mobile phone owners click on ads they receive on their phones. D2, the biggest mobile advertising agency in Japan, announced in November 2009, at the Mobile Asia Congress, that mobile advertising was worth 900 million dollars in Japan alone.”

With statistics like that it’s clear that this is no immature market. Many advertisers consider the mobile network to be a core component of the digital advertising market-place – and one ripe for expansion and development.

Why Mobile Advertising?

The numbers above make clear the pervasiveness of the mobile phone. Moreover, mobile device features are improving markedly – even in developing countries. Device specification improvement allows for a more sophisticated advertising experience. However even lower end devices support WAP and SMS – the protocols that are typically used to deliver adverts to devices.

At SLA Mobile we believe that mobile advertising will grow in importance in all markets as operators see declines in ARPU. Mobile advertising represents an important opportunity to monetise mobile capital investment. Moreover, advertising opportunities are increasing as advertisers create new, engaging user experiences based on gaming, competitions and event-related activities.

The SLA Mobile Advertising Platform

SLA Mobile has developed an end-to-end solution allowing delivery, management and reporting of advertising campaigns targeted specifically to mobile users.

The SLA mobile advertising solution is a very powerful tool that takes advantage of several new advertising channels enabled by mobile telephony and associated data services.

The platform supports SMS advertising, MMS advertising, mobile web advertising, advertising in audio calls, advertising in video calls, idle screen advertising – and more.

SLA Mobile is also working with partners to fully integrate the mobile advertising platform with other key elements of service delivery.

Who is the Mobile Advertising Platform for?

The stakeholders in mobile advertising are advertisers and their agencies, mobile operators, mobile content providers, and mobile website owners.

How does the product work?

The mobile advertising platform has, at its core, a campaign administrator. This configures system parameters, defines advertisers and operators and provides overall operation and control of the system.

Advertisers may have multiple campaigns. Each campaign can consist of multiple adverts. There is support for a variety of advertisement formats serving different mobile advertising channels.

Campaigns and adverts can be targeted – based on user demographics or behavior – in order to be most effective.

Each campaign has an assigned budget, based on the number of impressions to be served. In addition, the advertiser may specify a daily limit on the impressions served for a campaign.

Campaigns also have priority associated with them. The SLA Mobile Advertising Platform offers three priority levels.

Operators (the term includes mobile operators, MVNOs, content providers, and mobile websites) deliver ads. An operator may request an advert of a specific format from the ad server using a Web Service API.

The platform generates statistics of the ads served. The statistics may be classified and/or filtered by advertiser or by the operator.

Types of Adverts Supported

SMS text ads (ASCII and Unicode supported)
SMS picture ads
Mobile web text ads
Mobile web banner ads
Picture ads
Audio ads
Video ads

Interstitial Advertising in The Data Domain

As a core component of its advertising platform SLA Mobile supports interactive ‘interstitial’ advertising solutions for mobile or 3G data card users. The SLA Mobile advertising campaign manager product integrates with wireless carriers’ existing capability to track users’ browsing behaviour and provides a dedicated server to coordinate targeted advertising delivery and report on specific campaign penetration.

Based on a user opt-in model, the closed-loop interstitial advertising solution analyses individual users’ browsing habits to define unique interests and load specific advertising tailored to their preferences between webpage loads.

Summary Benefits

The SLA Mobile Advertising Platform allows advertisers and network owners to take advantage of the mobile subscriber advertising opportunity.

The solution operates end-to-end – allowing planning, delivery and control of campaigns to maximise return on investment.

Supporting multiple channels, and allowing for fine-tuning of campaigns, the SLA Mobile Advertising Platform allows mobile advertising to come of age and produce tangible returns on investment.