mobile advertising: the hidden breakthrough
June 1, 2007
By Tom Wheeler
My last article discussed “phonepublishing” and how the print and cable television market segmentation model for content was coming to mobile. True, the content is coming, but we’ve got a way to go before mobile publishing has the same kind of revenue streams as do magazines and cable.
While magazines and cable TV have dual revenue streams — consumer subscription and advertising — the wireless industry still relies on monthly bills for its revenue. True, that bill is growing as ringtones and other downloads are added, but that’s not good enough. If wireless is to truly benefit from the publishing model it has to graduate to generating advertising dollars.
“Gee, Wheeler, what’s the insight here? Mobile advertising is one of today’s really hot topics. Why, even Microsoft (News - Alert) just bought a mobile advertising company.”
True, but there is a dirty little secret about mobile advertising that continues to differentiate it from its print and cable cousins: mobile advertising is a one-to-one operation, and as a result relatively costly to deliver. When a magazine publisher or a cable network distributes an advertisement, it sends the message once and a huge audience receives the commercial. The economics of such point-to-multipoint distribution elude mobile carriers because each mobile ad has to be sent to only one consumer at a time, occupying valuable channel space in the process. You don’t even have to fire up the spreadsheet to realize how a one-to-many multicast ad costs virtually nothing to deliver compared to the one-to-one unicast of mobile distribution.
This situation, however, exists only until broadcasting comes to mobile. Up to now technologies such as MediaFLO and DVB-H have only been thought of in terms of their ability to deliver video to mobile phones. The hidden breakthrough — the sleeper in these technologies — is their ability to deliver broadcast advertising on a virtually costless basis.
In addition to video, the mobile broadcasting technologies offer the potential for “datacasting,” the delivery on a one-to-many basis of a data stream containing information. The obvious example is a programming guide. There is a need for a guide to navigate the mobile TV offerings, as well as look to see what is on the home television. Yet it would be prohibitively inefficient and expensive to distribute each guide on a one-by-one basis, so a data stream that goes to all mobile video users carries the information once, the mobile device receives it and knows what to do with it. That’s datacasting — one data feed reaching multiple consumers simultaneously.
Now apply that concept to advertising. Instead of sending the McDonald’s ad one at a time to mobile subscribers, why not send it once to everyone, cache it on the phone, and then let the network call it out of the cache as appropriate to be inserted into the content? This is exactly the way the local cable system does its local advertising. At the appropriate time in the national network feed the locally stored ad is inserted and sent to all subscribers watching that channel. To make this work on mobile is a no-brainer with datacasting — it’s even possible once the ad is cached on the phone to insert the commercial which was delivered via MediaFLO or DVB-H into non-FLO or non-DVB-H programming.
But the greatest sleeper may be how datacasting of advertisements can solve the carriers’ concerns about being made into a commoditized “pipe.” More on that in the next article.
Tom Wheeler is a Managing Director at Core Capital Partners (www.core-capital.com), a Washington, DC-based venture capital firm whose investments include Roundbox, a datacasting platform company. He has been CEO of both the Cellular Telecommunications & Internet Association (CTIA) and National Cable Television Association (NCTA).