Increasing revenue by serving targeted mobile ads to wireless customers is one way mobile operators can increase revenue, and Alcatel-Lucent is hoping its new Advertising Selection Server will help create the next generation of mobile advertising and generate additional revenue in a wireless business model that goes beyond monthly subscriptions.
People carry their phones 24 hours a day….It's every marketer's dream to use that platform.
Digital Media & Advertising, Alcatel-Lucen
Telecom service providers of all types have been looking for a role in the growing digital media value chain -- in short, getting a cut of the content they transport. By concentrating on the assets that wireless operators have and other companies don't, Alcatel-Lucent's targeted advertising model is designed to capitalize on carriers' network expertise, customer information and operating and billing systems (OSS/BSS).
"Alcatel-Lucent is essentially saying that the mobile operator has a unique ability to support location-based services and those that relate to a user's behavior. In addition, because the local operator has that capability, Alcatel has an unusual capability to support it because of its relationships with the providers," said Tom Nolle, president of industry consultancy CIMI Corp.
Alcatel-Lucent has also created a new revenue stream for itself by offering the Advertising Selection Server as a hosted cloud-based service, although operators can buy the servers and run their own ad-serving operation.
"With the hosted model, there's no capex investment on the part of service providers. In an economic downturn, this can improve their return on investment," said Rudi Broos, director of strategy and marketing for Alcatel-Lucent's digital media and advertising business. The hosted model also provides a faster go-to-market strategy.
Avoiding mobile silo solutions, Alcatel-Lucent's Advertising Selection Server can address a number of mobile services, including SMS, MMS, WAP browsers, even ring tones.
"Our solution can consolidate all the inventory you can imagine in push and pull modes," Broos said. Wireless carriers choose the advertising models they want to use.
Adding credibility to its offering, Alcatel-Lucent came out of the gate with German mobile operator E-Plus as its first hosted-service customer. E-Plus is part of the KPN group of companies and, as the third-largest German wireless carrier, has 15 million mobile customers, an estimated 25% of the German market.
Changing digital media business model includes mobile operators
According to HeavyReading projections, mobile advertising revenue worldwide will increase from $1.4 billion in 2007 to more than $10 billion by 2013. To make the new mobile advertising model work, however, traditional advertising media buyers will have to get used to dealing with wireless operators, and vice versa. Advertising media buyers aren't used to doing business with wireless carriers, but the nascent mobile phone advertising market has enormous possibilities, according to Broos. "People carry their phones 24 hours a day and use them for all sorts of multimedia activities," he said. "It's every marketer's dream to use that platform."
The way Alcatel-Lucent sees it, the mobile advertising value chain will have to change, and media buyers will need to include mobile operators in the list of media sellers that include newspapers, magazines, radio, television and Internet advertising. "Mobile operators have a role to play. But they need a technical solution and the expertise to know how to sell the assets they have in the language media buyers understand," Broos said. Instead of trying to learn the advertising business, E-Plus is working with a German sales agency that will sell on the carrier's behalf.
Mobile operators have an enormous set of advantages they can play, if used correctly, that can make them better advertising players, Nolle said. Privacy is always a consideration, "but one of the hard and fast rules is that you don't have to have your privacy protected from someone who already knows something about you, and mobile operators already know where you are geographically," he said. "That fact argues that it isn't an intrusion for mobile carriers to gather data about subscribers, but it could be an intrusion for Google to gather the same data."
Wireless subscribers exchange information for targeted ads
Mobile carriers don't want to ruin the ad-revenue possibilities by spamming their customers with unwanted and irrelevant ads, however. To guard against that, the targeted advertising service is opt-in only. Customers can provide various amounts of personal information. In return, they will receive a certain number of targeted ads per month on their mobile phones, as well as "rewards" for doing so -- most likely credits on their monthly wireless bill.
As important as it is to know when it's appropriate and useful to target ads to a mobile subscriber, it may be more important to know when not to advertise. If a providers knows that a person never stops for coffee on the way to work, for example, don't show him anything at that time because it will just be irritating, Nolle said.
Making the system work is complex, Broos said, and there needs to be soft integration with mobile operators' OSS/BSS to make sure customers get their expected rewards.
Demographically, Broos expects targeted mobile advertising to take off with younger customers who pay their own mobile bills and have less disposable income than older mobile customers. Geographically, Alcatel-Lucent believes the first uptake may be in Europe, northern Africa, and Asia-Pacific countries.