Why Mobile Operators Are Becoming Mad Men
Editor’s note: Rich LeFurgy is a general partner at Archer Advisors. LeFurgy was Founding Chairman of the IAB and sfBIG, a Venture Capitalist (WaldenVC), head of ad sales at Starwave (ESPN.com) and the Walt Disney Internet Group. Follow him on Twitter @rich_lefurgy.
The characters on AMC’s television show Mad Men and the real-life mobile operators of today are pretty much the same. Both could enjoy cigars and martinis while business runs as usual, living as kings of their respective business worlds. But in 2012, both Madison Avenue and the mobile carrier world are getting turned on their heads by the likes of Google and Facebook. Both industries are re-inventing themselves as we speak, and the good news is they actually need each other to help them survive and thrive.
Mad Men’s main character, Don Draper, famously said “Advertising is about one thing: happiness.” Earlier this month, we saw one of the most interesting moves in digital media: the mobile operator SingTel purchased mobile ad company Amobee for $321 million in an all-cash deal.
Now that’s happiness for Amobee.
This transaction is one of the largest in the mobile ad space behind AdMob’s sale to Google, and Quattro’s acquisition by Apple. It also signals a major chapter in the carrier world– they are fighting back against the over-the-top plays by Google and Facebook. The carriers want their fair share of the media pie, and realize now is the time to act.
The big question is: Can telcos add the advertising expertise to create a great value proposition for both brands and consumers that makes them both happy? It’s a $22 billion question — or roughly, the estimated market size of combining deals, geofence mobile marketing and location-based services.
The world’s largest carriers – ATT, Telefonica, SingTel and others – have all created new business units focused on the delivery of digital advertising and mobile payments. Why? They have all recognized their uniquely valuable assets for advertisers: they can locate a user anytime and anywhere, they have a trusted relationship with their subscribers, and they can enable a closed loop, real world transaction. Most urgently, they are realizing that media and payments represent the best opportunity for growth in their own business in the face of rising infrastructure costs, churn and declining margins.
What it could look like
For consumers, the proposition could be compelling. From enabling hyper-local offers and the ability to pay with your phone, consumers could finally begin to receive media that is truly a valuable service – not intrusive. Consider an opt-in world, where consumers pre-select the categories and types of offers they want to receive: Get an alert from your favorite store about a sale when you are nearby? How about a discounted plan that is subsidized by advertising? Or even a free phone? Or a loyalty app with special deals just for being a subscriber? Link your credit card and pay with your phone? These and many other services are headed our way and, done right, they could transform our phones into highly personal and invaluable instruments of commerce.
For advertisers, the proposition is even better. While mobile advertising is taking off with performance-based models (think Tapjoy), brands are still struggling with mobile – look no further than the decline of Apple’s brand-centric iAd that had overly complicated pricing. Direct advertising deals are still nascent as proprietary apps often do not achieve scale and they only work when the app is on. Consumer apps require the brand to share their audience with competitors; display ads are small and often not relevant.
So what’s the solution?
By focusing on mobile advertising, carriers can bring brands real relevancy and the reach that has been missing from other mobile initiatives. Tailored offers triggered when a consumer is near a store without an app is a hugely powerful offering from the carriers. Combine it with consumer preferences and a host of anonymized data about subscribers, and brands finally get a tool that they can use at every point of contact. This ‘Mad Men of mobile’ play focuses on the digital purchase funnel that works for driving real-world commerce (web, email, mobile app, proximity). Advertisers who are already using this approach are seeing results incomparable to any other medium: as high as 65% purchase rates for proximity-based mobile marketing.
And there is real scale – the carriers I mentioned above represent over a billion consumers in 30+ countries. In markets like the UK, all the major operators are trying to collaborate to make it easy for brands to reach the entire audience of a country with a single ad buy. The potential is substantial: according to analysts, the daily deals market will be $4.2 billion over the next four years (BIA/Kelsey), while mobile proximity marketing could generate another $6 billion (Borrell Associates) and location-based services $12 billion (Juniper).
The SoLoMo cocktail
‘SoLoMo’ stands for social, local and mobile. While it is a ridiculous acronym, I’ll use it here for simplicity’s sake. The SoLoMo cocktail, when mixed together using the right recipe, is giving operators visions of their own large, tasty hunk of pie.
How? The key for operators to unlock this revenue is to add digital advertising expertise to their DNA, thus bringing breakthrough opportunities to advertisers – offerings that they cannot get anywhere else. For example, here’s something that operators are in a unique position to offer: the ability to deliver a targeted impression on the web, then possibly on Wi-Fi or in email, then followed by a tailored alert when the consumer is near the store without an app. In addition to transactions like Amobee, these companies are recruiting heavily from the digital technology companies and agencies. They are also opening offices in Silicon Valley and working closely with companies like Bubble Motion and Placecast, which enable operators to get a slice of that $22 billion pie all through a differentiated media offering. (Disclosure: I am a board member at Placecast)
The carriers can really succeed here because there is so much more that marketers want from mobile ads that Google, Facebook and Apple won’t be able to offer. But carriers must create a differentiated offering based on their unique attributes of user data, real-time location, direct consumer relationships and the ability to close the loop with transactions, and not just try to replicate the current ecosystem. From APIs for developers, to providing rich location context and user data for targeting on both the web and on mobile, carriers could deliver a consumer all the way down the purchase funnel – from awareness to a real-world transaction. It’s become clear that brands and agencies want more than what’s there today, and carriers are uniquely capable of unlocking mobile marketing at effective scale.
Whether this succeeds or not will simply come down to how fast operators embrace their future. If the industry moves towards SingTel and Telefonica, then the former kings of mobile can continue to earn a really big piece of the pie.
- RICH LEFURGY
SingTel currently has stakes in 8 Telecom Operators in the Asia Pac Region – with 100% ownership in Singapore Telecommunications in Singapore and 100% in Optus in Australia. It has stakes ranging from 25% to 49% in 6 other major markets – India : Airtel ; Indonesia : Telkomsel ; Phillippines : Globe; Thailand : AIS ; Bangladesh : PBTL ; Pakistan : Warid.
Arguably SingTel is the largest Pan Asian Telecom Operator considering its combined user base of…
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