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The nascent mobile advertising market is a fascinating one.
For all the hype and very real potential, it's hard not to observe that the market has failed to develop as rapidly as had been predicted - despite the fact that bullish sentiments have never really waned over the years.
Andrew Bud is the executive chairman of mBlox, which is the world's largest mobile transaction network.
Bud is therefore well-positioned to provide some insight into the state of markets related to mobile technology - including the mobile advertising market.
In a feature on Mobile Entertainment last Thursday, he discussed the mobile advertising market.
According to Bud,"there are five key, hard-edged points to resolve if the potential of this medium is to be realised":
What is mobile advertising supposed to accomplish?
What formats will need to be developed and refined if mobile is to become a vehicle for interactive brand advertising?
How will advertisers tap into the large audience of mobile users given that, unlike online, there are few large-scale properties? Who will aggregate them?
How will the success or failure of mobile advertising campaigns be tracked and evaluated?
How will advertisers get around the high cost of data tarffis?
Bud believes that the fifth challenge - data costs - is the greatest and states point blank that:
"With the current system of data tariffs, mobile advertising is unfeasible, as it is not ethical to make consumers pay for the delivery of advertising." [Emphasis mine]
That's quite a bold statement and one that probably isn't welcomed by entrepreneurs (and investors) who are currently trying to crack the nut that is mobile brand advertising.
Bud's solution - a "sender pays" model for advertisers:
"The ‘sender pays data’ model is the only viable solution to address this and allow for the growth and widespread take-up of mobile advertising. The process means data charges will be absorbed by advertisers, who can buy data in bulk at wholesale prices, thereby ensuring that no consumer is directly charged for ad delivery."
It's worth pointing out that as executive chairman of mBlox, Bud has an incentive to push a "sender pays" model to advertisers. After all, if the average mobile user isn't going to be very happy with an advertiser who "drops megabytes onto [his] bill," the logical solution for a company like mBlox is to shift the burden to advertisers - who conveniently have lots of money to spend.
The real questions, of course, are how low can wholesale prices go and will these prices be low enough to make mobile advertising campaigns economically compelling to advertisers?
While I agree with Bud that "everyone can win in a successful mobile advertising market," the challenges of "fragmentation" and "feedback" are just as important as data costs in my opinion.
After all, if the "sender pays data" model is the only model that can work, the senders are going to need scale and they're going to need to know what they can expect from their campaigns.
At the end of the day, I think Bud is spot on in noting that "there are significant challenges to meet before the potential [of the market] can be realised."
Which leads me to a single conclusion - many of the entrepreneurs and investors in this space have put the cart before the horse and quite a few eventual winners in this market may not yet even exist.