A recent report from ABI Research says that the market for mobile video telephony services, including video mail, video calling and video sharing, will grow from $1 billion in 2007 to $17 billion in 2012, a Compound Annual Growth Rate of 74 percent. Where will video advertising fit into the picture? Dan Shey, a principal analyst at ABI, discusses how video advertising could play with different mobile telephony services, the opportunity it presents for operators and how advertisers will use it to reach a growing mobile audience.
iSPOT: You’ve said customer acceptance, operator acceptance and a sufficient customer base for advertisers are essential for the success of mobile video advertising. What do you think operators can do to promote customer acceptance?
Shey: The first issue for operators with the real time communication services, video sharing and video calling, is completing the call. The operator is trying to promote a service where the real time aspect of connecting two callers is of utmost importance for the value of the service. When the issue is exchanging videos, it’s imperative to connect the callers and if you have advertising that blocks what the customer sees or delays that connection, the service isn’t valuable. Operators are saying if the value is based on real time communication, putting in video advertising is going to detract from that experience.
There’s also a question of network capacity. An advertiser is going to want to put a certain length ad that is graphically rich and in theory the advertiser should get more bang for the buck. If advertisers are disposed to a richer graphic video intensive ad it puts a load on the network. The question for operators is will the additional load and revenue they can bring in from advertising compensate them in place of other alternative uses of that network. With those services there’s a lot of experimentation by operators, various use cases for video calling and sharing services. They’re trying to create awareness so customers can find the opportunity to use those services.
When you talk about video mail or messaging, that’s where the most opportunity for video advertising is. Some of the same questions remain, such as network capacity. Operators are bundling different messaging services together, SMS, picture mail and e-mail, so trying to extract or bring down the price to add video advertising is going to be a question for operators. For operators the nice thing about bundling all this stuff together is it’s easy to sell. They start extracting certain pieces or educating customers about new aspects that are different from the messaging piece. There are going to be some challenges for the operator in communicating to customers and understanding how to price it and do we have two different bundles, one with advertising and one without, and do you put advertising in the video mail pieces or other pieces? That’s the operator acceptance issue. There’s lots of complexity there. At this time operators aren’t ready to take on those challenges but it doesn’t mean you won’t see some attempts overall. There’s enough other things for carriers to focus on.
When you think about mobile TV services, the hurdle for the customer to get over seeing an ad in the course of watching entertainment is not a big leap. Advertisers and operators are more focused on this service for mobile advertising since customers of mobile TV services will expect advertising within the programming content. The other benefit of focusing on mobile TV services with mobile advertising is that operators and advertisers will learn how to serve up advertising on the mobile and these experiences can be applied to other mobile services.
iSPOT: You’ve said there has to be a sufficient customer base for advertisers.
Shey: Advertisers need a particular base for customers within a demographic that they believe will provide them the most opportunity for sales. One of the fundamental quantities that needs to be considered is what is the base of customers who have the devices that you can serve up video services to. The number of phones that have the capability for video mail and call up services, which needs a particular application that goes onto the phone is very low. If you use 20 million as a base for what advertisers will accept, it’s not going to get to that base for at least four years and that’s just in the developed regions of the world. You have to break it down and segment the number, which keeps dropping. Twenty million might not be the right number to use with video advertising. MobiTV has had relations with Toyota and other advertisers for video broadcast services and they don’t need 20 million viewers but there still is that question of where am I going to spend my money.
Advertisers will experiment in this demographic with the mobile screen and see where it goes. It’s all a question of how many phones are out there with this capability. When you pare it down, it depends on who the advertiser is and the number of customers they can communicate with and if those customers opt in to receive advertising. Regardless of the minimum subscriber levels required by the advertiser, then the question is can the advertiser serve up an ad that meets the requirements of the operator and does not detract from the customer’s service experience.
iSPOT: The market is developing on a carrier by carrier basis, so it’s a question of which carrier will allow video advertising.
Shey: Yes, that’s generally the case. I’m not seeing any indication of operators going one way or the other, but there might be some operators that are more ambitious, such as Hutchison 3, which always seems to be a trailblazer with lots of different services. They’re a U.K. firm. I don’t see any indication of U.S. carriers entertaining mobile video advertising and using their video service capabilities. In the U.S. the only video service capability they have is video mail. Only one has video sharing, that’s AT&T. Only one has video calling, it’s Rogers Wireless of Canada. Only video mail has potential for adding video advertising in some way but I’m not seeing anyone going down that path at this time.
iSPOT: What kind of research do you do that pertains to mobile video advertising?
Shey: We created reports focused on video broadcasting. An update to a report submitted in mid 2006 on mobile TV services is in progress.
