More Mobile Advertising
Carlo has a great follow on to the recent discussion about mobile advertising:
For instance, there’s a “channel” on the service from Adult Swim that has a bunch of short video clips, and Sprint charges $4 per month to access it. $4 isn’t necessarily a high price, particularly if you’re an Adult Swim fan, but $4 here, $3 there, $8 over here adds up pretty quickly. What about offsetting these prices, or eliminating them by showing a brief targeted ad before the clip? Sprint wouldn’t have to sell much advertising to make back that $3 per month.
I totally agree with that, and would like to add a bit. The problem from the carrier end is normally one of capacity. Their system just can’t handle the volume necessary to model themselves on broadcast advertising. Depending on who you talk to you’ll hear somewhere between 20% and 3% thrown around as the high water mark for data activity on EDGE and 3G networks. I tend to think the number is somewhere around 7% to 10%. What I mean is that if just 7% of the people who are subscribed to highspeed data services were to use them at the same time for something like video download the system would grind to a halt. And if you think that 7% of people would never be active at the same time just think about 9/11 or the Michael Jackson verdict. Or the final moments of any given season of American Idol. If people could whip out their cellphones and see video for events like that they definitely would.
There’s been a lot of talk about this whole mobile ubiquity thing, the assumption is that these “always on” mobile data services are scalable solutions. But that’s just not the case. Networks reach capacity and cease to function, and particularly under the model the FCC chooses to enforce for cellular services here in the US bandwidth is a scarce resource. Unlike the television and radio models, there is an incremental cost for a new user on the cellular networks. Adding a subscriber consumes an increment of resource, whereas adding a subscriber under television and radio models did not reduce the number of watchers/listeners the system could add in the future.
Advertising is normally based on a large number of customers. The more readers you have the more interest advertisers have, the more effort you can put into getting readers and improving your content, which generates more advertiser interest, etc. That model is based on being able to keep adding more and more customers. In the first round of Internet advertising it was a major realization for some folks that there was a non-zero value in serving a pageview to a reader. In the early days banners were paying so much that it was pretty much trivial to add network bandwidth and server capacity as more readers arrived. But as that market constricted only the sites providing high value were able to keep their advertising inventory prices well above their provisioning costs.
What we have in the mobile environment is effectively a constrained potential customer base as well as a very high provisioning cost. It’s going to be very difficult to make a 15 second commercial clip pay off on cellular networks. Because “scheduling” that ad doesn’t mean tossing it into a slot where you know about 3000 people are tuned in, it means transferring that 200 to 300K of message (and I’m just making up that number based on 3gp video sizes) to 3000 individual handsets. That’s 600 megabytes of transfer over the network where bandwidth is a scarcity, just to get out one 15 second clip to a relatively limited audience.
I do like the idea of advertising supported mobile services, as I’ve mentioned before. However I think the existing television advertising model is a poor match for what the cellular video advertising model would have to be. It is out of necessity a premium model. But expecting the customer to bear all the cost of that premium service is wrong. It’s a new channel with radically different and powerful attributes. I’ve yet to see anything that really attempts to exploit the new medium to full benefit.
