IDC Says Early Lessons of Mobile Advertising Trials Require Advertisers and Wireless Service Providers to Rethink Business Models

FRAMINGHAM, MA – AUGUST 8, 2006 – The promise of wireless to be an effective and powerful tool for reaching targeted market segments makes it the hottest new medium for advertising and marketing. During the past year, both the U.S. wireless and the consumer brand communities have begun exploring mobile advertising through in-depth focus groups, market trials, and experimentation with different formats. IDC believes common themes are emerging from the mobile advertising market trials that, when viewed collectively, highlight the need for wireless service providers and advertisers to revise their business models.

The unique nature of wireless devices and wireless usage characteristics creates a number of advertising format opportunities that will prove beneficial to both advertisers and wireless service providers. Wireless service providers have access to vast amounts of customer data that could be leveraged to create more effective advertising messages that reach customers on an individual basis. In addition, mobile advertising presents a significant new revenue opportunity for wireless service providers who are facing continued erosion of voice service pricing. Although mobile advertising holds enormous potential for both the wireless and advertising industries, IDC analysts warn that there are a number of key issues involved.

"Early market trials are showing just how different the mobile advertising environment will likely prove to be," says Scott Ellison, vice president of IDC's Wireless and Mobile Communications group. "The real impact of mobile advertising will be forcing both advertisers and wireless service providers to substantially alter their highly successful business models to adapt to this very new but very different medium. Without fundamental model adaptation, both communities risk alienating the very customers they serve and strive to reach."

According to Ellison, the new business models will need to adapt to a range of issues, including different wireless user tolerances and receptivity to mobile ads, different mobile advertising formats, sharply compressed ad rotation cycles, and advertising that relates to individual user characteristics. Successfully addressing these issues in addition to creating ads that are effective and engaging, yet unobtrusive, will prove to be the ultimate challenge for the two industries. In addition, wireless service providers will be forced to view themselves as media companies instead of as telephone companies.

The IDC study, Spinning Business Models on Their Heads: The Early Lessons of U.S. Mobile Advertising (IDC #201954), presents an overview of key common findings from the early mobile advertising trials and related work that is underway or that has been completed by the various players in the U.S. wireless industry, including wireless service providers, mobile advertising firms, major advertisers, and content providers. The early lessons of the mobile advertising trials are already becoming apparent and are providing critical guidance to the advertising and wireless industries as they work together to evolve the wireless "third screen" into the next major advertising medium. Wireless advertising presents both new opportunities and new challenges, which will force both advertisers and wireless providers to fundamentally evolve their business models and practices to succeed.

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