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Mobile Advertising Revenue Remains Elusive

Spending on mobile advertising is beginning to develop worldwide, but mobile ad revenues aren't likely to reach any significant volume until 2010, as market participants continue to wrestle with formats, standards, and pricing strategies, according to a market study by Heavy Reading.

"Mobile advertising offers some significant advantages over other media, but also has some limitations," says Aditya Kishore, Senior Analyst with Heavy Reading. "Before selecting mobile as an ad medium, advertisers, vendors, and carriers will need to identify the objectives of their ad campaign, the requirements of the creative products and cost, and the responses required."

Once technology and business model issues are worked out, mobile advertising revenues will show significant and sustained long-term growth worldwide, Kishore says, adding that mobile network operators stand to gain a large percentage of the mobile ad revenue stream.

"Mobile advertising offers carriers the greatest opportunity to insert themselves into the advertising value chain," he explains. "Unlike with TV and Internet advertising, which developed before the service providers got involved, carriers have been involved with mobile advertising from the start."

Other key findings from the market study include the following:

Mobile advertising revenues will grow very rapidly, but initial growth will not be as rapid as many anticipate. The mobile advertising ecosystem is still very much in a state of evolution today, with a very high degree of unpredictability. This ecosystem will need more time to develop, and the industry will only exceed $10 billion in annual revenue in 2013.

Wireless carriers' share of mobile advertising revenue will grow to $3.4 billion in 2012. While this represents less than 1 percent of total wireless service provider revenue, it is also just the beginning. Mobile advertising revenue will ramp up steadily for the foreseeable future. Carriers now have an opportunity to enter this market at its early stage and influence its development as it expands into a sizable market.

Mobile ad revenues will not flow evenly to all network operators. Carriers that are aggressive in building their content, search, and advertising businesses will gain a disproportionate share of mobile advertising revenues. The market also will vary significantly by geography, with Japan, the U.S., and the U.K. now best positioned for mobile ad revenues.

Service providers that leverage their multi-screen advantage will have the most success in attracting advertising revenues. Advertisers are increasingly interested in cocooning their customers within their brand, and thus want their brand messages to be available across device platforms.

Service providers offering wireline and wireless services have a unique ability to integrate advertising across the TV, PC, and mobile device. This could offer advertisers significant value, provided it is packaged correctly. At least, that's the potential upside for this elusive market.

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