See Part 1: State of Online Advertising.
The Promise of the Mobile Market
For all of the excitement over online video, the jubilation over the promise of mobile entertainment looms larger, but perhaps that is because few analysts or companies have managed to wrap their arms around the market. Like the Web before it, there are numerous challenges facing the marketplace, both in terms of consumer adoption and monetization.
Wireless Entertainment: Definition of Market
The market for wireless entertainment consists of content, services and applications. Wireless content may be anything from a ringtone, graphics or streaming video. Mobile content comes with many challenges, including billing and digital rights management. Wireless services tend to be educational or news oriented, but may also be entertaining. Social networking tools allow for more interactive services on handheld devices: be it sharing or blogging. Finally, wireless entertainment applications include dynamic games and search tools.
But the promise is considerable:
- To properly put things into context, the world’s population stands at over 6.5 billion people, with China (1.3 billion), India (1.1 billion) and the USA (300 million) leading the way. When ranked by Internet users, Asia leads the way with at 389 million Internet users, followed by Europe with 313 million and North America, with 232 million. In terms of penetration, North America leads the world with nearly 70% reach. Clearly, the USA leads the world with 207 million Internet users, with China in second place with 132 million users.- The US wireless market, according to reports from CITA-the Wireless Association, has an estimated 224 million wireless subscribers.
In other words there are more Wireless subscribers than there are Web surfers in the US. In the first six months of 2006, revenues stood at $60.5 billion, up 8.6% over the first half of 2005. Additional data from the Wireless World Forum’s “USA Mobile Market 2006″ Statistical Handbook reveals that revenues from US Operators alone will grow by another $20 billion dollars in 2007.
Of course, it should be noted that the US is in fact years behind Asia and Europe. As early as 2003, iMode – the wireless Internet service run by Japanese giant NTT DoCoMo – surpassed AOL as the largest ISP with 35 million subscribers in 2003. It took AOL 15 years to reach 30 million subscribers, while iMode did it in three years! Clearly, mobile is the fastest-growing new content platform in history; wasn’t that Web’s tagline, after all?
This does not suggest that mobile has – and will – experience uninterrupted growth. After the initial burst of growth, mobile content is struggling to break out of the early adopter segment and achieve mass consumption.
Time will tell if the growth curve will kick back into high gear, but wireless entertainment is actually hitting some road bumps as the crucial transition to third-generation mobile telephony, or 3G, takes shape. For example, every month in the US, 10% of mobile subscribers download a ring tone, less than 4% download games and roughly one-third, or 33%, use text messaging.
In other words, with revenue from voice services dwindling, mobile carriers have begun to feel pressure to sell content to pay off their new data services. While Asian markets continue to benefit from robust projections, the US marketplace has proven somewhat challenging.
What kind of projections are we talking about?
It should be stated that the variance in market projections, overlaps in market size definitions and lack of standards give investors and marketers cause for concern. Indeed, the figures are sometimes highly questionable but even if the market reaches a fraction of the projections, wireless represents very lucrative opportunities that no one wants to miss.
- The worldwide mobile content market will grow from $16.7 billion in 2003 to $78 billion by 2007 (Research and Markets).
- The value of the mobile entertainment market – including music, games, TV, sports and infotainment, gambling and adult content – is forecast to increase from $17.3 billion in 2006 to nearly $77 billion by 2011, driven by mobile TV and other video rich applications (Juniper Research).
- Value of general mobile ad spending in the US will rise from $410 million in 2006 to $4.4 billion in 2011 (eMarketer).
The 3 C’s: Content, Community, Commerce
What the Web has proven, of course, is that advertisers follow audiences. That much we know. But audiences follow content. That is what the web proved as well: create content, make it free online, create a community around it, and commerce will flourish. On some sites, such as eBay and Amazon.com, commerce came in the form of transactions. This is what drove the first wave of the World Wide Web’s growth from 1994 to 2003. From 2003, commerce has been fueled largely by advertising. As such, WatchMojo.com is betting that the challenge facing the wireless entertainment industry is a lack of compelling content on the Web.
“The mobile marketing opportunity is a function of the specific mobile advertising or sponsorship opportunity for multimedia content and applications, such as full-track music, video and mobile TV, gaming, gambling and, of course, adult mobile content,” notes eMarketer senior analyst John du Pre Gauntt, author of the Mobile Marketing and Advertising report, which suggests that general mobile ads will account for most of the mobile ad spending growth through 2011, so long as faster networks (notably 3G) and more advanced handsets come to fruition.
History Repeats Itself
Of course, it should be noted that today’s handsets are not exactly weak by any stretch of the imagination. After all, today’s average handheld device, be it from Motorola, Nokia, Samsung, or Sony Ericsson boasts the equivalent processing power of a desktop computer from 1995.
Hmm… 1995?
If history repeats itself – and it always does – and wireless has overtaken the Web as the fastest-growing new content platform in history, then it should be noted that what ensued online after 1995 was the explosion of the Internet with the creation of the World Wide Web by Tim Berners-Lee and the launch of the web browser Mosaic by Netscape Communications. Of course, what really made the Web sticky was the quality of the content that flourished after 1995. ISPs began to offer more than connections to the Web and email addresses, they added content to retain users and engage them.
Similarly, if handheld devices have the firepower of a computer in 1995, then the right mobile content could change the name of the game. After all, currently, wireless carriers bill themselves as reliable telephone services that offer “four bars” and nationwide coverage. In other words, content is an afterthought. If that philosophy changes, then the dynamics of wireless entertainment will improve and realize their promise, and ideally, the theory goes, so will mobile advertising, which is slated to drive the mobile market into fully becoming the fastest-growing new content platform in history.
Is Content King?
The implication right now is that carriers are hoping to make all of those lofty projections come true without embracing the “content is king” mantra. After all, according to “How People Use Mobile Video,” a study released by Knowledge Networks, half the subscribers to mobile video services don’t watch video. Why? Probably they don’t like the content. Instead, they turn to the Web. The proof is that the laptop has emerged as the most-used device on which to watch mobile video.
Paid or Free?
The same study reveals some more eye-opening findings:
- 88% of respondents who download video content would seek out ad-supported video if it were free.
- 89% of those who watch live, streaming video would watch content that includes commercials if they weren’t charged.
- 70% of consumers lean toward ad-free content downloads when given a choice. The finding contradicts data from another recent report showing an interest for ad-supported over pay-per-download video content.
Just like the far-flung projections seem to contradict one another, previous studies have shown both support and opposition to ad-supported video on any platform.
Of course, these are all well-worth noting because one of the major benefits of video on cell phones is that people carry them around all the time and this allows for spontaneous viewing, and of relevance to advertisers, a pull mechanism.
All to say, while the leaders in Web content, services and applications seem to have been identified (and even that remains to be seen); the burgeoning wireless opportunity seems wide open. The euphoria over wireless was heightened this year when Apple finally unveiled its much anticipated iPhone, which is a wireless web browser, multimedia player, mobile camera phone and a personal digital assistant, but even then, with its lofty price tag, closed system and lack of keypad, it once again highlights the challenges to attain any semblance of market leadership, let alone dominance, in all things mobile.
See Part 1: State of Online Advertising.
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February 9th, 2007 at 11:50 pm
[…] For all of the excitement over online video, the jubilation over the promise of mobile entertainment looms larger, but perhaps that is because few analysts or companies have managed to wrap their arms around the market. Like the Web before it, there are numerous challenges facing the marketplace, both in terms of consumer adoption and monetization. […]