March 15, 2007


By Andrew Lim, Vice President (Business Development)

Mobile advertising is becoming an increasingly important revenue stream for service providers – companies whose business plans have traditionally relied on content downloads. And as Hisham pointed out in his column last week, mobile ads are a great tool for extending a company’s reach far beyond traditional media markets, particularly in developing countries where such a large part of the population lives outside major urban centres.

So you’d think that China – where mobile penetration is linking huge numbers of people to the internet like never before – would be the perfect market for mobile ads.

Well, it would be, if not for actions taken recently by the country’s largest telecom operators.

Late last year, China Mobile blocked access to all free WAP services other than their own and created extra “road blocks” to discourage users from surfing outside the company’s own flagship portal, Monternet. Sophisticated users can reset the proxy on their phones to surf WAP sites outside the telco garden, but they now have to pay a high fee to surf these outside sites. And each time a user is detected to be outside CM Monternet, she is directed to a holding page and “reminded” of the risk of surfing outside sites as well as of the higher tariffs that will be incurred.

To further determine what a user can see and from whom, China Mobile has announced that several services -- including mobile instant messaging and music -- will come directly under the periphery of China Mobile.


Take the case of instant messaging. The most popular IM platform in China, by far, was a service called QQ, run by Hong Kong-listed Tencent. China Mobile “invited” QQ to collaborate with Fetion, China Mobile’s own IM service. QQ was paid a sum of money and given six months to transfer its entire database to Fetion. By mid-2007, the process should be complete.

China Mobile’s intention is clear. It no longer wants to be just a telecom operator. It is now a service-provider as well. We thought about trying to collaborate, but there are already thousands of local companies trying to get China Mobile’s attention. Only those at the top of the buddy list can get in the door.

China Mobile and its list of “white sites” are eyeing ad revenues. But we think their actions actually threaten the development of wireless advertising. Restricting consumer choice will dampen the number of users and thus the size of the advertising audience.

China’s Minstry of Information Industry meanwhile issued a statement condemning monopolies, but regulators have taken no action against China Mobile’s anti-competitive actions.

Meanwhile, China Unicom, China’s 2nd biggest mobile operator, has recently announced plans to impose new rules and restrictions on her list of Service Providers. This is likely to lead to a further tightening of her “walled garden” as well.

It’s worth making one final note here. Telecom providers like Verizon in the US and Vodafone in Europe also restrict consumer choice. The story in the media about these companies is that they are opening up. Verizon is offering YouTube videos. Vodafone is starting a mySpace service. But offering access to a select list of popular providers is not the same as equal access for all – the model which has been the cornerstone of internet growth.

There are so many services that users would like to be able to access from their mobile phones and the list of new content and services is only going to grow. However, if access to these services is dependent on operators being able to secure an arrangement with each service provider, it's not going to work. Keeping up with the pace of innovation is a hard enough task. Telecom operators should focus on building systems that deliver services and content that users want, regardless of who creates them – not blocking them.