ANOTHER BRICK IN THE WALL

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.

MOBILE MARKETING - BEYOND SMS

By Hisham Isa, Vice President (Marketing)

Content downloads – the bulk of many a mobile industry business plan – are stagnating. In some cases, they’re even declining. The take home percentage for a mobile service provider isn’t very exciting either. Take the case of a ringtone sale in The Philippines. Retail price is PHP 30 (US$ 0.6). Market rate for revenue share is 30 percent. So that’s just PHP 9 (US$ 0.18) per transaction before royalties and marketing costs. In some countries, the percentage drops to just over 20 percent.
So what’s a mobile service provider to do?

Well, at BuzzCity, we have three revenue streams: membership fees, merchant commissions and advertising. The area where I see the most growth and opportunity is the third item on the list. And I’m not alone in this view:

"The full value of mobile marketing lies in the ability . . . to create more relevant customer experiences among more receptive target audiences," writes IDC vice president Scott Ellison in a report released last week entitled “The Potential Actually Exceeds the Hype”.

IDC predicts that the mobile advertising market will grow more than 25-fold from US$160 million last year to more than US$4 billion in 2011.

“Mobile marketing can reach billions of mobile users in the developing world on an individual basis for the very first time,” the report continues “and thereby create new markets and customer relationships for brands.”

At BuzzCity, though, we’re already running over a hundred ad campaigns. Eighty percent of our advertisers are repeat customers. Ads appear both on myGamma and on 1500 partner sites. Here are some examples:

* Mobile agency Mobiclicks is running ten campaigns for clients targeting users across South Africa.

* Malaysia-based mobile I.T. expert mTouche are running a regional campaign across southeast Asia. They chose to advertise on a mobile platform because of the rising cost of traditional print ads.

* US-based Cellufun is advertising across our network.
BuzzCity’s story is not typical of the industry at the moment – advertising already accounts for 15 percent of our total revenue and should rise to 40% in 2007 – but we believe we are at the forefront of the mobile marketing wave.

The next wave of content is likely to be specialised information (bus schedules, cricket scores, weather reports) with huge public appeal, and this is likely to attract the most ads.

You’ll notice that the first adapters are companies also working in the mobile space. Brick and mortar firms have been slow to adapt, mainly I think because media agencies are still overlooking the mobile sector. This will soon change though. Here’s why:

1. Mobile phones are the best platform for reaching people outside major urban centres, particularly in developing countries. This is a big driver in places like India. Mobile phone networks extend beyond the big cities into areas with poor TV reception and limited newspaper or magazine distribution. Mobile networkers also have a very different demographic than internet users (see Kok Fung’s article).

 

2. It’s cost-effective. We auction our ad space – similar to Google. The higher a company bids, the more likely its ad will be shown. The average cost per click is 2 US cents for a campaign on myGamma, so a one-month mobile media buy for a regional southeast Asian campaign costs US$10-15k. Compare this with (a) internet ads or (b) print campaigns. Google ads cost at least 5-6 cents a click (popular keywords cost more!) A print campaign in a single country, Malaysia, is US$42k. That will buy you regional exposure for 3 months on a mobile platform.

3. Mobile marketing offers a unique one-on-one experience. With traditional media, the net cast is really wide. Plus TV viewers can take a break during commercials to go to the kitchen or toilet. Mobile networkers, on the other hand, keep their eyes on the screen. It’s easier to target content to them based on their preferences and usage patterns.

The biggest obstacle that service providers like BuzzCity face in this area though comes from telecom operators. In the PRC, for example, China Mobile is making it increasingly difficult (and expensive) for mobile phone users to surf outside of a pre-approved network. But more about this in the next blog entry from our China expert, Andrew Lim.Hisham Isa


For more about mobile adverstising, join us at Mobile Content World Asia 2007, where Kok Fung will be speaking about global trends.

SOCIAL NETWORKING - CELL PHONES, COMPUTERS OR BOTH?

By Lai Kok Fung, BuzzCity CEO

The time between the western and lunar new years is a good period for reflection and at BuzzCity, we’ve decided to take a fresh look at how we communicate with people interested in mobile communities, like the ones being created everyday on myGamma. We strive to not only create the world’s best platform for mobile-generated user content, we also want to be thought leaders – taking a look at trends both within the industry and inside our own business. So starting today, we promise to update this blog regularly (we did a poor job of that in the past). Look for a new entry once a fortnight. Sometimes I’ll be the primary author; other members of our executive team – like Hisham and Yuszela– will also contribute. In every case, though, the entries will reflect collaboration. Not every word written will be mine – or Hisham’s or Yuszela’s for that matter – our communications team will play a role putting our conversations into print.

Taking Stock.

Will Asia's leadership in WAP usage be overshadowed by Africa ?

In early October 2006, we recorded 1 million registered users and it felt a good time to take stock of things.

Males dominate our membership at 69%, and the bulk of users (72%) were from Asia. While this trend continues and Asian registrations increase - with growing usage from Bangladesh, Sri Lanka and Pakistan - there were notable exceptions from South Africa (15%) , Nigeria and Romania. South Africa in particular, surged in usage in the 7 months since launch in February 06.

While Asian countries countinue to lead usage of the service, the rapid rise of African usage suggests a voracious appetite for WAP. Even as we tallied our users, new prospects appeared - from East Africa.

Across all markets, young adults aged 20-35 are active members of the community, making up some 82% of the population of myGamma users.

In a 2005 survey of users from Australia, Singapore, Malaysia and Thailand we found some 40% of the users have a diploma or higher. Among these early users, 70% were single while 20% were married.

Even as we take stock of the new markets we are in, these profiles seem to be repeated as new users make their presence felt in chat, blogs and photo contributions.

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