On Your Marks, Get Set…

David MacQueen Head of Mobile at analyst Screen Digest, which recently released a report analyzing the prospects for mobile advertising, takes a closer look at the companies vying for supremacy in this emerging market sector

David_macqueen_analyst_screen_digesMajor companies including AOL, Google, Microsoft, Nokia and Yahoo! have
put significant focus on mobile advertising. All have been committing
capital, either through acquisitions or internal investment in this
sector. Although each has different legacy areas of expertise,
strategies are converging towards mobile, either by choice or
obligation, paving the way for intense competition. So what are the
strategies, and prospects, for these companies in the mobile advertising sector?

In 2007 Nokia shipped a staggering 430 million devices, giving it a 38% share of the mobile handset market. However, the company has been undergoing a transformation towards services and the OVI brand embodies the companys strategic shift. Advertising is a major component of the companys evolution.
OVI is an umbrella concept, a brand which will ultimately incorporate all of Nokias content services, including the Nokia Music Stores, the re-launched N-Gage mobile gaming platform, mapping and social networking. Nokia acquired mobile advertising specialist Enpocket in 2007. Enpocket had developed an advertising delivery technology and operates a mobile advertising network through which the company sells inventory on the portals of major mobile operators, such as Orange and Sprint. However, Nokia has yet to integrate advertising into its mobile content channels. With Nokias acquisition of Navteq for some 5.7 billion (4.8 billion), many feel that Nokia is the company best placed to make location-based advertising a success.
Nokias key challenge is to convince its largest customers, the mobile operators, that its content services and the operators own content services can coexist. Some operators have refused to take handsets integrated with the Music Store as it competes with their own music services. Without a mass market reach for the services, possible only with mobile operator involvement, Nokia will not achieve the mass audiences that advertisers are most interested in.

Online advertising is Googles major source of revenue. With mobile advertising growing rapidly, the companys move into the mobile world is a necessary defensive step. Google is already selling advertising inventory on its mobile search portal and has a deal with Vodafone in the UK. However, many mobile operators have been wary of partnering with the search giant.
Google made waves in the mobile world with the acquisition of Android. Android is a Linux-based OS and the first Android-based devices are expected to be on sale in the second half of 2008. While on the face of it, an operating system has little to do with advertising, control over a mobile OS can ensure that all required elements for effective mobile advertising are included in handsets. Many industry observers are waiting to see just how heavily Googles advertising is integrated into Android devices.

Microsofts first move into mobile was the launch of its Windows Mobile OS (originally, and rather comically, called WinCE) in 2000. Windows Mobile is used by almost every major handset manufacturer (except Nokia) for some Smartphones. Following the companys acquisition of niche handset manufacturer Danger in 2007, Microsoft will also be producing its own handsets.
Microsoft recently acquired Musiwave, which Screen Digests research shows is one of the top three mobile music service providers, running the music stores for operators such as Orange and Telefnica. Other notable acquisitions include mobile advertising specialist ScreenTonic, aQuantive which provides advertising metrics, and TellMe Networks, a voice-based mobile search company.
The hardware, software and services combination could allow Microsoft to develop a tightly integrated mobile offering, reminiscent of Nokias OVI or indeed Apples iTunes.

AOL and Yahoo!
Yahoo! and AOL are platform agnostic and develop software and services for as many handsets as possible, even if it means developing the same software for different platforms. This stance prevents the online companies from having to pledge technological allegiance to a specific technology, with the risk of being dependent on a specific external OS.
AOL acquired mobile advertising specialist Third Screen Media in 2007. AOL has been evolving from an ISP and has made digital advertising a core part of its strategy. Yahoo! has moved into mobile advertising through internal investment. Both companies are struggling in the online advertising sector against the strength of Google. The mobile advertising market is as yet a largely unexplored frontier, and could offer both of the companies a significant growth opportunity. Indeed Yahoo! has enjoyed greater success than Google in providing its search services to mobile operators.

Who will dominate?
Mobile advertising is a growing industry with a rapidly evolving landscape. The potential is huge, and some of the worlds largest companies are vying for control of the next major advertising medium. The mobile operators have been slow to react and these five companies have stepped into the ring. With the early punches barely thrown, this will be a fascinating heavyweight contest, which is likely to go the distance.