Ad revenues will transform mobile industry

23 Oct 2007

Market saturation and declining average revenue per user levels (ARPU) have been a headache for mobile operators the world over and they’ve been scratching their heads for replacement revenue. But according to analysts, help is at hand in the shape of the ad business.

Berg Insight predicts that ad-based revenue models are going to have a profound long-term impact on the development of the mobile industry.

“Traditionally, telecom operators have focused their attention on maximising revenues by managing network traffic”, said Johan Fagerberg

“Now we have a different breed of players like Google who want to maximise their advertising exposure and revenues by generating as much traffic as possible.

“This force may prove formidable enough to disrupt the traditional telecom business model by shifting the focus from selling voice minutes to selling advertising space,” Fagerberg added.

According to the report, the greatest challenge facing providers of mobile advertising is the currently very low consumption of mobile media.

Even though Berg Insight estimates that there are close to 100 million mobile internet users in Europe and North America, the vast majority of those only access mobile media a few times per month.

“For the advertising business model to really work, there must be a massive surge in usage levels. If mobile media is to take 1pc of the €230 billion EU and US advertising markets, the existing user base must become exposed to between three to 10 commercial messages every day. The industry has not yet figured out how to achieve this”, Fagerberg added.

By John Kennedy