Mobile Advertising: A European Perspective

Introduction

The market for mobile phones has expanded rapidly during the past decade and continues to grow quickly. In some European countries such as Finland, Sweden, Norway, and Italy, the mobile phone has reached almost ubiquitous penetration with levels of 80% and higher (Economist, 2001). In Germany, mobile phones are more widely used than fixed-line connections (Brechtel, 2002). In addition to voice communications, German users send out 2.2 billion text messages through their mobile phone every month (Brinkhaus, 2002).

The fast spread of mobile phones has created immense profit expectations in the telecommunications industry. Telecommunication companies in many countries have invested large sums of money into acquiring third-generation licenses and building the necessary infrastructure. Yet, as it turns out, it is more difficult to generate revenues than initially anticipated.

In addition to call charges, there are three main revenue sources in mobile communications: (1) transactions, (2) information, and (3) advertising. Transactions are of high interest, yet as of now only to a limited extent, because of the small size of the screen and the clumsy usage of the keypad. With information services (such as weather forecasts or banking services) the crucial issue is the user’s willingness to pay for these types of services.

Does mobile advertising have the potential to be a significant source of revenue in the future? First studies on this new advertising medium indicate that mobile advertisement campaigns can be very successful, generating response rates as high as 40%, compared with the 3% response rate generally expected for direct mail and less than 1% for Internet banner ads (Borzo, 2002).

Because of the novelty of the technology, using mobile phones for advertising campaigns presents some challenging questions for marketing departments:

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  What are the strategic advantages of the mobile phone in comparison to other advertising media?

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  What campaign types can leverage these characteristics?

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  What critical issues need to be considered when launching a mobile advertising campaign?

In the remainder of this chapter, we discuss these questions drawing on field research conducted in cooperation with the German mobile marketing company 12Snap.

Advertising Through Mobile Phones

With the increasing number of media types, it has become more and more difficult for marketing managers to find appropriate strategies to target potential customers with their messages. First, while it was possible in the past to capture a large segment of society by placing advertisements with the main TV networks, the rise of private channels has led to a high degree of fragmentation, thereby complicating access to consumers. Similar fragmentation can be observed with other mass-media types such as print or radio. As a result, getting time and attention from their audience has turned into a major challenge for advertisers (Davenport & Beck, 2000).

Second, different media types require different approaches because of differences regarding their reach or richness. Reach is a function of how easily customers, or in this case, participants in advertising campaigns, can be contacted through a given medium. Richness, on the other hand, is defined by (1) bandwidth, that is, the amount of information that can be moved from sender to receiver in a given time, (2) the degree of individual customization of the information, and (3) interactivity, that is, the possibility to communicate bidirectionally (Evans & Wurster, 1997). The communication of rich marketing information, that is, information that ranks high on all three aspects, has traditionally required physical proximity to customers and/or channels specifically dedicated to transmitting the information (see Figure 1).

Figure 1.

The trade-off between richness and reach in advertising (adapted from Evans & Wurster, 1997)