INTERNATIONAL. Mobile advertising is widely regarded to be inevitable given the ubiquity of the device and its ability to deliver on all of the four 'Ps' of traditional marketing parameters. BI-ME reports from the Mobile TV World Summit.

According to panelists at the Mobile TV World Summit in London last month, mobile advertising is about to go prime time. Three reasons were given for this prognosis.

Mobile phones now have the processing power to handle the types of rich media content and displays required for quality advertising. Consequently, this ‘third screen’ is now a viable choice for advertisers wanting to create advertisements of the quality that are available on other digital media.

With minute bundles and calling plans becoming old news, mobile advertising is top-of-mind with operators as a means of providing a new message to consumers, as well as a much needed additional revenue stream.

Users have responded positively to operator mobile marketing campaigns by exhibiting a quantifiable appetite to consume more, whether the content is on-deck such as ringtones and mobile music, or off-deck such as consumer durables. Clearly, mobile advertising works even though it is held back by regulatory issues and issues of the viewing experience (lengthy navigation or download times) and the cost of the necessary bandwidth.

In Italy 3 Italia claims that its DVB-H (digital video broadcast-handheld) mobile TV service boosts its ARPU (average revenue per user) by 60%. One third of the extra revenue comes from the DVB-H service and two thirds of the extra revenue comes from additional voice and data services, according to Marco Maestri, TV solutions Director at 3 Italia, speaking at the Mobile TV World Summit, organised by Informa.

The operator, which had 8 million 3G customers in Italy at the end of 2007, had 800,000 mobile TV customers at the end of last year.

Telecom Italia Mobile (TIM) and Vodafone Italy also offer DVB-H services in the country. According to Gian Paolo Balboni, head of innovation trends at Telecom Italia, there are about 1 million DVB-H devices in Italy, “but that does not mean there are 1 million subscriptions.”

“Most of the devices are sold without a related subscription contract but with the capability to have pay-per-view....They are used, but occasionally,” said Balboni.

He said that although the free-to-air TV culture still dominates, in the future services will be more interactive with many facilities for voting during TV shows, for indexing channels or even programming the home DVD recorder direct from the handset.

Mobile advertising, he said can come in two different flavours, instream advertising as in traditional broadcast TV, but it will increasingly come in the form of more profiled advertising, and sponsorship around the browser tool, with sophisticated activities like voting built into the content.

Microsoft TV’s Gavin McLauchlin, Customer Marketing Manager, outlined plans for consumers to have access to on-demand and interactive services through the IP-enabled television or mobile, services consumers are used to experiencing on their computers.

Jakub Brzeczkowski, Content Division, TV/VOD Director in the EEMEA region for Orange said that operators are regionally tailoring mobile content for maximum effect. “Mobile TV is in a similar position as SMS in the beginning where everyone was unsure whether SMS was going to fly,” he said. “Handset devices also need to be ones that people will actually use. We need most of the industry on board to stimulate manufacturers to develop good handsets.” Orange also announced that it is currently looking into a plug-in module for mobile TV that consumers can use with their existing handsets.

Orange agrees with the concept of mobile operators becoming content distributors, and Brzeczkowski said the Orange strategy is for “content everywhere” on multiple devices.

Etisalat of the UAE recently announced an expanded partnership with Orange Business Services, the business services arm of France Telecom. Under the terms of the new agreement, the companies, which have worked together for the past six years, will combine forces to further develop secure and scaleable internet protocol (IP) virtual private network (VPN) solutions thus enabling Etisalat to deliver a multimedia network to its customers over the Orange Business Services network.

The surge of Internet TV entrepreneurs promises movies and TV programmes on any screen, anywhere, anytime, yet relatively little attention is being focused on the monumental challenge and new technologies needed to make video ubiquitous.

Brzeczkowski of Orange said the market and the technology are together opening up possibilities, and coverage and accessibility of content is expanding globally. He said the feedback shows that mobile TV can become a major factor in increasing ARPU and customer retention. But the discussion about what is unicast (video on demand) and what is broadcast is not straightforward, he said.

“The consumer will not necessarily understand what is TV, or what is not, and what is VOD,” he said. “There is a history of hype in the industry, but in fact we are barely getting there with the capability of the networks, and the applications are starting to come.”

Awareness lacking
 
A recent Zoomerang survey sponsored by QuickPlay Media has found that 47% of consumers were unaware if their mobile provider offered mobile TV and video services. The survey was conducted among 500 US mobile phone users between the ages of 18 and 34.

The number one reason for not trying mobile video was because 43% of respondents assumed it would be too expensive.

“Mobile operators have done an excellent job addressing the cost concerns of consumers with the launch of ‘all you can eat’ data plans," said Wayne Purboo, CEO of QuickPlay Media.

"Now, with the growing availability of advanced mobile devices, higher-speed networks and high-quality mobile TV and video services, carriers have a further opportunity to drive service adoption by increasing marketing promotion of mobile media services.” 

The new individual TV experience

The choice of cellular or broadcast overlay is one of many technical considerations that has to be addressed by operators, together with the issues raised when trying to combine them into hybrid delivery systems. Other areas of discussion include the availability of suitable spectrum for the construction of DVB-H and DAB/DMB based overlay networks, the all-important attitude of regulators to mobile TV, and how spectrum choices (often forced on overlay network operators by local conditions) will affect network build and operating costs, and therefore business models.

The construction of broadcast overlay networks for mobile TV raises complicated questions about who controls the spectrum, how potential TV service providers gain access to it, and the business models that will be employed. Prior to the release of spectrum at analogue switch-off, will regulators insist on common, wholesale TV packages that are made available to all mobile TV service providers on fair and non-discriminatory terms? And if so, how do service providers differentiate themselves from rivals? And just who will be providing the mobile TV services of the future? Will Pay TV operators - with their content aggregation skills, large customer base and existing customer billing relationships - be happy to act only as content providers and leave the marketing and retailing to mobile phone companies?

Could a large Pay TV operator seek to become a Mobile Virtual Network Operator (MVNO) itself and get into the mobile TV retail market? Or might they sell mobile TV direct to their existing subscribers without the need for a mobile phone at all, by offering customers portable devices, like a mobile Personal Video Recorder, that contains suitable broadcast reception equipment like a DVB-H or DMB receiver? What kinds of portable reception devices can we expect to see beyond mobile phones and perhaps portable PVRs?

Mobile TV is a departure from the traditional television model and presents great opportunities and challenges to all players within the content-to-consumer value chain.

Miguel Blockstrand, Senior Product Manager Mobile TV, End to end Network Solutions, Ericsson’s Business Unit Network, said that we can learn a lot from the broadband industry to see what will happen with mobile TV.

Blockstrand said Ericsson expects there to be a mass market for mobile television within the next two years, with 30% of mobile phone users accessing mobile television by then. He said consumer demands will force telecom operators to offer broadband television services in order to retain their subscribers.

“It is not just portable television that is out there,” Blockstrand said. “It is a completely different experience.” He added that any screen is a TV these days, and any screen is a device that can deliver TV.

“If content is digital, then you can move it around,” he said. “We are entering an era of television for the new generations. People want to keep their mobility and their freedom. They have their demands about where they want to watch, which is touching upon their identity.” He added that high quality is important for the pick up rate, especially the start-time of buffering at the start of the service. The broadband revolution is giving us higher speeds and HSPDA, which is enabling the quality of service aspects.

“The next generation will turn the concept of TV on its head,” said Blockstrand. “They will use all kinds of devices in different ways. The goal for operators is to help them in having this smart connectivity.”

More and more the focus is going to start moving onto the mobile TV side of the operations. The mobile operators are going to be carrying TV regardless of what happens, although there are still many unanswered questions about flat-rate data charging and forging the necessary partnerships with content providers.

Couch potato nirvana

Rather than rob traditional TV of its audience, Internet TV - including popular user-generated-video sites like YouTube - build audiences for traditional TV network programmes, according to a report ‘State of the Media 2007’.

"There is money being made by networks whenever they can get more than 100,000 people to watch on the Internet," said Gerry Kaufhold, who analyses Internet and mobile TV for In-Stat.

Internet TV is couch potato nirvana. People who miss their favourite TV programmes now often watch them on their computer at work during lunch hours and spread the word to friends, which adds incremental new viewers for network and cable shows. One episode of The Office, for example, attracted 400,000 Internet viewers after its first TV broadcast. Another attraction is the chance to watch programmes on the move, from lots of countries and hard-to-find movies genres like documentaries.

Nearly 80 million Internet users in the US, or 43% of the online population, have watched a TV show on the Internet, up from 25% a year earlier, according to Toronto research firm Solutions Research Group. A new SRG survey found that about 20% of Internet users in the US watch TV episodes on the web every week, compared with 14% who use a cable operator's video-on-demand.

The challenge for content providers will be to reach consumers who want to watch videos on mobile telephones, computers, MP3 players, and other devices and do it over all sorts of networks. That's going to require videos to be transcoded into some 30 existing formats (various audio and video codecs, file formats, screen resolutions and bit rates) so everybody everywhere can watch whatever they want, wherever they want to watch it.

Here's the problem for just one Internet TV player: YouTube transcodes 65,000 videos a day. Now YouTube is putting all of its existing videos on the Apple iPhone and Apple TV in a secondary format called H.264. This doubles YouTube's transcoding needs each day.

With the long tail comes the challenge of making millions of videos available when usage of most individual titles is minimal. Solving the problem will take content providers paying millions of dollars for many thousands of servers, software licenses, energy costs, and more video engineers, or the adoption of more efficient, on-demand transcoding technologies. So it is important not to misjudge the pace at which the technologies can be deployed.

Lessons for the Middle East

The Middle East region is a mix of markets experiencing different stages of broadband evolution and mobile penetration. Many countries in the Middle East have high rates of broadband penetration. Point Topic’s published figures show that the number of broadband subscribers in the Middle East and Africa grew by 38% in 2006, while the number of those subscribers using DSL access technology grew by 81.9% to 4.3 million.

Qatar, the UAE and Lebanon have the highest broadband penetration, with almost half the households in Qatar having broadband access, 28.87% in the UAE and 22.5% in Lebanon. Turkey has the most DSL subscribers in the region and almost doubled the number in 2006 to 2.9 million. Tunisia, Egypt and Qatar all increased the number of subscribers in their respective countries by over 100%, while in the UAE, the number of DSL subscribers grew by 63.45% to 207,080.

Rates of broadband penetration remain low overall in the MENA region, relative to the Gulf, at around 1% of total population, but Hilal Halaoui, Principal with Booz Allen Hamilton, says that rapid growth is expected.

Broadband uptake will continue to show double and triple digit growth across the region, the analyst company says, thus boosting the uptake of Internet TV and related mobile multimedia technologies. But in turn broadband service providers will need to develop new offerings to differentiate themselves from competitors.

“The region's number of broadband subscribers is expected to more than double over the next three years, largely because of the increasing availability of broadband access channels, reductions in cost, and the enormous demand for broadband content. In 2006, the number of broadband subscribers in the region experienced double- and triple-digit growth rates,” says Halaoui.

Increased uptake of broadband and market liberalisation will mean that operators face will face increased competition, and will not just rely on speed of connection and price to sell broadband services, according to the report. Operators will instead turn to TV packages and other services to differentiate themselves. Pay-as-you-go; guaranteed connectivity for demanding customer such as gamers or VoIP users; and value-added packages with multiple email addresses, web site hosting and content partnerships, are other examples of how operators might extend their services.
 
Operators would also need to enhance their customer services to deal with not just a larger customer base, but a broader, less tech-savvy customer base and perhaps look at systems such as remote management of customer premises equipment (CPE) to handle service provision.

“The broadband environment is changing, and operators will face challenges in finding the right answers to complex service differentiation questions, in selecting the most favourable network technology options, and in building the optimal customer service model going forward,” says Ghassan Hasbani, Vice Principal with Booz Allen Hamilton.

“Offering high-speed Internet access will become an essential qualifier for any operator in the market, causing prices to rapidly decrease. Operators will likely shift marketing emphasis away from speed and price, and begin differentiating services from their competitors,” based on other elements," he adds.

Gulf adopting the free-to-air model

It is the technology-forward nature of the Gulf market, rather than its size, which means that the current mobile TV experiments could turn into big business. This would also be a boon for mobile TV around the world. Despite success in countries like Japan, Korea and Italy, which began broadcasting mobile digital TV as early as 2005, the technology has yet to take off worldwide.

Clashing standards have slowed adoption. Like many cellular technologies, mobile TV standards differ by region, forming an alphabet soup of acronyms: wireless technology company Qualcomm's MediaFLO in the US, DVB-H (Digital Video Broadcasting for Handhelds) in Europe, T-DMB (Terrestrial Digital Multimedia Broadcast) in Korea, and ISDB-T (Integrated Services Digital Broadcasting - Terrestrial) in Japan and Brazil. The standards are largely incompatible.

That fragmentation extends to business models. There are free to air services, which, like basic TV channels, can be picked up by any device with the right chip or receiver, and no service provider necessary. Particularly popular in the Middle East and parts of Asia, these channels generally offer the same programmes a home TV would show for free. Then there's the paid model, predominant in the US, in which mobile carriers provide premium TV shows to subscribers for a fee. Proponents say that the Middle East is a prime case for the roll-out of mobile TV.

Dubai TV has launched an interactive mobile portal with local partner Qanawat, using U-Turn Media Group's mobile media delivery platform. The portal is branded Dubai TV and contains a wide selection of multimedia, including downloadable video previews of upcoming TV shows, daily sporting and weather information, ring-tones, games and a weekly competition.

Marketing of the service includes regular TV spots in the four countries where the service is offered, as well as a comprehensive SMS campaign in UAE. There are no plans to charge consumers directly for the service, although as user numbers grow advertising within the portal will be introduced in the form of banner ads and short pre-play video announcements. The long term strategy will be to deliver targeted advertising to consumers based on their location, age and preferences.

The Dubai TV portal is compatible with most handsets that have a colour screen and is available as an on device portal (ODP) which is installed onto the phone or as a WAP site. The ODP version allows users to launch the service by clicking on a branded icon residing on the desktop of the phone, with no manual configuration required. Updates to the portal are performed in real time over the air, ensuring the latest version of content is presented. It is a unique situation because the content, branding advertising and promotion are controlled by Dubai TV alone.

“We strongly believe that media companies will drive the deployment of video and other premium services on mobile phones,” says Daniel Konecny, Head of Global Sales at U-Turn. “We are delighted that Dubai TV sees the potential of going mobile and has chosen U-Turn as their trusted technology partner.”

In another example, Kuwait’s Future Communications Co and Turner Broadcasting System Europe are involved in a deal that is bringing Turner's world-leading news and entertainment products available to mobile phone users across the Middle East via a web portal. CNN and Cartoon Network mobile services will both be launched on the Future Club web portal.

This means that mobile users in Kuwait and across the MENA region can receive CNN Breaking News alerts in Arabic and English on their mobile phones, as soon as the news breaks. Subscribers are sent SMS messages on the latest developing stories and will also be able to access full news TV content from CNN.com, covering world news, business, and sport, amongst others.

The deal also enables phone users to download java games, ringtones and coloured wallpapers featuring classic and contemporary characters from the world's leading animation channel, Cartoon Network.

Khaldoon Al-Harmi, Future Strategic Business Manager, says that currently VAS revenue is on the increase and demand for premium content, at the right price, is high. Given that both Cartoon Network and CNN are valued, trusted brands in the region, the company sees a fantastic opportunity on both the content and the operator side.

Notwithstanding the obvious hype and potential, there is a tangible sense of trepidation as to how to introduce mobile advertisement to subscribers in a way that is not perceived as intrusive. The mobile phone is a highly personal electronic device characterised by ‘always with’ and ‘always on’. Therefore insensitive exploitation of the medium with mobile spam could cause widespread backlash. Stakeholders of all shapes and sizes (web portals, operators, handset vendors, content creators) are therefore advocating a very soft touch to mobile advertising with two golden rules.

Mobile advertising must be valuable. Whether as a redeemable electronic coupon or a location specific SMS message, the advertisement must match the expectations and desires of the end user otherwise it is an unwarranted intrusion.

Mobile advertising must be optional. Subscribers need to be able to choose the type of advertising and the frequency of delivery, with controls placed firmly in the hands of the recipient.

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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