The deals signal the emergence of a stronger mobile marketing ecosystem. At its heart is the fast-growing world of applications. Apple’s breakthrough with the iPhone was linking its device to these ‘apps’ - some of them useful, some of them fun, and, most importantly, some of them paid for. Apple’s App Store has been widely copied - not least by Google with its Android Market.
Apps can carry ads, offering app developers an extra revenue stream. By controlling the ad network, Apple and Google take an extra slice of the cash from the market and also make themselves more attractive to app developers. What’s more, an in-app ad should be enticing to a marketer as it will appear in something the user has actually chosen to download.
In Asia (outside the mobile hothouses of Japan and Korea, which play by their own rules), this ecosystem is only now developing. 3G coverage is widespread, and take-up of the smartphones needed to support apps has rocketed among high-end consumers. Hong Kong and Singapore would make obvious test-bed markets for the Nexus One.
Asia’s mobile ad network sector remains highly fragmented. Yet Brian Stoller, regional director for mobile at GroupM, believes the market will develop quickly, given the adoption of smartphones. According to Stoller, networks in Asia are split along the broad fault lines of India, China and Southeast Asia.
The last market is likely to be the best in the short term for operators such as Google and Apple. Indeed, Google’s purchase of Admob last year gave it a footprint in Southeast Asia and India. Lee Smith, regional CEO for digital at Omnicom Media Group, points to Thailand as a market where Google has already gained ground. “It will have its eye on Indonesia to do the same if it hasn’t already started.”
China will present a completely different challenge. The mobile marketplace there is still relatively immature - Joshua Maa, CEO of ad network operator Madhouse, points to its “numerous unique mobile internet protocols and operating systems”. However, the apps market is expected to grow, according to Maa, and with it the ad networks supporting it.
One senior source at a mobile operator even argues that the ad/app relationship will be stronger in China than elsewhere because “paid apps are not taking off as fast as other markets”.
Nokia recognised this early, and bought into Madhouse in 2009. But so far it has been slow to follow this up. The source argues that, despite the efforts of Nokia, domestic firms will take charge. “Chinese telecom operators are looking at this space and will try to capture it in anyway they can. China Mobile already has its app store and its OPhone play would be an opportunity to [look at] in-app ads.”
That view is backed up by Stoller, who says that China Mobile could easily build a mobile ad network from scratch. “Given its clout and audience reach in the marketplace, it can easily hang a shingle that says ‘open for business’ and acquire mobile ad spaces quite quickly without the need to buy an existing ad network or applications developer.”
The potential strength of China Mobile highlights a significant hurdle to any empire-building in Asia: the operators themselves. Outside China, Andrew Tu, VP business development at Adify Asia, points to SingTel as a potential buyer or builder of a network, given its presence around Southeast Asia. With operators looking to build average revenue per user, developing the app/ad ecosystem makes sense.
The upshot, then, is that the battle for Asia’s mobile market will be a many-sided affair - and that may not be a good thing.
“For once the struggle isn’t getting consumers to adopt mobile behaviour,” says Smith. “Inconsistent platforms and technologies stall growth for everyone. It will be very important for networks, agencies and marketers to get involved in the space early.”
Got a view?
Email [email protected]
This article was originally published in the 28 January 2010 issue of Media.