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Report Forecasts 60% Annual Growth in Mobile Advertising over the Next 4 Years

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As consumer demand for mobile broadband services reaches critical mass Arthur D. Little predicts in a new report that in the coming years mobile advertising is poised to be the next major digital media platform for brands to reach customers, and the key telecoms players have a great deal to gain from bringing their services to market early.

Forecast figures predict roughly 60 per cent annual growth in mobile advertising spend over the next four years.

Key findings include:

Online and in hand: mobile broadband and advertising. Unlike previous reports that have categorised mobile advertising as a new and different way of communicating advertisers' messages, Arthur D. Little's study finds that mobile advertising is the next step in the evolution of the online advertising industry. With the rise of mobile broadband unavoidable - Arthur D. Little recently predicted 50 per cent European penetration over the next five years - the report argues that mobile advertising will grow alongside mobile broadband and build on the interactivity of IP technology and mobile devices' unique functionality to develop new forms of online advertising particularly suited for the hand-held web surfer.

Telecoms operators must act early. Historically mobile operators have enjoyed a prime position in the telecoms value chain, as the controller of both the user interface and customer relationship. However, only 5 per cent of mobile operators' revenue is generated through advertising, compared to 16 per cent in the wider media world. If operators do not identify and secure their role in the provision and delivery of mobile advertising, they risk losing a major revenue stream to traditional internet advertisers like Google or Yahoo. Either forming partnerships or through specialist acquisition, telecoms providers risk falling behind their competition in the internet advertising space if they do not begin developing the technology and infrastructure to eventually deliver large-scale, multi-format mobile advertising to their customers. This report offers four specific recommendations for how mobile providers can begin taking action to stake their claim in the mobile advertising market.

"Advertisers prefer to deal with a single broker when launching a mobile phone ad campaign rather than striking deals with individual carriers across the markets. Making mobile advertising a true success requires cooperation among operators - something mobile operators typically haven't been very good at," says Klaus von den Hoff Global Head of Arthur D. Little's TIME Practice.

What it will look like. Online and mobile advertising is still dominated by search and display formats such as a banner, pop-up, or sponsored link. However, mobile advertising offers the possibility for more interactive and dynamic formats, such as service call waiting, idle-screen advertisements, mobile TV ads, games and voicemail ads. Push ads via SMS/MMS are another traditional option, but one whose potential has yet to be fully recognised due to operators' hesitation to cannibalise their core services in order to chase the ever-elusive advertising dollar. The full report includes Arthur D. Little's predictions of which mobile advertising formats are most likely to gain traction, and each format's percentage of mobile advertising share.

Blyk: a case study. The report documents the results from early adopters of Blyk, a UK-based virtual network operator, which has successfully launched large-scale mobile advertising in the UK with a 29 per cent response rate. The report identifies how Blyk used highly defined target groups and user data to achieve such positive rates of customer interest - 29 per cent compared with .05 per cent response rate for a typical online marketing campaign.

"Mobile players that want to take a serious bite of the advertising market first need to establish how they will deliver mobile advertising, and prove they have the scale of reach to compete with the big online players", says Juergen Morath, co-author of the report and a director in Arthur D. Little's TIME Practice.

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