The bottom line: These results highlight the potential of compelling, relevant and properly targeted messages. In particular, they illustrate how much more likely are consumers are to respond to SMS and MMS ads than simple Internet banners.  Peggy adds: Mobile Advertising Research U.K. confirms this, but there’s also a lot of mileage left in banners. For more on what makes for a great mobile advertising experience and a balanced value chain check back tomorrow for my take on a new-launch Hardees campaign.

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TOP APPLICATIONS ON THE APPLE APP STORE HAVE MORE THAN 1 MILLION USERS, according to AdMob’s latest Mobile Metrics Report for May 2009. The report found that the most popular free applications in AdMob’s iPhone network generated the majority of usage, with the top 5 percent of applications garnering more than 100,000 users in May, and some apps showing more than 1 million active users.

A further 14 percent of applications had between 10,000 and 100,000 active users, while 54 percent of applications had less than 1,000. AdMob reached 15.1 million unique users through iPhone and iPod touch devices across 2,309 applications in May, with the average user accessing four applications.  44 percent of iPhone ad requests came from devices running the new version 3.0 of the iPhone OS, compared to just 1 percent of iPod touch requests.  Source

The bottom line: These numbers from AdMob underline the ongoing popularity of apps on the iPhone. But they also offer some insight into the potential value of in-app advertising for developers and content providers, since the apps in AdMob’s iPhone network are all free to download, and earn money solely from advertising.

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SUBSCRIPTION VIDEO AND MUSIC ACCOUNT FOR 40 PERCENT OF MOBILE DOWNLOADS IN THE UK, according to a study from GfK, as the model grows in popularity against pay-per-download sales. The research also states that casual and classic trivia and word games lead the mobile gaming market with 27 per cent of sales, while the budget sector (£3 or less) is also enjoying success through basic and retro games.  It also adds that nine per cent of the mobile tariffs signed up in the UK in Q1 have bundled-in flat-rate data.
Source

The bottom line: This study illustrates the growing popularity of the flat-rate model, both in mobile data access, but also in content subscriptions. Still, the content-subscription model contrasts with the booming pay-per-download app store model.  Will one triumph over the other?

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AD-FUNDED MMS REVENUES TO HIT $8.7 BILLION by 2014, says Juniper Research in a new Mobile Messaging report.  The report says that annual growth rates are reaching 94%, with SMS and mobile email continuing to dominate the person-to-person (p2p) mobile messaging market.

The report, entitled “Mobile Messaging & IP Evolution”, found that the Far East & China would lead the global ad-funded MMS market by a considerable margin, followed by North America and Western Europe.  The adoption of push MMS and SMS in mature and emerging markets has enabled network operators to support ad-funded voice and SMS tariffs, and combat falling ARPU, while providing brands with new advertising channels. Source

The bottom line: These are bold projections from Juniper.  P2P MMS messaging still has a way to go before it reaches the usage level of SMS, but these projections suggest that MMS advertising could prove to be a lucrative revenue stream in its own right.

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MORE THAN 60 PERCENT OF MOBILE USERS STILL ONLY USE THEIR HANDSET FOR VOICE AND TEXT, according to a KPMG survey. The survey of 4,190 consumers in 19 countries also says that consumer satisfaction rates with mobile services have increased. Music satisfaction is up to 66 percent, video 52 percent (from just 14 percent), IM 44 percent and live TV 38 percent.

The factors influencing users’ next mobile content purchase, according to the survey are, in order: clarity of pricing, cost, ability to save content, download speed and the ability to try content before purchasing it.  36 percent of respondents said they would accept mobile advertising, while 49 percent said they would accept it in music and 28 percent in games.  Source

The bottom line: The level of acceptance of mobile advertising is encouraging.  However, the headline is arguably the most pertinent point: for over 60 percent of consumers, the mobile internet doesn’t exist and text messaging is the only data application of a mobile device.

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MOBILE ENTERTAINMENT REVENUES ARE EXPECTED TO GROW 28 PERCENT ON AVERAGE over the next year, according to the Mobile Entertainment Forum’s quarterly Business Confidence Index, up one percent from its last survey.

Content owners are much more optimistic about their revenues, with the anticipated average income up from $6.1 million to $17.1 million.Revenue in Western Europe is expected to be down 10 percent, North American revenues are predicted to be up 8

percent. 81 percent of respondents said they were as confident as last year about the future of their business. Source

The bottom line: This MEF study illustrates a bullish mobile entertainment market, unbowed by the economic climate.  It could be that, aside from the natural obligation towards market confidence, stakeholders believe the purchasing of relatively low cost content through microbilling will remain popular as consumers delay the big ticket items and seek alternative forms of entertainment.

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APATHY AND PRICE RULE IN NOT SELECTING THE iPHONE, say the latest findings from The NPD Group.  The study showed that the primary reasons consumers do not want to purchase an iPhone are “lack of interest” (55 percent) and “high price” (42 percent).

One in five mobile phone owners say they want to purchase an iPhone, but have not yet done so, and NPD’s report indicates data plan pricing and exclusivity remain key obstacles.  18 percent of consumers who have not purchased an iPhone cited the expense of the data plan, while 21 percent said they didn’t want to switch carriers.  Source

The bottom line: Reasons why Apple’s iPhone isn’t persuading everyone to leave their current carrier and device seem quite simple: they aren’t actually that bothered.  Given the previous data point, which revealed that 60 percent of people only use voice and text, this shouldn’t come as much of a surprise.

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iPHONE USERS TOP SMARTPHONE LOYALTY ratings, according to a new survey by Crowd Science.  It also says four out of ten BlackBerry and other smartphone users would switch to Apple’s iPhone as their next smartphone purchase.

On the other hand, only 14 percent of non-BlackBerry smartphone users would switch to a BlackBerry for their next purchase. Meanwhile, a huge 82 percent of iPhone users are loyal to the brand. Source

The bottom line: In contrast to the previous report, this one highlights the attitudes of smartphone users who, almost by definition of being smartphone users, care a little more.  The study is as much a study of consumer brand perception, and the iPhone steals the show as expected, but BlackBerry may take note of the small minority who would switch for their next purchase.

***

MORE THAN HALF HAVE MOBILE SECURITY FEARS, according to mobile security specialists, Cloudmark Inc.  The report says mobile spam now affects two in three consumers, more than 50 percent worry about mobile security, and only 7 percent believe the information they send over the phone is secure.

Cloudmark also says the concern about mobile security is detrimentally affecting the adoption of mobile services such as banking and e-commerce, with more than two thirds (69.3%) of consumers stating that they wouldn’t use value-added services such as mobile banking.

Two thirds of consumers (65.9%) have received unwanted or unsolicited messages (spam) on their mobile phone. While a majority of spam messages could simply be seen as a nuisance, 29% of respondents had received malicious spam such as phishing messages, fraud messages or messages containing inappropriate content.  Source

The bottom line: This report highlights the ongoing fears around the security of mobile devices, which will likely become more prevalent as smartphones become more pervasive, and spammers and malware authors pay more attention to mobile. However, we should also remember that the mobile security specialists who produced the report might have a small agenda of their own.

Is this a banner year for advertising?

No pun intended, but it’s not a laughing matter for Ari Paparo, group product manager for advertiser products for DoubleClick, a division of Google. As he pointed out during the Telecom Council of Silicon Valley event last week, the tools companies use to optimize ad dollars online–such as advertising metrics and planning and executing ad campaigns at scale and across multiple channels– don’t carry over into mobile. To make matters worse, frequency capping, the technique used to control the number of times a user sees a specific ad, is limited.

Paparo said he’s also not satisfied with creative capabilities in mobile advertising. In fact, he described the MMA’s guideline for an extra-large image banner ad as unexciting. It “won’t move dollars,” he said. And his company is still not seeing the type of ad server capability needed to streamline the publication, distribution, and data reporting of mobile advertising at large scale. But it’s not all grim. Paparo said that DoubleClick is encouraged by the availability and adoption of cookie-enabled high-end phones and the better creative delivered over these devices. And Paparo said that in the next 12-18 months, he expects publishing technologies and ad serving, as well as the ability offer even better and more-targeted ads, will all improve substantially.

While mobile advertising tools, technologies and all-important analytics have their shortcomings, there is mounting proof that mobile advertising can pay-off, particularly for the network operators who – like broadcast operators – stand to gain the most.

Kevin Kim, senior director of corporate development at SK Telecom –South Korea’s leading operator and a well-known innovator of data services– showed that Korea is, as he put it, a “test bed” of a viable and growing mobile ad market. Mobile advertising sales revenues in South Korea were $70 million in 2008, nearly double the revenues from 2007. And a breakdown of the $70 million in 2008 showed that mobile ads garnered a 5.9 percent share of the new media advertising market, not an insignificant figure. (To put all of this data in perspective, Kim reminded us that that South Korea’s advertising market is about 1/18 that of the US.)

SKT has offered mobile advertising since 2000 and has built a growing business because it understands advertiser requirements. In addition to offering attractive mobile data services, SKT has set up an in-house ad agency and advertising platform to help its partners develop and distribute ads. To round out the offer it also helps businesses offer mobile-commerce applications.

SMS- and MMS-related ads offered the greatest opportunity for SKT and its partners initially, but non-messaging ads are growing at a fast pace, increasing from only 16 percent  of ads in 2006, to 28 percent  in 2007 and reaching 37 percent in 2008. Kim said he expects non-messaging ads in the country as a whole to capture more than three-fourths of the market (76.3 percent) in 2010, when mobile advertising in South Korea is expected to exceed $200 million. These non-messaging ads will driven in part by flat-rate data plans, which 40 percent of customers will be using in 2010 (up from about 15 percent today). However, the popularity of SMS ads “will be short-lived,” he said. “It is not a long-term business model.”

Metrics may be a stumbling block for some, but Kim isn’t stymied by this. As an operator, SK Telecom can compile granular data on customer data usage, though Kim did acknowledge that the company has not been able to fully utilize this information and is therefore investing in creating tools to better facilitate this. But ultimately, he said, “the best metric is sales of products.”

To give this point extra emphasis, he offered a very positive and exciting look at mobile coupons – an area of marketing and advertising just beginning to take off outside Korea and Japan:  SKT’s numerous campaigns (conducted in partnership with major brands to attract customers to stores, often with a combination of banner ads, SMS ads, and short codes and other techniques and often integrated to point-of-sale terminals) are proving highly successful, he said, in some cases producing redemption rates above 96 percent.

Paid search was also a hot topic, and we were treated to some fascinating observations on mobile search and advertising usage from early-adopter markets such as Japan and Southeast Asia.

Paul Feng, Google senior product manager for mobile advertising, said Japan is one of Google’s best markets for mobile search. Comparing mobile and desktop search usage and patterns, Feng pointed out that Google is observing a bump in favor of mobile search in the morning during commute hours, an increase in mobile search versus a drop in desktop search during the lunch hour, and more mobile than desktop search in the evening hours.

Further, he said that Google Maps usage on mobile phones increases on weekends, while the use of that application on desktop systems goes down. While all this is favorable for mobile, he acknowledged that early morning mobile search was not as meaningful as his company had hoped. “Commuting is not as big a factor as we expected,” he said. His message for advertisers: Consider mobile and desktop search as complementary to one another and when targeting your ads, keep in mind daily traffic trends.

But could it be that morning mobile search is a significant trend that doesn’t play in favor of Google mobile search?

Phyllis Reuther, CTO of Mobile Content Networks (MCN)–a company that began by providing a platform for federated mobile search and has since extended its reach to providing a combination PPC content promotion and vertical paid search program – stated that MCN is observing a significantly higher jump (than Google) in search traffic in the early morning, around 7:00 to 9:00 a.m., in the company’s Japan and Southeast Asia markets (her data for the two markets is combined). She said the early morning jump on MCN is similar to the lunch-hour peak. Usage begins picking up again around 5:00 p.m.

Reuther attributed the better early morning traffic to MCN’s ability to present search results according to vertical channels, such as music, games and comics, direct from the content provider (as opposed to a link to the content delivered by other mobile search services). In her view, the early morning users are in the under-30 age group and highly motivated to find the latest ringtones and other products before beginning their daily work and school routines.

Another view on the best times of day to advertise came from Cirius Technologies, a Tokyo-based company whose AdLocal service (available in Tokyo) displays local ads to users based on their current location. A Tokyo case study showed some interesting differences in the number of ad impressions delivered during specific hours of the day. In short, ad impressions go up beginning at 7:00 a.m., at lunchtime, and beginning again at 4:00 p.m.  Cirius also delivers substantially more local ads during the weekends than on other days of the week.

For sure, these companies’ observations underscore the extent to which the type and personalization of service impact take-up of search and advertising services and the degree to which “know your customer” must really be understood.

While context and advertising are intertwined, communications – in the form of mobile email–also offers an excellent vehicle for delivering a marketing message.

Funambol, a company that offers a cross-platform, ad-funded white-label push email solution and synchronization technology for mainstream mobile phones, used the Telecom Council event to release findings from a recent survey of 600 users.  (The company began offering its ad-funded email services in October to Nokia 60 willing handset users. The service offers email micro-banner ads supplied by one of its partners, Smaato.)

Hal Steger, vice president of marketing at Funambol, said the company surveyed users after the first month of service. It found that users viewed an average of about 500 mobile ads each, clicking on about 1.5 percent of those ads. The company calculates that on the basis of CPM and CPC, the service generated about $10 per user per month.

Most were generally happy with the service, he said. About two-thirds (63 percent) recalled seeing the micro banner ads. Nearly three-quarters (74 percent) said the adds did not interfere with their ability to access email and 85 percent said that ads did not affect usability of the email client. About 21 percent said they had “clicked” on ads to visit mobile sites. And 84 percent said they would recommend the service to others.

Funambol users also said they’d be willing to pay about $6/month, inclusive of data fees, for an ad-funded mobile email service in order to help subsidize the cost of mobile email. Steger believes the service is ideal for mobile phone customers who want the convenience of push-based email but who may not be able to afford the types of devices or data plans associated with the BlackBerry and similar devices.

***

Peggy Anne adds: The market opportunity for ad-funded email was also the subject of a recent white paper I wrote on behalf of Funambol, aptly titled Free For All: The Untapped Opportunity For Mass Market Mobile Email. In it I present some intriguing evidence that an ad-funded or ad-subsidized go-to-market model is the only approach that will drive service adoption among cost-conscious mass market users. Put simply, an ad-funded business model is the only approach that gives people the service they want at minimal or no cost, while allowing mobile operators and service providers to generate significant revenue. You can download the white paper or listen in to the podcast Hal Steger recorded with me here.

Why the focus on Blyk? For one, it’s a perfect fit with my passion to analyze all things mobile at the intersection of content and context. Blyk has honed its customer profiling to send its users (between the ages of 16 and 24 – the toughest demographic there is) only those advertising messages that they (the users) deem relevant and valuable. Blyk understands the requirement to conduct its business at these crossroads (where content and context meet) and that is rare. It merits a closer look, and I recently attended an analyst roundtable hosted by Blyk executives to find out more.

Listen to the podcast here.

Before I list some of the podcast highlights, allow me to focus on one presentation slide that stood out during the roundtable – one I believe speaks volumes about the brand power Blyk has built over just one year. (No wonder esteemed colleagues such as Emeka Obiodu at Ovum speculate on whether a mobile operator might not just buy up Blyk to pull ahead in mobile advertising.)

At first glance, the slide documents that Blyk has the highest “net advocacy score” among mobile networks. (Translated: 40 percent of those polled would recommend Blyk.) In my view, the real story is the company Blyk now keeps. It trails the likes of YouTube and Facebook – and has pulled ahead of MSN, MySpace and Bebo.

My take: It may not have been Blyk’s strategy to be in the same league as social networks and Internet giants – but Blyk has made the grade.

And that without spending “a single pound on marketing.” Leif tells me Blyk has become a word-of-mouth brand with strong appeal among members of a choice demographic of trendsetters, early-adopters and lead users he calls “The Recommenders.” True to the name, these young people try new things and pass them around to their friends. (Little wonder why friend-tells-a-friend referrals are how 6 out of 10 Blyk users learned about the offer and joined up.)

Can Blyk cash in on this phenomenon to enhance its appeal to brands as a provider of mobile advertising (more correctly mobile social advertising) content to youth?

I put the question to Leif during the podcast. Blyk isn’t pursuing a wider strategy around providing content and enabling mobile social networking – but it could. For now, however, research and focus groups confirm his views that users can and will get content and services from other sources and other kinds of channels. “The evolution of mobile advertising will not go to [in the direction of] more content. It’s about dialogue …it’s not about [adopting] online business models or anything like that.”

During the roundtable, I learned that some companies have approached Blyk – a numbers-run company that takes customer analytics seriously – with a strong interest in purchasing a white-label solution that would get them up to speed and pave the way for them to engage users, collect and collate data, and so effectively advertise to empowered consumers. Will Blyk do it? There are discussions but the company will stick to its knitting – at least for now.

Other podcast highlights:

ADVERTISING & ENGAGEMENT: Combining the two is a core value at Blyk and a key competitive advantage that has allowed Blyk to chalk up some impressive stats, including a 25 percent response rate among Blyk users to mobile advertising campaigns. In fact, the campaign by Penguin to introduce the book Slam by author Nick Hornby resulted in a 67 percent response rate. Over half (51 percent) of users downloaded an audio clip (a preview of the opening chapters) to their mobile phone. Mobile advertising is in need of a re-think (as Jonathan MacDonald is quite quick to point out). Leif agrees and sees some encouraging progress in this direction. “The industry is starting to realize that mobile advertising equates to engaging young people. It’s a communication tool.”

MESSAGING & MESSAGES: Blyk messaging traffic is fairly evenly split between SMS and MMS. Interactive campaigns generally consist of 2 SMS text messages and one MMS. The first text message asks the user if they want to know about a specific brand or offer; the second continues the conversation; and the MMS comes as a follow-up. It’s more natural for someone in the 16-24 year-old demographic to receive and respond to an SMS as opposed to clicking through to a WAP link. (I learned during the roundtable that even if the user says “no” to the first SMS, indicating they are not interested, they will get a message back acknowledging that choice and asking them if they would be interested in something else. This advertising is a conversation.)

Will other forms of advertising, such as display and search advertising, be the “next big thing” in mobile advertising? Not if it’s a conversation. “People don’t want to be advertised to. They want an experience,” as Leif put it. “I think if I take the research …there was a lot of discussion about what would be the driving pattern in mobile advertising. With the [advent of] display advertising, it will be search advertising. [However,] the latest trend reports I have seen … talk about the lion’s share of all investments already now [and] moving forward is based on message advertising. This is for the simple reason that it’s the most common [communication] pattern and the way people use their phones.”

NO-BRAINER CAMPAIGNS: During the roundtable, Blyk asked the big question: Why has mobile advertising not been happening, and why is it happening now with Blyk? Clearly, the emphasis on engagement is part of the answer. But Blyk also has ambitious plans underway to make mobile advertising campaigns (planning, execution and measurement) a no-brainer for brands. Leif couldn’t disclose details, but it’s clear Blyk want to make this dead simple. A welcome change from the bureaucracy brands typically face when they put in a call to a mobile operator.

(Indeed, many advertisers with significant budgets have told me they threw in the towel after making dozens of calls around mobile operators and their ad partners. Even Shaun Gregory, Blyk Managing Director, UK, revealed his own experiment -posing as a brand with a GBP25,000 mobile advertising budget – ended up with him talking to “no less than 27 touch points” at which point he gave up.)

As Leif put it: “We have been working with a lot of big media agencies, and we have developed booking and planning tools that they can use. We also have a couple of frame agreements now in place with the biggest media companies in the U.K.”

CUSTOMER DATA & MORE: These are Blyk’s crown jewels. Users freely share their preferences (filling out customer profiles to qualify for the service in the first place) and freely share their opinions with Blyk on what they think is hot – and not. Case in point is this user response to the question: Are you proud to be British? ^Y/N

“Being British is about drivin’ in a german car 2 an Irish pub 4 a Belgian beer, then on way 2 ya home, grabbin’ an Indian curry or a Turkish kebab, 2 sit on a Swedish sofa and watch USA shows on a Japanese TV. And most of all being suspicious of anything Foreign. Oh and.. Only in Britain .. Can u get a pizza 2 ya home faster than ambulance. Only in Britain do banks leave both doors open and chain pens 2 the counter. Also Supermarkets make sick people walk to the back of the shop 4 prescriptions whilst healthy people get their fags at front of shop. We might be british but by hell we’re funny!”

Read between the lines and it’s clear that Blyk is doing more than delivering mobile advertising and recording the response. It has become a brand users trust with their ideas, feelings and personal opinions. As Leif pointed out: “People are opting in [and] we have a lot of insight into [youth] trends.” This unique position – between the brands and the consumers – is money in the bank, so no wonder Blyk is “accelerating” the development of this “inside piece” of the mobile advertising equation. Knowing why users think a campaign is off the mark is as important as understanding why it is a success. “There are many brands that – before they run a campaign – want to test the waters and know ‘do I have the right value proposition, do I have the right messages.’ It can even be that advertisers want to know what TV shows young people are watching.”

My take: Companies will no doubt try to copy the Blyk model (in fact, MSG has reported on a similar ad-funded scheme here). But it’ll take more than free services to convince consumers to offer frequent and honest feedback to ad campaigns.

Remember Blyk isn’t only delivering mobile advertising. The combination of analytics systems and solutions (supplied by Xtract, a pioneer in social advertising intelligence whose claim to fame is its ability to tap into social interactions, behavior data and other dataflow to create dynamic real-time customer profiles) and Blyk’s own conviction that advertising is and must remain a two-way conversation position at the center of the exchange and allow it to keep its finger on the pulse of users long after the campaign is over. And that’s a powerful place to be.

More in Part 2 of this podcast series – so check back!