O2 Media In Targeted UK Mobile Advertising Push - The Return Of Walled Gardens?

First published via Gerson Lehrman Group 06.12.2009
For a long while operators have been considering how best to leverage their key assets – infrastructure and subscribers – so as to increase the rate of revenue generation. With the launch of their O2 More service, O2 are starting a wave of activity which will see operators attempt to take back the initiative and create value from mobile data services. But are we about to see a return to the kind of “walled gardens” that existed in the early days of the mobile internet and do we need to go there?


First Google (NASDAQ:GOOG) acquired AdMob, now 02 Media undertake a high profile launch of their “targeted advertising service” - 02 More - and early in 2010 Orange are set to launch their own targeted service using Blyk’s technology. All of this activity is giving voice to the fact that scale and targeting are what really matters in the mobile advertising business.

Are “walled gardens” set for a return?
But the 02 announcement highlights an issue that has yet to be addressed, who owns the customer? O2 are in effect putting a ring fence around their 20m subscribers and saying, “They are our customers, if your want to market to them then do it through us and abide by the controls that we are putting in place.” This has strong parallels to the “walled garden” approach that operator’s first took when they started offering mobile internet access. Subscribers could only access the internet through their operator’s portal and the operator controlled what content was available to them. It was not good for subscribers and did not work for the brands that had deep enough pockets to rent space on those portals in the first place.
If all operators take this approach advertisers will have to choose which networks they advertise on or run the same campaign across multiple operator networks. This is not really efficient and maybe just as they got bored with walled gardens, they will tire of having to deal with multiple operators in different ways in order to deliver the same message to an audience that is broader than one operator’s subscriber base.
Contrast this approach to that of setting up a short code service to support a promotion. Any subscriber from any network can respond. Respondents to some extent are opting in and declaring themselves interested in what is on offer. Subject to following the relevant rules, and good practice – Mobile Marketing Association, Institute of Direct Marketing and so on brands can continue their engagement with these new customers long after the initial campaign and the customers can opt-out whenever they want. Why do we need walled gardens?

Measurable personalised advertising, really?
A lot of information is required to deliver the level of personalisation that really matters to consumers. Operators have the handset type, location data, usage patterns and billing profiles when actually what is required includes leisure and lifestyle choices, brand preferences and social network affiliations. So will subscribers really take the time to access a dedicated website, give up this level of information and maintain it when they have already given it to the brands that they have affiliations with and who will continue to market to them directly in any case?
To get subscribers engaged for the longer term, the available advertising will need to be highly compelling and advertisers will want to measure it so that they can ensure its effectiveness. If they are offering discounts and money off deals are we going to see hundreds of thousands of subscribers waving their iPhones, Nokias and Samsungs at cashiers across the nation as they rush to redeem them? If not, how will advertisers know exactly what effect their campaigns are having? Retailers beware.

Better targeting or better revenue model?
At a time when brands, advertisers and their agencies are exploring the broader use of mobile – apps, internet, video, TV and even e-Books - to deliver value added targeted messages to their target audiences, messaging does not deliver the richness of content or level of interactivity that subscribers expect. It is an easy way for operators to increase data revenues which can be further increased by controlling the number of messages that each subscriber receives. Controlling the number of messages that are delivered to the subscribers under the guise of “spam prevention” in effect increases the rates that advertisers will have to pay in order to ensure that their messages are amongst the limited set that are permitted to be delivered. This removes one of the key benefits of mobile as a direct marketing channel, its’ relatively low cost compared to all other channels.