The advertising business model, the Web and the Mobile Web

Here is something I am thinking of – triggered by the latest issue of Fortune magazine

The question I am asking here is:

If the online advertising business model is expected to double in two years from $40 billion to $80 billion .. How can some of the revenue from the Web advertising extend to the Mobile domain?

On one hand,

as per fortune magazine

Ballmer et al. believe that online advertising is the business where its greatest potential revenue and profit growth lie. So far only about $40 billion of the world’s $500 billion in ad spending has moved online. But Ballmer expects the Internet portion to be $80 billion in just two years. While total worldwide spending on business technology is much bigger, around $1.6 trillion, it isn’t growing nearly so fast.

And more from the Guardian ..

Besieged US newspaper journalists face final deadline

In the first three months of this year, print advertising sales by American newspapers charted their biggest drop since records began in 1971. And it was the eighth quarterly drop in a row. Advertisers spent $8.43bn on newspaper ads in the first three months of 2008, a 14 per cent decline on the same period last year, according to the Newspaper Association of America. The appalling state of the US economy is largely to blame this time around, as property and recruitment ads – the newspaper industry’s bread and butter – are surplus to requirements in a downturn.

On the other hand,

the mobile data industry laments that the ad agencies don’t seem to be getting it when it comes to mobile advertising (What matters for mobile advertising)

However, there is a third perspective ..

I mentioned in a recent blog

iphone vs. Symbian vs. Android vs. Limo vs. Ovi : We cannot compare an ecosystem with an operating system

The opportunity in making Web services(this includes content accessed from RSS feeds, email, IM etc) usable on mobile is huge – technologically this is similar to mobile SAAS – but in business model terms – it needs the advertising business model to make it work – simply because there is no other revenue model that can work.

Why?

Because the information is available mostly for free on the Web(or we have services like email which are also free on the Web). It is not possible to charge a premium for this service just because it is ‘mobile’(A lesson which many in the mobile industry doggedly refuse to accept!). You see the same problems with companies that try to monetise mobile widgets. Instead, the service becomes free and ad funded.

And the question we have to ask ourselves is

If the online advertising business model is expected to double in two years from $40 billion to $80 billion .. How can some of the revenue from the Web advertising extend to the Mobile domain?

The answer, as I see it, is to take a unified view – of the Web and the Mobile Web together. And in this case, the Web is the driver(not mobile). (I once said that you should not think of Mobile Web 2.0 – rather you should think of Web Mobile 2.0 i.e. the Web is the stronger part. – that did NOT go well in an audience of telecoms execs :) )

However, if we look at the Web and the Mobile Web holistically, then it all makes a lot of sense

a) A unified view of the Web and the Mobile Web lends critical mass which the mobile lacks due to fragmentation

b) The services originating from the Web can be subsidised by advertising on mobile devices

c) The advertising is targeted / personalised within the context of the critical mass(this is important since I don’t believe that personalization on it’s own will work and critical mass is a pre-requisite to personalization )

So, to conclude

a) Advertising on the Web is expected to take off substantially over the next two years

b) By viewing the Web and the Mobile Web holistically – we could capture some of that new advertising revenue on to mobile devices

c) Specifically, services that are present on the Web can be accessed on mobile devices through subsidization by the ad model – this includes content accessed from RSS feeds, email, IM etc(and I think only the ad model will work for these because people will not pay on the mobile for content which is free on the web)

d) We can thus balance both critical mass and personalization

Thoughts?

Comments

  1. I’m currently not sure how mobile apps fit into all this. Will people accept ads in iPhone Applications? Will they click on them? Maybe a good way to monetize will be to advertise other iPhone apps within your popular and free app, just like on the facebook plattform.
    Moreover:
    Mobile is about here and now, right? If that’s the case then mobile apps are much better suited than mobile browser apps, because of performance, ui and device integration. Therefore I think that mobile productivity apps will be huge, because they carry a lot of here and now information.

  2. Engelbert Kerschbaummayr says:

    To make web applications mobile is definitely a real value add. Till now, I have no glue why users should pay extra money just because it’s mobile. The mobile device could bring additional information to make adds more powerfull.
    Possible result: applications providers could earn more money with mobile enabled applications.
    There is still a missing pice: mobile devices with “power”-browsers available on PC’s.

  3. Ajit Jaokar says:

    yes I think the ad model will work for apps as well. kind rgds Ajit

  4. Ajit Jaokar says:

    Hello Engelbert
    Re
    >> Possible result: applications providers could earn more money with mobile enabled applications.
    yes .. I see this scenario as well ie the mobile application is an extension of the Web. kind rgds Ajit

  5. Iphone and gPhone have raised my hope for mobile model otherwise i wasnt optimistic