Big New Markets, Such as Mobile Advertising, are Tough to Crack

Big new markets do not automatically translate into big profits for ecosystem participants in those new markets. That’s just one of the problems application and service providers face in new businesses such as mobile advertising, which just about any observer would say represents a huge growth opportunity.

Publishers have seen what happened to display advertising on the web: As more and more ad space was controlled by auction-based marketplaces, the excess supply drove down prices. So it has become hard for publishers to make profits selling web ads.

It might be reasonable to suggest that large publishers likewise will not want to subject their inventory to auction mechanisms, and will try to sell direct, a method that can maintain higher profit margins.

One might argue that will leave the mobile advertising networks with only the cheapest, least-demanded inventory available. At least so far, there is some evidence that mobile ad networks are not having an especially easy time.

In the first quarter of 2012, Velti had revenues of $51.8 million bur a loss of $8.8 million.
Millennial Media had revenue of $32.9 million and a loss of $5.3 million.

Augme had revenue of $5 million and a loss of $7.5 million.  Hipcricket, now owned by Augme, had revenue of $3.4 million and had a loss of $5 million.

Only Opera, which makes most of its money from browser-related ads, had revenue of $47 million and a profit of $11.4 million. Keep in mind, though, that Opera makes $7 million in mobile advertising.

Similarly, you might argue that telcos have had very mixed success with their efforts to create mobile app stores and important, widely-used over the top apps, as big as “apps” have become.
Most really successful apps generally are created by third parties these days. But that doesn’t mean all telcos will stop trying to move up the value chain.

Telefónica Digital is perhaps the best example of a tier-one global telco trying very hard to create important new apps, something Telefónica hinted at when it acquired Jajah.

Telefónica Digital  already has launched a VoIP platform called “TuMe,” constructed out of the JahJah acquisition, which provides free calls and messaging between members. Tu Me has no direct revenue model, at the moment, but is envisioned as a possibly important out of market growth platform.

“TuGo” is coming next. ,TuGo users will be able to move their mobile number into the cloud, using a service that routes incoming calls to whatever device they happen to be using as well as supporting outgoing calls from that device to any phone, but billed to the customer’s own account.

TuGo redefines the customer: they are no longer subscribing to a mobile telephone service, they're subscribing to a phone number which will drift between mobile and fixed networks as best suits them. In coming iterations of the service, Telefónica envisions the abilty to create entirely new 
personalities and functions for any smart phone using HTML5 capabilities.




No matter, the search for new business models and revenue streams will continue as an urgent priority, as voice revenues are declining.