What's to Come

Ads That Subsidize Mobile

I recently was sent an article from MediaPost entitled Closing The Ad-Support Deal that talked about a fully ad-supported wireless service called Xero Mobile. That means that revenues for the company are not generated from the traditional subscriber fees, but from ads that are placed on the service.

This is probably a scary deal for the mobile carriers because it shatters their current model and could start a trend toward ad-supported mobile. Currently the major mobile carriers depend solely on revenue from subscriptions, additional services and downloads. But, as the article points out, in the mobile market which becomes much more than a way to communicate via phone calls, there will be some basic services that will be expected by the consumer - relatively free. To gain the kind of audiences that the mobile carriers need, they won't be able to sustain a model where they nickel & dime their customers for every minute, every application and every text message! So, they're going to have to move toward at least a partial ad-supported model.

In my discussions with some of the carriers, they are not there yet and really feel they can continue charging for airtime, applications, events and maybe even the connect time for ads. I don't see the consumer embracing this. Like the Internet, cable television and television before, they will understand the value ads bring to the mobile device and adopt a business model that takes this into account and creates winners on all sides. Consumers will accept ads to get more affordable pricing on mobile services, applications and equipment, advertisers will gain access to nearly 200 million potential buyers of their product and mobile carriers will create a strong and sustainable revenue flow that will allow them to stay profitable and continue to innovate.

As consumers and professionals in this or related areas, I'd like to hear your thoughts on this one.

-Andy

posted by Andy Huckaba @ 10:05 AM