Ad-subsidized mobile video: Where is it?

April 21, 2009 — 2:35pm ET | By Mike Dano
Related Stories

For close to a decade, the wireless industry has hyped itself as the next great medium for advertising. All the elements are there for killer ad campaigns: location information, precise monitoring and-perhaps most importantly-direct access to consumers' most personal device.

So why is mobile advertising still in its infancy?

The question is especially troubling when it's applied to mobile video and mobile TV. After all, primetime TV ads generate millions in advertising dollars, and advertisers have long subsidized major TV networks including NBC, CBS, ABC and Fox. And, despite the rise of paid-for cable TV, there are still millions of Americans who get free (meaning, ad-subsidized) TV through over-the-air broadcasts from these networks.

Will the same ever be true for mobile?

First, let's look at some facts about the mobile video market:

• According to comScore, There are mobile than 10 million active mobile video consumers in the United States.
• There are a variety of mobile video offerings in the market. Some cost upwards of $30 per month, while others are free.
• There are a variety of types of mobile video. Some videos are available on demand, some are broadcast to handsets, some travel through carriers' networks and some arrive via dedicated mobile TV networks.
• Marketers are currently advertising over mobile video, but it seems they aren't spending much at all.

So where is the market heading? We've collected the leading players in the mobile video and TV market to talk about the state of the industry, and where they see it going. Specifically, we asked them whether advertising can subsidize the cost of such offerings, thereby making it free to end users-and if so, when?

Ray DeRenzo, chief marketing officer of MobiTV

MobiTV has been active in the mobile video market since before the introduction of 3G networks. The company powers the TV services of a number of players, including Sprint Nextel, and offers content from the likes of Showtime, CNBC, ESPN and others. The company recently announced it passed the six-million-subscriber mark. The company offers a MobiTV-branded service for $10 per month.

Does MobiTV get any revenues from advertisers? "It certainly is a minority portion of the revenues," DeRenzo said, explaining that "less than 10%" of MobiTV's revenues currently come from advertising.

Will that percentage change? Not necessarily, DeRenzo said, since the company hopes to grow both its subscription and advertising plays. DeRenzo said MobiTV expects to use advertising "to compliment that (paid-for) product," adding that "our business model isn't about us becoming a mobile ad company."

That said, DeRenzo said MobiTV has conducted a number of mobile-specific ad campaigns for the likes of Charles Schwab and BMW. Such campaigns have included a "click to call" function that makes use of the unique attributes of the mobile marketing channel.

Will MobiTV ever offer free video services? Surprisingly, the answer is yes. DeRenzo said MobiTV expects to offer a free service "perhaps in the next 12 to 18 months."

DeRenzo said the vendor plans to offer a free tier of service, and then offer additional content at a premium, paid-for tier. He said this strategy won't rely on ad-subsidized content specifically, but instead will be a way to expand MobiTV's subscriber base by enticing customers with a free service in order to potentially lure them into a premium, paid-for service.

"We find mobile television is a very experiential service," DeRenzo said, explaining that a free tier would act as a "vehicle to create awareness" and possibly score more paying customers.

Thus, MobiTV hopes to straddle the best of both worlds by scoring ad revenues with a free service while trumpeting a premium offering-a strategy that essentially mirrors the broadcast versus cable TV market.