Mobile Marketing in the Middle East
Advertisers are continually seeking alternative and more effective means to reach and connect directly with their target audiences. Direct marketing techniques range from simple direct mail campaigns to more sophisticated relationship-based web promotions.
In the United States and Europe, total expenditure on direct marketing can be as much as 20 per cent of total advertising budgets. However, according to a recent Booz Allen Hamilton survey, direct marketing represents a mere two per cent of total advertising spend in the Middle East.
A key impediment to direct marketing in the region is the lack of reliable and efficient residential postal service delivery. In addition, the relatively low internet penetrations in many Middle Eastern countries are limiting advertisers' appetites for online advertising. In 2003, total internet advertising spend in the Middle East, excluding non-cash barter deals, did not exceed $6 million (Dh22 million).
However, the convergence of the telecom and media industries is leading to new opportunities in infotainment-related value-added services, including mobile marketing. This development could prove to be an effective way to invigorate the historically underdeveloped direct marketing industry in the region and open an attractive new option for advertisers.
The rise of the mobile value-added services industry is already evident from the proliferation of mobile ringtones and logos and the emergence of services such as SMS breaking news from Al Jazeera TV. A wide range of media, technology and telecom players are involved in contributing content to the value-added services value chain.
Service providers then deliver this content using specialised IT applications over mobile operator networks to consumers for display and manipulation on their mobile devices. "The current market for value-added services in the Middle East is estimated at around $350 million (Dh1.28 billion), divided among the companies operating in the sector according to a web of content fees and revenue sharing agreements," said Karim Sabbagh, partner and vice-president with the communications, media, and technology practice at Booz Allen Hamilton, based in the firm's Riyadh and Dubai offices.
"Half of the current market value is in the form of mobile personalisation services such as ringtones, logos, wallpapers, etc. Operators, media owners, and independent value-added services providers are already tapping into this market. As a result, future growth is expected to come from value-added services categories such as general entertainment, interactive media services, gaming, and information, bringing the total market to over $1.7 billion by 2010."
Gabriel Chahine, Principal with Booz Allen Hamilton and a member of the Global Communications, Media, and Technology group based in Dubai, said: "Bringing together the mobile value-added services industry with the classical direct marketing activities of customer database management, creative, and campaign services management instantly creates an altogether new industry for mobile marketing. Mobile marketing seems to be one of the most attractive options for advertisers."
The upside potential and unique nature of mobile marketing at the intersection of media, telecom, and advertising is attracting four types of players with varying business models.
Key advantage
1. Telecom Operators: They are attempting to leverage existing application and service provisioning to build direct marketing capabilities. The key advantage for operators lies in their existing mobile portals, billing relationships, large customer databases, and their position as the gatekeeper to customer access. However, operators are not advertising agencies and have no experience in designing and running campaigns.
Therefore, many have been content to focus on simple format, high volume consumer campaigns, such as TV voting or selling SMS in bulk to corporate clients. Notwithstanding the above, some operators have created new mobile marketing divisions such as O2 Interactive and Vodafone Target. Similarly, NTT DoCoMo created D2 Communications as a wireless advertising subsidiary to deliver advertising on i-Mode.
2. Advertising Agencies: They are extending their traditional media services offerings into the mobile marketing space. The key strategic objective is to complement traditional media campaigns with mobile marketing tools such as SMS in order to differentiate their offerings to existing clients and attract new brand relationships.
Most agencies, such as Carat Interactive and Ogilvy One, are partnering with content and application service providers to secure technology and delivery capabilities. Some new entrant players, such as 12Snap, aim to position themselves as new media agencies specialised in interactive mobile marketing.
They focus on mobile marketing creative services and partnering with application service providers such as Lucent and NeoMedia for mobile software and patented technologies, such as PaperClick an application to capture bar codes and ISDN product codes through a Nokia mobile camera and retrieve product information including the retail price in alternative outlets.
3. Operator Partner Companies: They are spin offs from mobile operators, created in order to prevent the momentum of the much larger core business from subduing the creativity and entrepreneurial spirit of their new mobile marketing ventures. Mindmatics, a mobile marketing market leader in Germany, has T-Venture (the venture capital arm of T-Mobile) as one of its main investors.
Mindmatics has built up extensive in-house marketing and creative services capabilities, as well as a wide range of mobile applications as part of its core portfolio. At the same time, a strategic alliance with T-Mobile allowed Mindmatics to co-develop a six-million-profile database in the UK along 100 different selection criteria.
The alliance also leverages T-Mobile's pan-European network connectivity, while maintaining enough independence for Mindmatics to work with all mobile operators in any given market.
Greenfield entrants
4. Independent Players: They are greenfield entrants offering specialised mobile marketing applications, content, and services including integrated creative and campaign management services. For example, Flytxt is developing multiple proprietary application platforms and offering business strategy, marketing, and technology consulting services.
Players such as 12Snap are more focused on creative services and aim to position themselves as new media agencies specialised in interactive mobile marketing. In the Middle East, players such as Spot Cell are starting to build their own consumer databases, develop creative services capabilities, and procure sophisticated marketing applications from international vendors.
These different players are gearing up to win future mobile marketing campaigns that are becoming increasingly sophisticated and integrated in nature. Rudimentary mobile marketing campaigns such as branded ringtones/logos and mass SMS for event marketing are unlikely to persist in the future.
More elaborate and integrated mobile marketing is already emerging in the form of mobile promotion coupons, branded multi-level games and CRM marketing that includes personalised information alerts (customer retention), loyalty schemes, and mobile community marketing. A good example is when Mobileway and Adreact created a campaign for Dunkin Donuts in Rome, Italy, which was designed to increase footfall in the Dunkin Donuts stores and raise awareness of the brand.
The lead was in the form of four billboards, two-week radio plugs, 1,500 leaflets dropped among students, and posters in all eight of the Rome outlets. Donut lovers were invited to enter a prize draw using SMS, receiving in return a money-off or free coffee voucher sent back to the consumer's handset for redemption in stores.
Further interaction was encouraged with options to text to obtain addresses of the franchise outlets, statistics regarding Dunkin Donuts, or employment information. Redemption of the SMS coupon in-store and purchase of a donut automatically entered users into a draw for a free Piaggio scooter
Ahmad Galal Esmail, associate with Booz Allen Hamilton based in the firm's Dubai office, commented that, "Key to successful mobile marketing is multimedia creative services, access to advanced technology, and elaborate permission-based customer databases. First-mover advantage is also likely to be a winning strategy for players needing to build capabilities, relationships, and market shares ahead of multiple new entrants in this exciting new market."
Recent forecasts based on actual revenues to date are projecting mobile marketing revenues in Western Europe to grow by 97 per cent annually, reaching $560 million in 2006. This tremendous growth is primarily driven by an estimated 71 per cent of direct marketers adopting SMS as a marketing media over the next two years.
Increased mobile phone ownership in the Middle East due to increased competition and falling prices coupled with the overall underdeveloped state of direct marketing in the Middle East underscores the potential of mobile marketing. In addition, current and potential heavy users of mobile marketing in Europe, such as consumer goods and automotive companies, are already well represented in the region with significant annual advertising budgets. As such, regional mobile marketing revenues are projected to grow by 52 per cent annually, reaching over $50 million by 2010.
Although a potential inhibitor of mobile marketing growth, SMS spamming unlike e-mail spam is unlikely to persist in the long term. Why? Because advertising SMS messages are usually charged a flat price fixed for each SMS sent, independent of its effectiveness.
Since spam SMS response rates tend to decrease over time as the novelty wears off and recipients become increasingly annoyed by the intrusive messages, the cost of responded advertising SMS messages increases significantly, making SMS spamming cost-ineffective in the long term.
Looking forward, mobile marketing could rejuvenate the vastly underdeveloped direct marketing industry in the Middle East. A sustainable business model for any mobile marketing service provider would have to rely on a mix of in-house and partner capabilities that mix elements from the advertising, media, and telecom industries. A handful of independent players are already starting to shape the market across the region, but many operators and agencies have been less engaged.
Overall, the potential size of the mobile marketing prize in the region is significant. However, Booz Allen argues that the market will only realise its full potential if players actively and cooperatively invest in developing the market and respect consumer privacy, instead of focusing on unsustainable short-term gains.
Booz Allen Hamilton is a global strategy and technology consulting firm.
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