Network operators want a lucrative slice of the pay-per-click advertising pie, but are they too impatient?
AT the Café Royal hotel in London this month, pioneers of a fledgling industry gathered to discuss building a prosperous future.
The first Mobile Search & Discovery conference brought together mobile-phone and technology companies eager to repeat Google’s success. It is not hard to see the potential goldmine. Google has built a fast-growing and enormously valuable business by connecting Internet users to advertisers. One of the many attractions of pay-per-click advertising, or paid search, is its measurability.
But Google, Yahoo and Microsoft’s MSN are pitching their ads to an audience of “only” 1 billion personal-computer users. There are already more than 2 billion mobile-phone users in the world, and over the next few years far more will go online via the mobile Internet rather than the PC.
Mobile-phone companies, therefore, see an opportunity to create a hugely profitable new medium for advertising and e-commerce. The mobile firms have some advantages over Google and Yahoo in choosing which ads to serve up. They know where their customers are; what they spend; and have a billing relationship with them.
Hutchison Whampoa, the Hong Kong conglomerate that owns 3, is one of those hoping to sprinkle some Google-style magic dust over the valuations of its mobile- phone businesses. It hopes that advertising-revenue prospects will pump up the price for a 3 Italia flotation.
Unsurprisingly, Google was the star turn at the conference. Listening to the debate, there is clearly a philosophical divide between Google and mobile firms that seek to ape its success.
Google already has a mobile search engine that is accessible by more modern and higher-end handsets. However, it is not yet running the sponsored links that generate the money for its fixed-line website. David Thevenon, Google’s head of European wireless partnerships, said: “Let’s throw the product out there and see what works for users. It’s a little bit early to look for links on a mobile phone. We want to be sure what the user wants first. We want to be sure we have a great product, and then find a way to monetise.”
This is at odds with the hard-nosed commercial attitude of many in the mobile industry, perhaps best typified by Dan Olschwang, chief executive of JumpTap, offering an unbranded mobile search engine to mobile operators.
Olschwang’s approach could be described as “monetise it and they will come”. He believes the network operators need to focus now on making money from search, rather than leaving it to the fixed-line world of Google and Yahoo.
With stock-market valuations depressed, said Olschwang, “the mobile industry is at a crossroads”.
“The opportunity that the mobile industry faces today is to embrace search and monetise it to create an upside (future growth). If we don’t do it, we will end up as a ‘bit pipe’.” In other words, merely as a transport mechanism for bits of data.
He is sceptical of Google’s apparent selflessness. Google was after a bigger slice of an advertising pie worth billions — a pie that fixed- line telecoms companies had already surrendered. “They have no incentive to operate with the carriers. I don’t see Google sharing revenues with BT or Deutsche Telekom”.
The objection to this is the relative success of Google and the mobile industry in generating demand for new products and services over the past five years. While Google has scored a runaway success, mobile firms have struggled to make meaningful revenue from picture- messaging, location-based services and song downloads.
By Paul Durman
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