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Straight Talk Media & Entertainment

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This week's Straight Talk is written by guest columnist Nick Thomas.

Ovum's Digital Media team is finalizing a new mobile advertising forecast, but one thing is already abundantly clear. Not only is mobile the fastest-growing area in advertising, but it is dominated at a global level by two companies in particular – Google and Facebook. As we know, a few years ago both these giants consciously chose to pivot their companies toward mobile, recognizing that consumers were increasingly making their mobile their primary device not just for communication, but for content.

When will we see major media companies make the transition toward a mobile-first strategy that is focused on mobile as the primary platform for engaging consumers?

For traditional media companies, this is a daunting prospect. Although mobile ad revenues are growing, they still represent a fraction of the revenues earned through traditional media. Therefore, even if consumers are turning to mobile en masse, until the revenues follow it would take a very bold CEO to pivot a media business at this stage.

But if mobile is starting to dominate media consumption (and our clients tell us this has accelerated dramatically in the last 12 months), how and when will ad revenues catch up? What needs to happen for mobile to fulfill its potential not just as a content distribution platform but as a revenue stream?

At Ovum, we will be addressing many aspects of this question through our upcoming research, but let's pick out some clear objectives for growing revenue from mobile media:

  • Use programmatic to increase the value of premium inventory. Incumbent players may complain that programmatic trading, through its association with remnant inventory, is driving down the value of digital ads. But real-time bidding technology is equally able to maximize the value of premium inventory, especially around video. Moreover, ad technology can also help advertisers target campaigns more effectively. Increasing the quality and value of mobile ad inventory (as well as the volume) is vital to growing overall revenues, and programmatic offers an efficient way to do this.
  • Ensure mobile-first is not mobile-only. The real value in digital advertising will come once there is an agreed and effective way of measuring how a consumer interacts with multiple digital touchpoints as part of a cross-platform offering. But the mobile device is ubiquitous; it is always on, is personal, and is generally the consumer's primary connected device. So while the TV industry, for example, struggles to add "other devices" to its panel-based measurement metrics, it surely makes sense to start tracking consumption across multiple devices by measuring mobile, and building from there.
  • Improve the mobile user experience. The rise of ad blocking is a cause for concern, but the sustainable answer lies in improving the user experience of mobile ads, which remains the primary driver of ad-blocking software. Many mobile ad executions appear to use formats and models that work on other platforms, but not on mobile. Banner ads are not effective and increase the user's load time. Video ads are too often hand-me-down campaigns that are far too long. That is before you get to all the horrible trackers that clog up mobile pages. Is a mobile ad the right content at the right time on the right platforms, and shown at the right frequency? Is it useful, relevant, and targeted? No? Then leave it out.
  • Create new distribution channels to maximize reach. One of the big trends this year has been the diminishing role of the hosted site or app, because more and more content is accessed via third-party platforms, including social networks and messaging apps. Where are your consumers and how can they be reached, and what are the ad models that will work here? Consider also the importance for certain premium content services (such as Netflix and Spotify) of partnering with access providers to ensure that their service gets the widest possible reach.
  • Monetization cannot be an afterthought. The predominant digital media business model has been to build a large, engaged audience, with a view to monetizing down the line (perhaps through a sale or in the hope that digital ad revenues will grow rapidly), but now even some of the most popular content services are struggling to generate meaningful revenues. The solution is multifaceted, but with one clear imperative: monetization is no longer an afterthought, it is the priority and must be embedded into the business model from day one.
  • Learn from adjacent sectors. In the Digital Media team, we try to identify best practice in monetizing the digital media experience, wherever it comes from. For example, mobile gaming services lead the way with in-app monetization; B2B publishers are doing smart things around adapting their product around the end user's day; telcos are actively implementing billing solutions to encourage consumer spend; and some Asian content services have effectively integrated m-commerce into their offerings.

Through the rest of 2016, the Digital Media team will be publishing further research, including reports, market trackers, and market forecasts, looking at these trends. We always welcome the chance to talk further to our clients about the challenges and opportunities they face as mobile continues its inexorable growth, so please feel free to contact us.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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