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Smaato Shows How Mobile and Ad Industry Synergies Can Accelerate MNOs’ Foray into Mobile Advertising

Clock 3 August 2015
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In recent years, mobile advertising saw its growing popularity attracting cross-industry players, including Mobile Network Operators(MNOs), as revenues in this segment continue to rise and mobile content and mediums of communications over mobile channels continue to proliferate. MNOs for example, with subscribers running in tens of millions, and with real-time customer information and insights in their hands, have a natural fit for the market, to act as the important middle-man, or the vital conduit between advertisers, publishers and the masses. 

Albeit the enthusiasm on the part of MNOs and some of their early moves in mobile advertising, the pace at which MNOs are tapping into the vast opportunities in this area has been constrained to a considerable extent by factors such as lack of experience, and the capabilities, especially technological platforms, necessary to translate these opportunities into lucrative revenue streams. For this reason, real models for MNOs’ participation in mobile advertising and major investment outlay in this area have yet to take shape in the telco space.

The scenario however, may be about to change. Early last quarter, Indosat, Indonesia’s second largest MNO, unveiled the IMX (Indonesia Ad Exchange) powered by Smaato Exchange (SMX), marking one of the first deployments of its scale in the telco market.  Following the announcement, Tara Neal and Prushothma Rao of The Fast Mode reached out to Smaato, the company behind the SMX, to discuss on MNOs’ foray into the US$100 billion advertising industry and how Smaato’s solution will help MNOs to make faster inroads into the segment.  

Smaato SPX: A Unified Platform

Jay Hinman,

VP Marketing, Smaato

In introducing the company, Smato’s VP of Marketing, Jay Hinman said that Smaato is a leading independent global mobile real-time bidding (RTB) ad exchange and supply side platform (SSP) that currently has more than 80,000 mobile publishers using its platform to monetize their mobile inventory around the world. According to Jay, the Smaato Exchange (SMX) is globally connected to more than 390 demand partners and the company currently delivers 7.5 billion ad impressions every day, including campaigns from 91 of the top 100 Ad Age brands.

Jay shared a long list of big names using Smaato's SMX platform. On the publishers end, major companies include Microsoft, Pinger, Blackberry, AccuWeather, Match.com, Craiglist, Gameloft, The Times of India, Grindr, Wikia, Tunein and Slidejoy. On the demand side that comprises digital service providers, ad networks, advertisers and ad agencies, leading names include Citibank, E-bay, Toyota, Carat, Havas, Vivaki, Expedia, RedBull, InMobi, Appnexus, Advertising.com, Turn, Dstillery and ADX.

Mobile Advertising and the ARPU Perspective

Ragnar Kruse,

CEO and co-founder, Smaato

Moving on to the topic on how MNOs are faring in the world of mobile advertising, Ragnar Kruse, Smaato’s CEO and co-founder, recounted some early moves by telcos in this space, citing Verizon’s acquisition of AoL, Telefonica’s launch of its mobile ad exchange Axonics powered by the Mobclix technology it acquired from Velti and Singtel’s acquisition of Amobee, a mobile advertising technology company. However, apart from these technology buyouts, Ragnar said that the majority of MNOs have yet to roll out initiatives to develop revenue sources from mobile advertising.

Saying so, Ragnar shared recent developments elsewhere on the web which may create renewed interest in mobile advertising among MNOs. Ragnar was referring to Facebook’s recent announcement of its ‘ARPU’ figures for the second quarter of this year, which saw the social media giant posting an annual ARPU equivalent of US$10-12. Ragnar drew a parallel between the ARPU in the apps market and mobile industry’s own ARPU measurement which looks at the average revenue made per user based on combined spending on voice, SMS and data.

As ARPU represents a user’s average spending on an app or a subscription, and if Facebook alone via its mobile advertising and in-app purchases can churn out an ARPU of 80 cents per month, MNOs, making an average ARPU of US$15 monthly can start looking at mobile advertisement as a separate ARPU add-on, that if pushed with the right approaches, can result in EVERY existing subscriber (totals which go up to hundreds of millions) contributing in cents (and perhaps dollars) each to make up an entirely new, yet fat, revenue stream for MNOs.

A Crowded Market?

The mobile advertising business is really a ‘match-making’ business, where advertisers, ie those with goods and services that need advertising are brought together with the inventory owners, ie those with ad spaces, for example, online news portals, magazine publishers, app publishers or digital signage providers. Huge ad exchanges, such as Smaato, leverage ad technologies to match thousands of advertisers with thousands of publishers on a daily basis via their online platforms, allowing both parties to transact in real-time, transparently and efficiently.

Life of An Impression - At 200 milliseconds

When it comes to MNOs entering the mobile advertising space, the question often asked is how, as newcomers to the segment, can MNOs carve a niche for themselves in a market that is already dominated by expert ad exchanges that have over the years grown to perfect their ad technologies, developed proven business models and acquired huge advertiser and publisher base across a multitude of industries. To this, Ragnar said that while MNOs can start developing their own expertise in the area, a more accelerated and effective way to onboard themselves into the fast growing mobile advertising space is to leverage the synergies that abound in the merger of existing expertise and the unique value MNOs bring to the equation.

Towards this end, MNOs, via their widespread local presence and reputation are able to leverage the ad technology provided by incumbents such as Smaato, growing their own local publisher base while at the same time, benefitting from Smaato’s existing advertiser-base that comes from all over the world. Indosat’s IMX for example, uses the advertiser feed from Smaato’s ad exchange and combines this, via Smaato’s ad technology, with its own feed which comes from local ad networks, local advertising partners and also from direct sales, creating the biggest pool of ads as well as inventory for the local market. For Smaato, the arrangement sees its publisher inventory becoming further enriched with local publisher ecosystem while its global advertisers will now have a ready access to more niche and targeted local publishers.

Smaato Publisher Portal: Advanced Publisher Self Serve Controls

The Way Subscribers Want it – Non-Intrusive, Contextual and Timely

With customer experience becoming MNOs’ top priority amid stiff competition within the telecom industry, MNOs are wary of how mobile ads, when intrusive, can adversely impact subscribers' experience. It is important, says Ragnar, that for this reason, MNOs adopt methods which allow them to deliver ad messages contextually, timely and without impinging on user experience.

Ads delivered via publisher inventory, as how Smaato’s ad delivery works, ensures that subscribers are in control of these ads, where they only see these ads upon visiting pages where the inventory is allocated. This differs from intrusive ads which often involve traffic interception, where ads or messages are injected before loading a page, or overlaid on a page and in some cases, users redirected completely to the advertiser’s website.

Contextual – MNOs’ Real Advantage

Smaato’s ad exchange solution, explained Ragnar, goes beyond subscriber experience to providing highly contextual ads that are delivered based of a rich set of targeting parameters. For MNOs, this is where their unique value proposition is centered. The huge subscriber database that resides in their business support systems for example, provides various inputs that make ad targeting highly effective. Delivery of contextual ads hinges on how much information the delivering platform has on both ends, the ad and the inventory. Impressions are served based on the filtering of the viewer’s profile and preferences, as well as the publisher’s content, together with the categorization and tagging of each advert that is served. MNOs sit on the wealth of information that can be used, within regulated limits, to serve subscribers with the most relevant ads, improving their experience while maximising the returns from advertisers’ ad spend.

Ad exchanges that provide richer targeting parameters will hence benefit advertisers and publishers alike, for example, ad targeting based on device types and connection allows advertisers to ‘send’ adverts to only customers using a particular type of device or subscribed to a particular service provider.  This level of granularity helps MNOs target their own subscribers with advertisements or offers that are aligned to MNOs’ own brand and affiliations, hence paving way for better engagement and relationship management.

Do I Pay Data Charges for Video Ads?

Ragnar touched on a particularly interesting question that most MNOs and subscribers alike wonder when it comes to mobile ads, specifically rich video ads which are known to consume a fair amount of bandwidth, and hence the user's monthly mobile data allocation. Who pays for the data consumed on such ads?

Current targeting technology has matured to the extent that ads are not only matched to user profiles, application types and device specifications, they are also matched to network types and conditions. This is driven partly by the focus on subscriber experience, added Ragnar, where advertisers will not want their ads to buffer or stall and consequently, impact user’s experience. This sees most ad technologies adhering to the industry's best practice of reserving lighter ads to be served on cellular connectivity, while richer ads appear when users are on Wi-Fi, when they have sufficient bandwidth and when such ads will not be wiping out a chunk of the users' monthly quota. This practice, added Ragnar, somewhat mirrors consumers' general viewing preference, citing the fact that for 50%-70% of the time, content is consumed on smartphones when these devices are in Wi-Fi coverage areas such as offices, homes or cafes and food outlets.  

Fraud and Why Smaato Blocks 25% of its Publishers

When it comes to addressing fraudulent practices in mobile advertising, it is imperative, said Ragnar, that an ad exchange maintains its reputation by weeding out publishers as well as advertisers who fail to comply with the required best practices. To date, Smaato has blocked 25% of publishers due to click frauds, artificial impressions, artificial clicks and stuffed ads as well as other malpractices such as short refresh rates deployed to earn more impressions.

On the advertisers end, similar practices include fraudulent, inappropriate, non brand-safe, non-transparent and non-viewable ads being injected into the system, elaborated Ragnar, saying that it is critical that ad exchanges maintain the highest level of quality on both the publisher and advertiser end for long-term business sustainability.

The Power of the App Market

Serving 7.5 billion ads a day, Smaato has built an impressive ad exchange technology over the years. Ragnar says that given the shift towards consumption of content on mobile devices specifically on mobile apps, revenues from mobile advertising will be surpassing revenues from other online advertising by next year. This is attributable primarily to the rise of the app culture, where more and more people are communicating, transacting and running their daily activities leveraging thousands of apps in the market place today. Ad-sponsored apps are generating millions of dollars from advertisers and the crowds they pool, with more and more users becoming accustomed to viewing and engaging in ads while they use them for free.  

Infact, apps are becoming such perfect conduits for advertising on mobile for the information they provide. Apps such as Facebook for example, leverage a rich user database derived from user profile information ( for example, timelines, content preferences, likes, friends), enabling advertisers to serve highly contextual ads that match a user’s preferences closely, and which enable both advertisers and app publishers to achieve their monetization targets.

Nailing the US$69 Billion Opportunity

For Smaato, working with MNOs paves way for yet another exciting endeavour, enabling them to bring their 10-year expertise, business acumen and a tested and proven platform to the telecom industry, merging technology leadership and MNO’s extensive reach to deliver the best service to all parties. At the same time, owing to its long and deep-rooted presence in the industry, Smaato is able to deliver some of the best market insights for MNOs and partners it supports, leveraging the massive market base it has acquired over the years. 

All said and done, the US$69 billion opportunity in mobile advertising, as per eMarketer's forecast, will continue to balloon over the years as more and more digital consumers bring their consumption decisions online, and MNOs can choose to walk past this opportunity or take a bolder step to make a stopover, assess the many means of making an entry to this market and gradually establish themselves as a player within an ecosystem that makes up one of the most lucrative sectors within the digital services space. 

Tara Neal is the Executive Editor of The Fast Mode. She covers stories on the Digital Telco's strategies and service innovations, and anchors the Internet-of-Things, M2M and M-Commerce verticals on the publication. Tara Neal holds a First Class Honours in BSc. Accounting & Finance from The London School of Economics, and is a CFA holder from the CFA Institute, United States. Tara has over 17 years of experience in technology and business strategy.

   

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