Fox News announced Monday that it is partnering with Third Screen Media to help it inject advertising throughout its mobile properties. Initially, Third Screen Media will insert banner advertising on Fox News' mobile Web site. While no further plans have been announced, Fox News will likely add video advertising and other forms of advertising using Third Screen's technology at a later date.
"We are doing this now because our advertisers are asking for it," said Jeremy Steinberg, vice president of digital media sales and business development at Fox News Channel. "And with the way the mobile market has been growing, we think this will be a big business for us down the road."
Fox is joining other big media brands, such as ESPN, Weather.com, USA Today and The New York Times, that have all added advertising to their mobile Web sites, which are accessed directly through a mobile browser and not through a mobile operator's menu or "deck."
Even though cellular operators have, so far they've moved cautiously for fear of annoying customers and sparking defections to competitors. In the U.S., Sprint Nextel is the only major operator to have announced a major initiative. Verizon Wireless and AT&T have said they are testing advertising plans and technology, but haven't yet announced details.
Operators in Europe, and in particular the U.K., seem to be moving more quickly. Last week, 3, an operator in the U.K., said it will launch an ad-funded video content service, giving users who visit its Planet 3 portal free video clips including news, comedy, gossip, animations and film. At least three other operators in the U.K are also rumored to be gearing up to include advertising on their portals, including O2, T-Mobile and Virgin Mobile.
As an industry, mobile advertising is still in its infancy. Mobile advertising generated about $871 million in 2006, according to Informa Telcoms & Media. That compares with a worldwide advertising market across all mediums that was valued in the billions. But with nearly 3 billion cell phone users in the world, more than 200 million of whom are in the U.S., it's clear that mobile advertising represents a huge opportunity.
Recent studies are also showing that subscribers are willing to tolerate advertising if they are able to get something in return. Today roughly 75 percent of all mobile subscribers in the U.S. and Western Europe can access the mobile Internet from their mobile devices. And of those people with access, about one-third say they would watch advertising in exchange for free mobile content, according to a study called "Going Mobile" from the Online Publishers Association.
"What this says is there is a healthy foundation for a market in mobile advertising," said Pam Horan, president of OPA.
The huge potential of mobile advertising has created somewhat of a land rush, as everyone from marketers to big media companies to handset makers to Internet search companies to mobile operators hopes to get a piece of the action.
The result has been a growing and complicated ecosystem of advertising-solutions suppliers who all want to put ads onto tiny cell phone screens. Internet players Google and Yahoo have. And just last week, Nokia, the world's largest supplier of handsets, to help media publishers and advertisers streamline and manage their mobile advertising campaigns.
"It will be interesting to see how mobile operators react to this development," Eden Zoller, an analyst with Ovum, said in her blog. "Nokia is not looking to compete with them but instead wants to act as a service provider. However, some may be uncomfortable because Nokia wants to place itself at the center of a mobile advertising community that it controls in terms of provisioning and, presumably, revenue flows."
The problem is very simple. Today mobile operators, at least in the U.S. market, exert tight control over what content subscribers access, as well as how they get to it. But other players, such as Google, Nokia or even Fox News, would like to have more of a direct relationship with consumers.
"There is a lot of tension growing over who owns the customer," said Charles Golvin, an analyst with Forrester Research. "Is the carrier an impediment or a conduit? Or should content owners and handset makers have a direct relationship with customers? The realistic answer is, it has to be both."
In addition to controlling access to content, mobile operators own a billing relationship with customers, which provides a treasure trove of key demographic information that advertisers would love to use to target consumers. What's more, mobile operators are the only companies that have access to and a right to know the location of their subscribers, which could prove beneficial for selling local advertisements.
While many analysts agree that the carriers' walled gardens won't last forever, for now it's the reality of the market. And for mobile advertising to really be successful, advertisers and media companies need to work with operators to get ads on cell phone screens.
Steinberg of Fox News Channel said that his company is already in talks with its wireless partners about wrapping advertising around video clips delivered through the carrier menu or deck.
"Whether the content is accessed on deck or off deck doesn't matter so much to us as long as we are providing Fox News to users when and where they want it," he said. "So we will have to figure out a way to work with the carriers."