That killer mobile video ad, so gorgeous and popular, may actually be a data-driven profit killer according to a study released by Tellabs during Mobile World Congress. “Mobile operators can spend themselves into a hole well before users run out of hunger for capacity,” said Rob Pullen, chief executive officer and president of Tellabs.
“Our study shows that simply adding capacity or ‘dumb pipes’ is an unsustainable business. To avoid the ‘end of profit,’ operators must bring intelligence to their networks – it’s critical to carrier survival.” The study also sites higher network access costs as causing North American operators to be the most susceptible to mobile internet cost fluctuations.
What does this mean for marketers and brands? Brands may have to absorb higher costs for mobile advertising by 2013 and creative mobile advertising will have to show a vastly improved ROI in order to remain viewed as a viable option for marketers. Mobile carriers will be forced to either set-up an unpopular tiered-system for content, or face ever-dwindling revenues.
While video consumes almost half of mobile bandwidth, and is estimated to shoot to 66% in 2014, users rank it fourth in terms of importance in their willingness to allocate payment towards access under a subscription plan, per a study by Tekelec . Although the latter study was European-based, American users are historically even less willing than Europeans to shell-out for services that they previously enjoyed under a flat-rate system.
That means users will probably balk at paying extra for faster download times or enhanced video services on their mobile phones, even as mobile video usage rises. According to both studies, the answer for brands, marketers and mobile carriers is employing smart analytics that effectively targets users who are most likely to engage with sponsoring brands or purchase add-on services. “Adding intelligence to networks”, stated Dr. Vikram Saksena, CTO of Tellabs, will allow carriers to manage costs while developing new business models that “add revenue and improve business fundamentals.”
View the Tellabs study here