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Stuart Garfield
Friday, December 19, 2008
Looking ahead: Sector by sector surveys of the landscape ahead
2009 a breakout year for mobile ad firms?
By Efrain Viscarolasaga
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While many tech sectors struggled to the end of 2008, new mobile applications hit the airwaves almost weekly. As those mobile apps mature, their backbone — the advertising-based model — is also maturing.
While still in its earliest stages, and while industry insiders admit there are still challenges to monetizing mobile applications and content, 2009 could be the year the mobile ad model makes major strides toward becoming mainstream.
Mocospace, a mobile social network operated by Boston-based JNJ Mobile Inc., is one of the more successful local adopters of the mobile advertising model. JNJ Mobile co-founder and CEO Justin Siegel said the company expects to bring in “several million dollars” in revenue this year and expects continued growth in 2009. The company has reached those numbers by adopting a multiple ad network model that places ads from several different groups on its mobile pages, a method common in the online realm.
“This isn’t a novel approach on the online side, but relatively new on the mobile side,” said Siegel. “With more companies jumping into mobile advertising, I think you are going to see more of it next year.”
That could mean more success for not only application developers and mobile websites, but mobile ad network developers, such as Quattro Wireless Inc. of Waltham.
Analysts also remain positive on the mobile advertising industry. In a report from Gartner Inc. earlier this year, the analyst firm projected $2.7 billion in worldwide mobile advertising sales in 2008, and $12.8 billion by 2011, up from $1.7 billion in 2007.
Locally, investors have not been shy about making bets on the mobile advertising model. Several companies with an eye on mobile advertising have landed funding this year, including a $4 million round for JNJ Mobile; a $26 million round for mobile search and advertising platform maker JumpTap Inc.; a $5 million round for Needham-based Mobicious Inc., which makes online photo-sharing application SnapMyLife; and a $500,000 angel funding round to Wellesley-based ad platform developer Cielo Group Inc.
But if the mobile advertising model is to be successful, support must come from the advertisers themselves.
According to Siegel, Mocospace has done direct advertising deals with both KMart Corp. and Def Jam Music, as well as a number of other major brands, including Procter & Gamble, through its ad networks. Likewise, Cielo Group has announced deals with both Major League Baseball and Anheuser-Busch Companies Inc.
“We are seeing a lot of large brands run campaigns through mobile,” said Mocospace CEO Siegel. “I am sure their mobile budgets are much smaller than online, but they are coming back for return campaigns.”
Investors and executives alike recognize mobile advertising will eventually support a number of profitable companies but admit the industry still faces short-term challenges.
“‘Next year’ has been the year of mobile advertising for the past nine years,” said Carl Stjernfeldt, a general partner with Waltham-based venture capital firm Castile Ventures, which has invested in a number of companies in the mobile space, but none driven solely by advertising. “That being said, I think there is truly value there, but it is going to be really difficult to do right and will take a little longer than people had expected.”
One of the sticking points is the sheer number of click-throughs needed to generate significant revenue. Mocospace, for example, says it regularly gets more than a billion page views per month but is not yet profitable, according to Siegel.
That dynamic is keeping some companies out of the mobile ad business. Maynard-based RPM Communications Inc., operator of mobile social network Utterli, and Weston-based ProxPro Inc. have both chosen subscription models for their companies but have not ruled out the possibility of ad-based models in the future.
“In the long term, I think ad-based models are going to work,” said Julian Bourne, CEO of ProxPro. “But you are going to need an application that is driving a lot of activity from the user — 15 or 20 page views per day — which is quite a lot.”
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