With 35 million U.S. cell phone users, the mobile ad market is potentially huge. Market research firm EMarketer estimates it could grow to a $16 billion industry. That figure has certainly grabbed the attention of Internet search companies, which have made billions from online ads.
But mobile advertising is still a nascent business due to fragmentation in the market and the control the carriers assert over their networks. Despite the size of the potential gains of this new market, carriers are cautious about opening up their networks and becoming commoditized while companies such as Google exploit the opening.
“There’s tremendous fragmentation, which creates advertising barriers,” said Greg Sterling principal analyst with Sterling Market Intelligence. “Historically, there’s consumer behavior and then the advertisers come along.” Interactive advertising agencies take an experimental attitude toward the market, he added. Many agencies are still getting their head around Web advertising, he said.
Carrier Control
That might be because the opportunities are so limited. “The carriers are too busy trying to protect the money they are making now to look at the next way to make money,” Chad Stoller, head of mobile advertising at Organic, told Bloomberg. He added that carriers “want to control every aspect of the relationship between the consumer and the phone.”
Sterling agreed that “the structure of the industry has been largely responsible for the absence on advertising.” Carrier control, Google has argued to the FCC, inhibits innovation and consumers have suffered. While this argument was theoretical, the release of the iPhone underscored the extent of the inhibition. “The iPhone comes out and there’s great consumer demand for it,” Sterling said.
The carriers say they’re interested but need to move slowly. Ralph de la Vega of AT&T said the No. 1 carrier is concerned about the experience on less powerful phones. “We want to do this…