Mobile advertising is getting more mainstream.
I am not talking about unwanted SMS messages. I’m referring to the embedded advertisements that are found on many mobile applications on today’s smartphones.
For example, on my Android phones, I use something called Advanced Task Killer. The free version of this application displays ad banners at the bottom of the screen. The developer of the application gets revenue from the advertising to offset his development costs and I, the user, get the application for free.
Unfortunately, though, the ads come with a cost: bandwidth. The ad banners have to be sent to your smartphone somehow and mostly likely over the Internet. Although the ads are small, they still consume some amount of bandwidth.
We have seen this year that AT&T’s reputation has taken a bashing thanks to iPhone users overloading its data network. As result, AT&T has moved towards limited data plans. Verizon is rumored to be considering a similar move. Users will then bear the cost of any data consumption over and above their “quota”.
So while those tiny mobile ads appear to be innocuous, they result in hidden costs:
- Infrastructure investment costs as operators try to build up their network to deal with bandwidth demands
- Reputation costs (see this Wired article)
- Potential data overage costs to the user
What may happen, though, is that before the impact of mobile ads get too big, mobile operators will start demanding their share of the advertising pie.
This is where the business model may get interesting: rather than you paying for your smartphone via monthly subscription fees and a 2-year contract, perhaps the ads on the phone can pay for the phone instead.