Business Models in the Emerging Context of Mobile Advertising (PDF ...

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In connection with the advances in wireless technology, mobile advertising has been named as one of the most promising potential business areas.
FRONTIERS OF E-BUSINESS RESEARCH 2004

Business Models in the Emerging Context of Mobile Advertising Hanna Komulainen¹; Tuija Mainela²; Jaakko Sinisalo3; Jaana Tähtinen4; Pauliina Ulkuniemi5 ¹ M.Sc. (Econ. & Bus. Adm.), Researcher, University of Oulu, [email protected] ² D.Sc. (Econ. & Bus. Adm.), Assistant Professor, University of Oulu, [email protected] 3 M.Sc. (Econ. & Bus. Adm.), Assistant, University of Oulu, [email protected] 4 D.Sc. (Econ. & Bus. Adm.), Professor, University of Oulu, [email protected] 5 D.Sc. (Econ. & Bus. Adm.), Assistant Professor, University of Oulu, [email protected] Abstract In connection with the advances in wireless technology, mobile advertising has been named as one of the most promising potential business areas. Even though it offers revenuegenerating opportunities for a number of different actors, the opportunities have not been utilised or studied. The purpose of the paper is to explore what kind of business network could evolve around the novel mobile advertising services. Using a scenario planning method the study suggests four different scenarios for business models. The potential mobile advertising business models describe three essential elements, i.e. the service, the roles of the actors, and the value creating exchanges between the actors. The study also evaluates the four scenarios by discussing their potential to create revenue for all actors involved. Acknowledgements The financial support of the National Technology Agency of Finland is gratefully acknowledged. The authors wish to thank the organisations whose invaluable collaboration has made this work possible.

Introduction Advances in wireless technology have changed the business environment significantly. Mobile business has potential to grow and to be one of the most important industries in the world (Ling 2003). Dholakia and Dholakia (2004) even suggest that, based on high mobile phone adoption, many of the initial applications of m-commerce are likely to emerge in Europe and Asia. However, there is a shortage of research on the success of different mobile services or mobile business models. Therefore, examining the emerging businesses around new mobile services in Europe is extremely important and topical. Mobile advertising, i.e. advertising using mobile devices as communication vehicle, can be seen as one of the most important and promising applications of mobile services (Varshney & Vetter 2002). Mobile advertising offers potential revenue-generating opportunities for a number of different actors, but the industry is still rather fragmented (Durlacher 2001). In Finland, for example, a country where mobile phone penetration has long been very high, the only commercially available mobile advertising solution is based on SMS-ads, even though 590

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using MMS or WAP Push technology would offer advertisers and consumers much more value through the use of images, voice, videos etc. In spite of the potential, the revenue-generating opportunities in mobile advertising are yet to be utilised, and a successful business model is yet to be found. Success in the mobile business requires co-operation among various business actors, e.g. technology providers, device manufacturers, content providers, service developers etc. to provide value to end customers. Because a large number of actors have to coordinate and combine their activities and resources in order to develop the mobile advertising service, the emergence of a viable business model takes time. Therefore, this paper explores what kind of network business models could evolve around a novel mobile advertising service. The purpose of the paper is to suggest ways of organise mobile advertising business. This is done by suggesting four business model scenarios that describe the potential mobile advertising service, the potential roles of the network actors, and the potential value-creating exchanges between them. The roots for the four scenarios are drawn from a historical analysis of two diverging businesses: advertising and the software business. The two businesses were selected on the basis of the current service; it has features of both of them, since the service is based on software designed specifically to enable advertising to mobile phones. Therefore, the two businesses provide important insights on how a value-creating network in mobile advertising business could be organised. With the help of a scenario planning technique and a number of experts from the above-mentioned industries, the paper develops four network business models as ways of organising mobile advertising. The paper is organised as follows. Firstly, we discuss the business model concept and its use in existing research. Secondly, we describe the two businesses that are used as inspiration in the scenario building. Thirdly, we explain the procedure that was followed in the scenario building. As an outcome of the exercise, we propose four scenarios for organising mobile advertising business. Finally, we conclude the paper with discussion on the applicability of the models and with suggestions for future research.

What is a business model? The business model construct is useful in explaining an emerging empirical phenomenon such as mobile advertising that is not fully explained by conceptual frameworks already in existence (Amit & Zott 2001). The concept is therefore widely used in research on e-business (e.g. Timmers 1998, Amit & Zott 2001, Hedman & Kalling 2001) as well as in studies that focus on mobile or wireless business (e.g. Faber & Bouwman 2003, Kallio 2004). The literature concentrates on depicting how firms can utilise technological innovations, and a business model is often seen as a mode for generating revenues. In other words, it is stressed that the right business model or “the architecture of revenue” needs to be found if companies wish to create revenues from new technologies (Chesbrough & Rosenbloom 2002). A common feature in the existing mobile and e-business model studies (e.g. Afuah & Tucci 2001, Camponovo & Pigneur 2003, Plepys 2002, Sharma & Nakamura 2003) is a strong emphasis not only on revenue flows, but also on business actors and their roles. For example, Kallio (2004) identifies, based on existing research, a number of roles in wireless business 591

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from which we have adopted the following main roles: application provider, content provider, infrastructure provider, mobile network operator, mobile service provider and end user. In addition, the role of device manufacturer providing end users with physical wireless devices i.e. mobile phones and PDAs is recognised. However, since the role of the device manufacturer remains the same in all scenarios, we do not include it in the focal mobile advertising business network, treating it rather like an enabling actor that is needed in all the models. How then is a business model defined? According to Yunos et al. (2003), business model describes the strategy used to generate revenue by specifying markets, products, customers and the position of the business in the value networks. Picard (2000) suggests that business model involves the conception of how the business operates, its underlying foundations, and the exchange activities and financial flows upon which it can be successful. Timmers (1998) defines business model as “architecture for the product, service and information flows, including a description of the various business actors and their roles; a description of the potential benefits for the various business actors; and a description of the sources of revenues”. Thus, the above-mentioned studies on business models as well as the definitions share some core elements, which this study will also use when referring to a business model. The elements include the product/service, the business actors and their roles, and the valuecreating exchanges among the actors. In this case, the service is mobile advertising, but its description also includes the chosen technology that is used in delivering the m-ads to the mobile devices. The business actors and their roles refer to the various activities that have to be performed in order to create value in mobile advertising. The activities are also connected to the technology used, but on the other hand, some actors may perform more than one activity, thus reducing the number of actors in the network. From the viewpoint of this study the following business actors’ roles are considered most important. First, by application provider we refer to a software vendor developing the software system needed in mobile advertising. Second, an advertiser plays the role of content provider as it provides the content, i.e. mobile ads into the mobile advertising system. Third, an infrastructure provider provides the network infrastructure needed to run the services. Related to this, a mobile network operator rents the network from the infrastructure provider, thus providing access to the wireless network and enabling the sending the m-ads. Mobile service provider refers to the actor offering the mobile advertising service system to content providers. Finally, in this study an end user is the consumer receiving the mobile ads. The third element, value-creating exchanges, includes all economic exchanges, whether they are performed as discrete transactions or as long-term relationships (Komulainen et al. 2004). A description of the exchanges potentially taking place between the actors also provides a description of the economic and non-economic value that is being created in the exchanges. This study concentrates on describing the money flows, product/service flows and information flows. According to Amitt and Zott (2001) each business model is centred on a particular actor. This central actor in a way also defines the area of the business model, in other words what 592

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business the model describes. However, the way we use the concept of business model draws on network theory (see e.g. Håkansson & Snehota 1989), where one of the main premises is that no company can do business on its own; instead, it needs relationships to other actors. Therefore, in the present study we do not limit the business model to one core actor but instead explore the mobile advertising business model from a network perspective. Having described what is meant by a business model in this study, we move on to sketch the first lines in mobile advertising business model. This is done by looking for inspiration from the existing advertising and software businesses.

Searching for mobile advertising business models – inspiration from historical analogies Mobile advertising service has its roots both in the advertising business and in the software business. Thus, we will next look at the two businesses and the way they are currently being conducted. Looking at the more traditional modes of advertising business (newspaper advertising, TV advertising etc.), we can see that there exist various actors, each with their very specific areas of expertise and roles. Halinen (1994, p. 48) presents a hypothetical network in which an advertising agency-client relationship is embedded. The network aptly illustrates the spectrum of actors in traditional advertising services setting. The network as a whole includes actors such as a press company, a photographer, an international partner company, a printing house, an advertising agency, a client (i.e. the advertiser), a market research supplier, a media buying agency, a broadcasting company, product distributors and final consumers. The central dyad is the advertiser – ad agency dyad, and all the other actors are connected to it. For example, the ad agency designs a campaign for the advertiser, and the media-buying agency suggests the timing and reserves the space from the media on behalf of the advertiser. In many cases, the advertising agency is the central actor that orchestrates and integrates the services of e.g. a photographer and a printing house into a poster. The advertiser pays all companies and expects to receive value (e.g. as stronger image and eventually increases in sales) from each campaign. Thus, the way these actors relate to each other in terms of information and revenue flows forms a print media advertising services business model. Nowadays, the advertising service business model and the network of actors may also be much simpler. New technology, e.g. digital cameras, graphics software, and high quality printers enables cutting down the number of actors, if the advertiser so wishes. An in-house art director can take care of some of the tasks that used to belong to the ad agency. Brochures can easily be designed and copied in-house, and local newspaper ads can be designed and delivered to the media directly from the advertiser via e-mail. However, although this is possible, advertising agencies are still in business, because their clients see that advertising agencies provide higher value than what would be achieved if designing in-house. An alternative way to approach the emerging mobile advertising business models is to look at it from the point of view of software industry; in other words to concentrate on the fact that software is a core element in mobile advertising services. Thus, the business model is analysed from the perspective of the software vendor, i.e. the application provider (see Amit 593

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& Zott 2001). In the literature focusing on the software industry, the concept of business model has been applied in making sense of the way a traditional software company and its customers interact. Thus, software business models are often focused on the relationship between the software vendor and its customers. This paper will still apply the network view to the mobile advertising business model. According to Hoch et al. (1999), the software industry can be seen as consisting mainly of five different business segments or models: three traditional and two emerging ones. The traditional business segments are the professional software services business, the enterprise solutions business, and the packaged mass-market software business. Professional service business refers to a situation where tailored software is designed and developed in cooperation with the buyer company, to fit its unique needs. The cost of the software is related to the resources needed to develop it, i.e. the number of consultants and the time it takes. Enterprise solutions are large software systems (e.g. accounting and control management systems) that require a limited amount of tailoring to meet the needs of the customer. Packaged mass-market software business refers to a mass of customers that share similar needs and thus the same software (e.g. MS Windows) can be sold off the self to them all. The two new segments are embedded software development and internet-based services, which includes companies that e.g. use the Internet for data exchange. The main distinction between the alternative ways of operating in the software industry has often been made between the project and product business (e.g. Carmel & Sawyer 1998, Alajoutsijärvi et. al 1999). The professional services software business is a project business and the packaged mass-market business is a product business (Hoch et al. 1999). Sallinen (2002) confirms that also in Finland these represent only the two extremes of the alternative ways of operating, but yet they can be used in making sense of the industry. The service business and the product business models differ in several aspects, such as intellectual property rights, product complementarity, returns from scale, and connections with users (Nambisan 2001). When considering the alternative scenarios for the mobile advertising business, it is relevant to consider whether the mobile advertising software should be tailored, i.e. project business model, or packaged software, i.e. product business model. If the software is packaged into a standard form it can be sold to several customers as such, thus keeping the price level rather low. In the case of mobile advertising, it would be possible to market packaged software (i.e. the content provider interface) via Internet to a mass of customers. On the other hand, if the software system needs to be integrated into other software within the advertiser (e.g. CRM software or customer databases in general) increasing the need to tailor the software, a more project-type business model would be relevant. In that case, the m-advertising system would be installed into the customer’s hardware, enabling its tailored maintenance and further development as the mobile technology develops. Thus, the application provider (i.e. the software vendor) can either sell the system as a standard product or a tailored solution or alternatively, it can also operate as an application service provider by not selling the whole software to the advertisers, but selling only the service that the software provides (mobile advertising service) for them. To sum up, it is possible to consider mobile advertising business models from two very different perspectives. First, in traditional advertising business several different actors are 594

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needed in order to accomplish the advertising service. Each actor has a well-defined role and several revenue flows between the actors can be identified. Hence, the service (advertisement) is a result of integrated interaction between numerous actors playing different roles. Thus, if mobile advertising is approached from this perspective all the actors, their roles, the revenue flows and the interaction between them are in the focus of the mobile advertising business model. On the other hand, mobile advertising business can also be approached from the software industry perspective. In this case, the nature of the software as well as the relationship between the vendor and its customer are highlighted in the business model.

Searching for mobile advertising business models – scenario planning method The methodology of the study has its roots in the envisioning and polling methods of futures studies (Cole 2001). The method used in the construction of the business models is an application of scenario planning technique (see Moutinho et al. 2002; Velotsou et al. 2002). This involves building four scenarios of possible mobile advertising networks and describing the service, the actors and their roles, and value-creating exchanges between them in each scenario. The traditional ways of doing business in advertising and media and the more recently arisen business models of software firms, discussed above, provided the possibility for envisioning based on historical analogies. This envisioning resulted in the development of the first sketches of the possible business models. These sketches were presented on different occasions to a number of experts to be evaluated and commented on (see Appendix 1). During the envisioning process the sketches were presented in two different project meetings to several representatives of device manufacturers, infrastructure providers, mobile network operators, application providers as well as representatives of the local retail business community. In addition, two academics, a professor of technical sciences and a professor of software business, were able to provide comments on the sketches. In addition, two representatives of application providers and one representative of a mobile network operator were personally interviewed to get more detailed feedback on the sketches. Several of the experts had their background in engineering or technical sciences and were therefore able to also evaluate the technological feasibility of the scenarios. In addition, the authors received empirical insights for one of the suggested scenarios through a larger research project entitled Rotuaari. The multidisciplinary research project designs and empirically evaluates technology and new mobile services by setting up field trials (for details see Ojala et al. 2003). A field trial of mobile multimedia services was operational in the centre of Oulu from August 28 to September 30, 2003. The setting resembles the first scenario, although the technology used to deliver m-ads was different, as were the mobile devices used. The service system consisted of a wireless multi-access network, a middleware for service provisioning, a web portal with content provider interface, and a collection of functional context-aware mobile multimedia services of which m-advertising was one (see Ojala et a. 2003). In the first field trial, personal digital assistants were used as mobile devices receiving m-ads and they were delivered through a WLAN network, without any cost to either the madvertisers or the end users. Twelve voluntary local retailers and restaurants acted as content 595

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providers. The end users were volunteers, and they received the PDA device for a few hours to try the system. During the field trial, the research group served the roles of application provider, service provider, mobile network operator and infrastructure provider. In other words, the madvertisers could brief the research group to design and implement the m-ad as well as to send it to the voluntary end users’ devices at no cost. This very simple business model served as an important basis for inspiration and practical ideas in the scenario planning process. As a result of these think tank exercises we were able to develop four scenarios of the business models presented in the following section. The first two scenarios seem to be more applicable for small and medium-sized advertisers, whereas the third and fourth ones can be applicable to large advertisers with more internal resources and expertise in advertising (see also Komulainen et al. 2004).

Searching for mobile advertising business models – proposing four scenarios In the following, we present the four scenarios of mobile advertising business models. The titles or the four models are inspired by the product/service being offered to the advertiser. Thus, the first two refer to mobile advertising service and present the mobile advertising service provider acting as an integrator. In other words, the service provider integrates the offerings of a software company and a service and mobile network operators to bring value to the advertisers and end customers. The basis for these two business models is adapted from the traditional advertising business. The models differ in the technology that is used when delivering the m-ad to the mobile phone user. The third and fourth business models both refer to mobile advertising software and present a software company as an application provider. In other words, the software vendor provides the mobile advertising software directly to the m-advertiser. These business models are based on the software industry perspective. Each of the four scenarios uses the three elements of business models: the service, the actors and their roles, and the value-creating exchanges between the actors. The roles of the actors are specified according to Kallio (2004). In this study, two technologies of sending mobile ads are under examination. First, mobile ads can be sent as multimedia messages, which can include e.g. picture, text, sound and video clips. The consumer receives the messages in the same way as traditional SMS messages and does not have to pay anything for the messages. The other technology available is WAP Push. In this case, a so-called service indicator message is first sent to the consumer. The indicator includes a description of the mobile ad and an URL address. After receiving the service indicator, the consumer can decide if s/he is willing to browse the actual mobile ad by using GPRS. Browsing the ad thus costs the consumer, since using the GPRS connection is a service offered by the consumer’s service operator. A WAP Push ad can utilize all XHTML features and thus can direct the consumer to the advertiser’s web pages, if they are suitable for mobile browsing.

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Scenario 1 MMS advertising service The first scenario is based on traditional advertising business as well as the insights obtained from the Rotuaari project. This scenario is centred on the mobile advertising service provider (MASP). As described in Figure 1, MASP acts as an intermediary between the focal actors, i.e. it is the central actor of this business model. MASP has acquired a tailored mobile advertising software system from the application provider (1 and with the aid of the system MASP integrates the other core actors to provide value to them and the end users (i.e. consumers). Ad

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Figure 1. MMS advertising service model In this business model, an advertising agency acts as a professional service provider. It designs the m-ad in digital format for the advertiser by assignment, and therefore the advertiser pays an agreed price to the advertising agency for the designing of the m-ad (2. The ad agency can also place the m-ad into the m-advertising system, if the advertiser wishes to pay for that service. Otherwise, the advertiser’s personnel may do that. MASP provides access to the mobile advertising tool for the advertiser and, therefore, MASP bills the advertiser for the advertising services (3. The services include the database of consumers willing to receive m-ads1, the profile information of the consumers for targeting the ad, running the mobile advertising system and the costs of sending m-ads to consumers via mobile networks. The advertiser pays either a fixed price per moth, or on the basis of m-ads sent to mobile ad service provider (naturally depending on the contract between the advertiser and MASP).

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Mobile advertising is legal only if the receiver has given permission for it.

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MASP sends m-ads as MMS messages to consumers according to the criteria chosen by both the consumers and the advertiser. After receiving the m-ad consumers can make a buying decision and thus provide direct revenue for the advertiser (4. In addition, consumers can forward the m-ad to their friend(s). However, in doing so the consumers have to pay for the forwarded MMS messages to mobile network operator by themselves (5. In the best case, consumers’ friends make a buying decision for the product as well, adding to the positive revenue of the advertiser (6. Mobile network operator provides an access to the wireless network. Thus, MASP pays the mobile network operator for the service of sending MMS messages to consumers, which includes the costs of the mobile network operator renting the network from the infrastructure provider (7. It should be noted that the mobile network operator and the infrastructure provider can belong to the same group. However, in such cases they are still different strategic business units, which charge each other for their services (8. This situation is governed by legislation to ensure competition in the telecommunication business. A critical success factor for the model presented above is MASP’s ability to get willing consumers to not only give permission to send m-ads, but also to provide personal information into the data base. Such information may reveal their personal background (i.e. gender, age, family status, income, education), their preferences (i.e. what products or services they are interested in, hobbies, professional interests) as well as their wishes concerning the time of day when they wish to receive m-ads and how many they wish to receive per hour or per day. MASP ‘sells’ this valuable information to the mobile advertisers, so that they are aware of what type of persons they are able to reach and how well that corresponds to the goals of their advertising. It has to be noted that the end users may at any time wish to refuse to receive any m-ads for a certain period, or for good, or from those advertisers whose m-ads do not provide any value for them (see Salo and Tähtinen, 2005). Therefore, the price per sent m-ad seems to be a logical way of billing the m-advertiser. Scenario 2 WAP Push advertising service The second scenario is also based on traditional advertising business as well as the insights obtained from the Rotuaari project. In the second scenario the actors remain the same while the technology that is used to deliver the m-ads changes. This change influences some of the actors’ roles and thus also the flows of money. Also in this model, MASP acts as an intermediary between the focal actors, i.e. it is the central actor of this business model, and the application provider sells the completely mobile advertising software to MASP (1. In the same way as in scenario 1, the advertising agency designs the digital m-ad for the advertiser by assignment (figure 2). Therefore, the advertiser pays the advertising agency for the designing and implementing of the m-ad (2. Furthermore, the advertiser pays MASP for the mobile advertising services (3. The services that are provided include the use of the madvertising software to create mobile ads from digital data, as well as delivering the m-ads as WAP Push messages to the consumers, but also the use of the consumer database. The advertiser pays either a fixed price per month, or on the basis of the number of m-ads sent. Unlike in scenario 1, the technology used in m-ad service is not MMS but WAP Push. This means that the m-ad service provider sends first a so-called service indicator (SI) message to 598

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the receiver. The indicator includes a description of the mobile ad and an URL address. Then the receiver can decide if s/he is willing to go to browse the actual m-ad by using GPRS. If the consumer is willing to browse the m-ad by using a GPRS-connection, s/he has to pay for the connection to mobile network operator by her/himself (4. After browsing the m-ad the consumer can make a buying decision and, therefore, create a revenue flow for the advertiser for the purchases made (5. Ad

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Figure 2. WAP Push advertising service model MASP pays the mobile network operator for the service of sending SI messages to consumers (5 , which includes the costs of the mobile network operator renting the network from the infrastructure provider. Therefore, the roles and revenue flows between the mobile network operator and the infrastructure provider remain the same as in scenario 1 (6. Scenario 3 MMS advertising software The third scenario is based on the software industry approach. In this scenario, the actors and their roles change compared to the first two scenarios. The money flows between the actors are therefore also different. Because software is a core element in this sketch, this model is centred on application provider, i.e. the software firm acts as an intermediary between the focal network actors. The ad agency can design the m-ad for the advertiser if the advertiser wishes to pay for that service and place the m-ad into the m-advertising system. However, the advertiser can also perform the above-mentioned tasks by itself. In any case, the application provider hosts the 599

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mobile advertising service system. Hosting includes developing the software, maintaining it, running the mobile advertising system in the service provider’s own servers, and sending the m-ads to the consumers. In this case, the database of the consumers willing to receive m-ads2 and the profile information of the consumers for targeting the ad is gathered and updated by the application provider and the consumers themselves. Because the application provider delivers the hosting service for the advertiser, the advertiser pays the application provider for that service (1. Ad

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Figure 3. MMS advertising software model The application provider sends m-ads as MMS messages (like in scenario 1) to the consumer according to the criteria chosen by both the consumers and the advertiser. After receiving the m-ad the consumer can make a buying decision and thus provide direct revenue to advertiser (2 . The application provider pays the service operator for using the mobile network (3. Like in scenario 1, the roles and revenue flows of both the mobile network operator and the infrastructure provider remain the same (4. Scenario 4 Wap Push advertising software The fourth scenario is also based on the software industry approach. Compared to the previous scenario, the actors remain the same while the technology that is used to deliver the m-ads changes to Wap Push. This change influences some of the actors’ roles and therefore also the flows of money. Like in scenario 3, the application provider acts also as MASP, hosting the mobile advertising service system. Therefore, the advertiser pays the application provider for the hosting the advertising service system (1. In this model the application provider sends the m-ads as a WAP Push message (like in scenario 2). If the consumer is willing to browse the m-ad by using GPRS-connection, s/he has to pay the price for the connection to the mobile network operator (2. In this case, forwarding the m-ad is not possible because of technical limitations. After browsing, the m-ad 2

Mobile advertising is legal only if the receiver has given permission to it.

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consumer can make a buying decision and, therefore, add a revenue flow to the advertiser for purchases made (3. Ad

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Figure 4. WAP Push advertising software model MASP pays the mobile network operator for the service of sending SI messages to consumers (4 , which includes the cost of the mobile network operator renting the network from the infrastructure provider. Although the mobile network operator and the infrastructure provider can belong to the same group, they are still different strategic business units, which charge each other for their services as mentioned before (5.

Conclusions The aim of the paper was to propose business models for the emerging mobile advertising business. Four scenarios were presented, derived from the scenario-building method. The scenarios were built with the aid of a theoretical discussion, inspiration from historical analogies of two industries, an empirical field trial as well as expert discussions and insight. Now it is time to also evaluate the scenarios. The two mobile advertising service models seem to suit better such small and medium-sized b-to-c companies that are not very technology oriented and thus do not have the know-how, time or resources to learn how to use new technology efficiently. In the business scenarios, the advertisers still select the target consumers from the service provider’s database and create the m-ad with the help of an ad agency. The service provider may even insert the m-ad into the system and set up the target criteria for the advertiser, so that the advertiser only needs to follow the reports on the number of consumers that have been receiving the company’s message. The first two scenarios offer

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small retailers enough service content, so that in spite of lack in advertising knowledge or lack of an Internet connection they can use m-advertising as a new advertising channel. The two latter advertising software models seem more suited for large advertisers that have the technological and marketing expertise as well as their own customer databases which they can use in targeting the m-ads. Large marketers often have in-house advertising expertise, which is why designing m-advertising campaigns and ads could also be done in-house. Moreover, although not discussed earlier, large advertisers may use m-advertising as a way to communicate with their loyal customers by using their own instead of the application provider’s customer data bases. Thus, the role of the application provider would be to provide the content provider interface and to integrate the mobile network operators’ services into the advertising software. The models suggested in the paper offer two different technologies for delivering the m-ad. Already at this stage, we assume that the MMS will ‘conquer’ over WAP Push. Although using MMS m-ads is more costly to the advertiser, the receiver gets the m-ad free of charge and, what is also important, the m-ad can be seen right away without browsing it over the Internet as in the case of WAP Push. Although we argue that the scenarios are all suitable for mobile advertising, they still include a high number of actors in each network. When thinking about revenues, each actor should be able to derive value from the exchanges within the business network. The more actors there are, the more money has to be put into the business, which means that the price for the customer, in this case the advertiser, can be too high. Thus, already at this stage, we assume that whichever the business model, the number of actors in mobile advertising networks will decrease, which will enable the profitability of the business model in the long run. The number of actors in the value network could decrease if the mobile network operator took over the role and tasks of MASP. Buellingen and Woerter (2004) and Figge (2004) already anticipate that mobile network operators will take on a more central role in mobile service business networks. In mobile advertising, this would mean that the operator acquires the mobile advertising system software from a software vendor and performs all the tasks of offering the mobile advertising services and the customer databases, the transmission, and the billing directly to mobile advertisers. In case of a large advertiser, they may also integrate their own customer databases into the system. This would reduce the number of actors needed to perform the advertising service process considerably and would increase the revenues of the mobile network operators. In that case, however, different mobile operators would need to agree how they use each other’s customer databases, if m-advertisers demanded access to all end users. As the study deals with a novel mobile service that is not yet in use our business models are based on more or less speculative estimations. However, a unique possibility to observe a operating network and assess the proposed models in actual business situations is offered by the ROTUAARI research project. The project’s second field trial took place in AugustSeptember 2004. Since the field trial involved not only real consumers as triallists, but also real retailers as advertisers, as well as technology providers, we hope to be able to elaborate on the future of the business models based on the data gathered from the field trial. In other words, we can already see that the roles of the actors may change towards more viable 602

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business models. The first two business models were chosen to be used in the field trial, because they allow also such retailers that do not possess advertising or technology resources to take part as content providers (i.e. mobile advertisers). Thus, the next step in studying the emerging business models is to use the data gathered from the field trial to empirically study the value creation in two of the mobile business models suggested in this paper.

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Appendix Occasions for expert feedback for the suggested business models. Occasion Project meeting 1.4.04

Expert Professor of Technical Sciences Professor of Software Business CEO External Relations Manager Mobile Software Manager Manager Business Development Director Project Manager Hotel Manager

Actor represented University/ Technical sciences University/ Economic sciences Application provider Device manufacturer Device manufacturer Device manufacturer Mobile network operator Content provider/ Society of trades Content provider / Hotel business

Personal interview 13.5.04 Email-discussions 18.5.04, 7.6.04 Personal interview 2.9.04 Project meeting 4.11.04

CEO Project Manager

Application provider Application provider

Business Development Director Professor of Technical Sciences Professor of Software Business CEO Business Development Director Project Manager

Mobile network operator University/ Technical sciences University/ Economic sciences Application provider Mobile network operator Content provider/ Society of trades

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