The Japanese advertising market was bearish in 2008. According to top Japanese advertising agency Dentsu, it shrank to US$68.3 billion in the last year, representing a 4.7% decline from 2007 – the first downturn in the last five years.

This decline stems from the global economic recession and the effect of the high yen, which have led advertisers in Japan to slash marketing and advertising budgets. Figures show that the volume of advertising spending on conventional media channels – newspaper, TV, magazine, and radio – have plummeted since 2005. Newspapers presented the highest downfall with a 12.5% drop.

In contrast, online advertising has continuously grown during this same period, showing a 16.3% growth rate in 2008. Although this rate has slowed down in reaction to the global economic downturn, search-based and mobile advertising in the Japanese advertising market have continued to grow overall. In 2008, the mobile advertising market recorded almost a 100% growth in volume over 2007 in Japan.

The continuous expansion of mobile advertising in Japan is similar to other countries with proliferated mobile phone penetration and brands that take advantage of this effective vehicle for delivering personalized advertising messages. According to AdMob, a leading mobile aggregator offering worldwide access for advertisers to mobile customers, the number of worldwide advertising requests over AdMob’s network almost tripled in the last year alone.

Mobile advertising is emerging as an important new channel for brands to communicate with consumers. The highly personalized nature of mobile phones, their ubiquity, and their increasing media capabilities make these devices ideal for reaching out to consumers to extend brand awareness and advertise products and services.

Yet despite bright promise and continuous growth, mobile advertising is still in its infancy. Many retailers are wary of venturing into this unique and unfamiliar ground. Even advertisers who do make use of mobile channels still consider this to be only part of their larger campaigns taking place through more conventional media channels.

Most current mobile advertising relies on text-based advertising messages sent via SMS. The dominance of SMS is attributable to its cost-effectiveness and its ability to reach a large number of mobile subscribers, as well as to the ubiquity of SMS in even the lowest-tech mobile markets. Although this technology is simple, business models in this space will become more diverse in the near future. For instance, Apple recently filed a patent for a location-based interface that would facilitate mobile advertising based on the location of iPhone and iPod users. Apple’s idea of revenue sharing with retailers by utilizing location-based information would create innovative and lucrative business models to benefit both Apple and retailers. Further, it is expected that consumers will be more tolerant of location-relevant advertising messages.

In fact, mobile advertisers are already able to deliver their messages to consumers based not only on demographic information but on specific location data as well. In mobile advertising space, location information is the core feature to enhance consumer response rates by delivering messages closely related to the current location of users, such as the nearest restaurant, Starbucks, music store, etc.

An interesting model was recently developed by a Korean mobile advertising agency, whereby mobile phone users can earn points and even cash when they click on mobile advertising messages. The points or cash earned could go towards monthly cell phone fees or mobile Internet access charges. This can be referred to as a payback model, and it is designed to appeal to consumers as well as increase advertising reach rates. 

New business models for reaching mobile subscribers with brand messaging are continuously evolving. Mobile technology may be somewhat complex and confusing for general advertisers and retailers who do not know much about the technology itself. However, making use of this new technology is the final target for retailers and users alike. The crucial issue surrounding mobile marketing going forward is neither the mobile platform, nor super-precision LBS technology, but rather how ecosystem players can create effective and lucrative win-win business models.
　

For more information you can contact the author at andy@maravedis-bwa.com

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