I picked up one of the most beautfully coined terms about the mobile content industry by Fred (whose last name will remain anonymous to protect the innocent), a long time industry veteran. “The race to zero” describes a downward trend in premium mobile content. He was pointing out the following situation happening:
* Mobile operators are in their quest for more revenues introducing two things: display ads/ad networks on mobile and search functionality
* Mobile ads are quite nascent, though working well, but naturally given the mobile content industry’s knowledge and proximity to mobile advertising, a large majority of the ad buyers are providers of mobile content.
Combine the two trends, and you have the bizarre situation that you for instance on any given mobile operator deck can search for free games directly from the games portal, and be served ads from companies offering just that. He even cited an example that on a sign up page on the mobile carrier deck (i.e. the page where you agree to pay $X/month for the service) for their social community service, you will quite often see an ad for free chat. So what do you think the consumers will do?
Quite obvious really. Give people all the tools to find free stuff, and have the majority of advertisers be the ones providing free stuff for the content you are currently browsing the paid versions of, then what happens to the paid stuff? Chetan Sharma confirms this in his annual report on the US market, as downloads are trending down. Well, I am not surprised. The mobile content idustry has had dysfunctional business models since it started, and it is seemingly not getting better – except for a general trend towards a 70/30 split on apps which is certainly a good trend started by Apple…
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