Mobile Ads in the Middle Kingdom

A nascent media channel set for rapid growth as companies target China’s burgeoning cellphone population.

Connecting with a target audience of over 500 million mobile phone users should be a marketer’s fantasy, yet China’s mobile advertising market is still dragging its feet behind Japanese and US counterparts. However, as Olympic excitement builds in the run up to August 2008, advertisers and advertising agencies become more familiar with mobile advertising techniques, and China’s long-awaited 3G roll-out becomes a reality, the market looks set to grow significantly.

According to Marbridge Consulting, China’s mobile ad market was worth $65 million last year, compared to $410 million in the US and $370 million in Japan. However, revenues are projected to reach $92 million this year and $142 million next year. According to OgilvyOne’s China President, online ad spending in China could reach $6 billion by 2012, although most analysts are projecting a figure of around $4 billion.

China-based mobile ad serving companies such as MadHouse, WAPS and CASEE have blossomed over the last two years, as have mobile search companies like mInfo, UUCun and Yicha. In the long-term China’s search market is expected to capture most of the mobile ad revenue, and recent months have certainly seen a lot of activity within this sector.

In August China Mobile received licensing approval to create and execute its own mobile advertising and marketing services. Its services will focus on different forms of mobile advertising, including sending ads to clients’ mobile phones through service providers, embedding graphical ads on web pages on its own ad network, providing ringtones, and creating interactive marketing games.

Google has just launched an SMS-based mobile phone search service in China, which will compete with existing services offered by mInfo, UUCun and Yicha. mInfo announced a partnership with Medio, a Seattle-based firm that creates white label mobile search sites for operators to expand mInfo’s functionality in China. Baidu, by far the largest internet search engine in China, also announced it was working with China Mobile and China Netcom Group in preparation for the launch of 3G services on the mainland.

2D barcode and photo-based mobile companies are also emerging to grab a piece of the mobile ad pie, with Gmedia, Inspiry or Coolmark in 2D, and Hong Kong-based MyClick (picture-taking and recognition advertising-based model) as prominent examples. On the marketing side, long time players like 21Communications and Puca and new players like Shanghai-based Fugumobile (advergaming) and Pioco (bluetooth marketing) are doing well.

Although companies involved in mobile advertising are naturally upbeat, some analysts are still cautious. Are there enough Chinese people out there who really want their phone to be more than just a phone? Will advertisers find a way of creating mobile ads that don’t just turn people off? Years of dealing with SMS spam and mobile phone scams have made Chinese consumers sensitive to commercial messages coming through their mobiles, and ads will definitely have to be well-targeted and innovatively delivered to be effective. Only time will tell whether China’s rapidly developing mobile ad industry is up to the task.

Interview with Joshua Maa - CEO of Madhouse (from last year but still relevant)

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