The March 21st-27th 2009 issue of the Economist has both a leader and article on Silicon Valley and the potential for another “nuclear winter” as startups vanish into thin air. The global economic crisis has exposed the free at first, grow fast, establish niche dominance and then make a killing selling advertising business model . The result is like a retelling of the fairy tale, “The Emperor’s New Clothes“ but with roles reversed. With the exception of Google (the Emperor above), no other company has been able to build a sustainable business model based mostly on internet advertising – (although LinkedIn may come close).
So what does this mean for the mobile Telcos, where so much is riding on the success of mobile advertising to make up for the commoditization of their core voice business. While the jury is still out, I believe that mobile advertising is fundamentally different from internet advertising. It is not an alternate channel but a different tyoe of business in its own right. and there are some very unique aspects to mobile phone advertising. For example, it can be very targeted (location being an obvious example), the delivery and receiving mechanisms (2.5G, 3G ~ smartphones) are in place and the ubiquitous of the mobile phone means a critical mass audience already exists. As such, the mobile Telcos are well positioned to truly make mobile advertising a core component of their go-to-market business model, but it will not be easy as this is outside their core competence (delivering bits) and will take a major re-think of how they should approach the marketplace.