The future of mobile marketing in the Middle East: trends and opportunities (page 1 of 3)

Direct marketing techniques range from simple direct mail campaigns to more sophisticated relationship-based web promotions. In the United States and Europe, total expenditure on direct marketing can be as much as 20% of total advertising budgets. However, according to a recent Booz Allen Hamilton survey, direct marketing represents a mere 2% of total advertising spend in the Middle East. A key impediment to direct marketing in the region is the lack of reliable and efficient residential postal service delivery. In addition, the relatively low Internet penetrations in many Middle Eastern countries are limiting advertisers' appetites for on-line advertising. In 2003, total Internet advertising spend in the Middle East, excluding non-cash barter deals, did not exceed US$6 million.

The convergence of the telecom and media industries is leading to new opportunities in infotainment-related value added services, including mobile marketing. This development could prove to be an effective way to invigorate the historically underdeveloped direct marketing industry in the region and open an attractive new option for advertisers.

The rise of the mobile value-added services industry is already evident from the proliferation of mobile ringtones and logos and the emergence of services such as SMS breaking news from Al Jazeera TV. Figure 2 shows how a wide range of media, technology and telecom players are involved at the various stages of the value-added services value chain in order for content to eventually reach the mobile phone screen. Content supplied by the likes of Disney and Rotana is delivered by service providers using specialized IT applications via mobile operator networks to be displayed and manipulated on mobile devices.

"The current market for value-added services in the Middle East is estimated at around US$350 million, which is distributed across the various players along the value chain according to a web of content fees and revenue sharing agreements," said Karim Sabbagh, Partner and Vice President with the communications, media, and technology practice at Booz Allen Hamilton, based in the firm's Riyadh and Dubai offices. "Half of the current market value is in the form of mobile personalization services such as ringtones, logos, wallpapers, etc. Operators, media owners, and independent value-added services providers are already tapping into this market. As a result, future growth is expected to come from value-added services categories such as general entertainment, interactive media services, gaming, and information, bringing the total market to over US$1.7 billion by 2010."

Gabriel Chahine, Principal with Booz Allen Hamilton and a member of the Global Communications, Media, and Technology group based in Dubai, said, "Augmenting the mobile value-added services industry with the classical direct marketing activities of customer database management, creative, and campaign services management instantly creates an altogether new industry for mobile marketing. Mobile marketing seems to be one of the most attractive options for advertisers."

The upside potential and unique nature of mobile marketing at the intersection of media, telecom, and advertising is attracting four types of players with varying business models.

1. Telecom operators are attempting to leverage existing application and service provisioning to build direct marketing capabilities. Operators' key advantage lies in their existing mobile portals, billing relationships, large customer databases, and their position on the value chain as the gatekeeper to customer access.