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ONLINE ENTERTAINMENT: STRATEGIES FOR PROFITABILITY

When Canon launched a portable photo printer called Selphy in China this year, the Japanese firm took a new approach in its marketing blitz. It launched a contest to create the best Chinese name for the new printer with each contestant sending an SMS (short message service) via mobile phone to a designated short code. Each of the top 10 winners received a Canon digital camera and a Selphy printer.

The response was overwhelming: The six-week contest generated well over 20,000 SMS messages, says a marketing specialist at Canon, who asks not to be named.

Canon has already tasted the sweetness of this new marketing approach. "Our ultimate goal is not solely about finding an appealing Chinese name for Selphy," says the Canon marketing specialist. The winning name has not yet been announced. "The best thing about the contest is that it enables a significant number of people to get familiar with the features of the new printer."

And that could boost Canon's sales. Most of the contestants are youth who are most likely to buy Selphy printers.

Canon is one of a growing number of firms starting to advertise via new media, especially mobile phones. The mobile phone craze in China is creating a fast-growing market for mobile advertising. "China is a very mobile country. We believe there is huge potential to unleash for mobile advertising," says Joshua Maa, chief executive officer of Shanghai-based Madhouse, a mobile ad network. Madhouse partnered with Japan-based Digital Advertising Consortium to launch the Canon contest.

China's wireless advertising market will more than double to 50 million yuan (US$6.25 million) by the end of this year, according to Shanghai-based iResearch. By 2008, it is projected to hit 1.1 billion yuan (US$137.5 million).

Maa, who co-founded Madhouse just eight months ago, sees a lot of opportunities to get his business on a roll. Compared with SMS marketing, which currently accounts for the largest portion of the mobile advertising market, "we are more interested in next-generation advertising," he says.

Madhouse offers opt-in banner ads projected onto mobile phone websites. A mobile phone user, when browsing the mobile Internet (also known as WAP or Wireless Application Protocol), has the option to click on the banner if the ad looks interesting. A mobile ad banner, for example, could lead to a free download of a short promotional video clip.

Compared with SMS models, the mobile Internet advertising model should be well received by Chinese mobile phone users. The growing problem of uninvited SMS spam has created a negative perception of mobile advertising in China.
The opt-in click-based ad model has put Madhouse's business on a fast track.

Mad, mad world.

Since mid-July Madhouse has launched successful mobile marketing campaigns for pioneering companies including Canon, Apple iPod, Dell Computers, Baodao Optical, Johnson & Johnson Pharmaceuticals, GlaxoSmithKline, and BenQ-Siemens. And it delivered nearly 66.9 million mobile ad impressions through the four-month period ending October 31. Peak daily impressions reached 3.8 million.

Compared with traditional advertising for print media and TV, Madhouse-style mobile advertising offers unique advantages: advertisers can set limits on the number of times individuals view mobile ads as well as choose their preferred type of billing, including time-based, impression-based, and click-based pricing.

Banner ads on mobile phone screens frequently include entertainment that appeals to a young market. Such ads often promote downloads of screensavers and short video clips. "Mobile phone Internet users often go online with their phones for short periods of snacking," Maa says.

Faster mobile download speeds, as well as lower charges and monthly data packages for mobile Internet access, have given a boost to mobile advertising in China. "It has become popular for young people to go online with their mobile phones outdoors or in the subway. Some youth are reading novels downloaded to their phones in bed before going to sleep," says Maa.

According to iResearch, youth aged 18 to 25 account for 38 per cent of China's Mobile Internet market. Those aged 25 to 30 account for 21 per cent.

"Many advertisers choose to use the mobile channel to target trendy youth in China's major cities," says Maa.
Another stimulus to the mobile advertising market is the willingness of wireless portals to introduce mobile advertising to drive revenue and to increase mobile traffic. With competition intensifying, mobile portals have found they cannot rely purely on downloads of pictures, music and ring-tones to maintain revenue growth.

Mobile advertising is providing a new revenue stream. Madhouse has established the MadNetwork, which consists of more than 100 partner sites including major mobile portals QQ (Tencent), WapTX, Sohu, 3g.net.cn and Kong.net, giving Madhouse clients comprehensive mobile media coverage. Madhouse shares revenue generated from ads with its network of mobile website publishers.

The growing potential of China's mobile advertising market has lured a growing number of new market entrants. Nasdaq-listed Chinese media firm Focus Media has acquired a mobile media agency, marking its foray into the lucrative market. And Japan's CA Mobile Ltd, Dentsu Inc and Cyber Communications Inc have established a joint venture in China for mobile advertising services.
Maa says the increasing number of players points to an industry boom. "We like to see more companies come in. This is a new, high-growth market, so we have to try different models and work to educate the market," he says.

It takes time for advertisers to grow familiar with this new approach to marketing. The marketing specialist at Canon suggests that while the company is interested in diversifying its marketing approaches by embracing mobile advertising, doubts remain.
First movers

"It's hard to find the first movers. Most players tend to be careful when trying new media," says Maa. "But once advertisers give the mobile channel a try, we are convinced they will recognize the strong returns on investment and come back for more and larger campaigns."

Compared with TV, print and Internet, mobile advertising can also be a cost-effective alternative, especially in reaching a young market.

With nearly 80 employees and offices in Shanghai, Beijing and Xiamen, Maa says Madhouse aims to maintain its position as China's largest mobile ad network thanks to its technology expertise and a strong understanding of both traditional and new media markets.

MadServing, the Madhouse ad serving and reporting system, features intelligent mobile targeting based on characteristics of the user viewing the ad including location, time, carrier brand and mobile phone brand and model.

MadServing enables advertisers to target specific mobile phone user groups, such as those in Beijing using mobile phones priced at 3,000 yuan and above.

"Targeting is very high-tech. Our system helps advertisers pre-select who will view the ads," Maa says