Creating a buzz on the mobile Internet

Singapore-headquartered BuzzCity delivers mobile Internet advertising (display) across its network spread over 200 countries, besides hosting its own mobile media properties. Having served over 5,000 advertisers and an equal amount of publishers of mobile Internet sites, it claims to have delivered over 12 billion ads in August, with India accounting for the largest chunk – around 25 per cent. The company works out of offices in India, Indonesia, Thailand, Malaysia, South Africa and France. In conversation with BrandLine, Dr K. F. Lai, co-founder and CEO, reveals trends in mobile Internet usage and advertising across markets, the Indian context, advantages of the ‘cost per click' model, educating advertisers on the category, and an inevitable future with advertising on the ubiquitous mobile. Lai admits that the company, incorporated in 1999 as a dotcom, did not succeed with its first few business models. “We were lucky that we had enough capital to last until 2007, when we started this mobile Internet advertising business,” he adds. Excerpts:

Tell us how the business has evolved. Specifically, the owned media properties – how big is that business?

BuzzCity provides marketers opportunities to reach the mobile audience via mobile-centric media properties and its advertising network. Our own properties include myGamma, an ad-supported wireless social networking service; Djuzz, an ad-supported free mobile games portal; Now Cook, a mobile site promoting everyday eating; and JAMsked, a free mobile Internet directory of international live music events.

Around 10 per cent of business comes from our own media properties. We intend to grow it to may be 15-20 per cent, but we largely remain an advertising network. We run our own media properties for several reasons. One of which is that we could build a mobile Internet audience that we understand a lot better – its likes, interests, surfing habits. Having an audience we control, we are also able to compete better in the market.

When we go with publishers, we pay them 65 per cent of advertising revenues. We may have to deal with competitors who are willing to pay much higher – there are people who pay 85 per cent, 95 per cent, 100 per cent or even 110 per cent ( laughs ). Publishers will go with whatever gets them more revenue.

So to prevent ourselves from this swing of traffic that happens because of such temporary disruption in the market, it is good to have some of our own properties and maintain them.

Also, white label versions of our properties on carriers (mobile and Internet service providers) and through media companies allows us to get to audiences that we may otherwise not get.

This allows us to talk to big media companies and carriers. We've worked with Airtel and Videocon, and we're in talks with companies like (Tata) Docomo.

India is the biggest market for BuzzCity by number of ads served. But you mention that the cost per click is lower here. Could you explain?

India is the largest in our whole network. We served about 12 billion ads last month (August) of which three billion were in India. The volume is huge, but the cost per click (CPC) is lower, and there are reasons for that. One is that the handset prices are very low. Most of these mobile handsets can serve Internet pretty well. Competition among service providers has pulled the Web access prices really low. These factors have caused the number of mobile Internet users to increase a lot.

We estimate that we reach around 70 million unique mobile Internet users in India (in July). More than 30 to 40 per cent of them would be on Nokia. Their share is decreasing – it used to be much bigger earlier. The Chinese MTK chipset-based phones (like the ones from Micromax) are getting bigger. There are a small number of Android and Apple phones. There are quite a number of advertisers looking for users of these phones. We have money sitting on the table that we cannot spend – most ad networks couldn't finish their Android demand. But things may change with the Android price dropping.

The cousin of Micromax in Vietnam, Q-Mobile, had 20 to 25 per cent share of new phone shipments six months ago. That dropped to 10 to 15 per cent last month, because Nokia and Samsung lowered handset prices in that market. The market is very price-driven. In the really low end, $40 is the magic threshold. At $100, you see good quality audiences coming into the market. With that, cost per click will go up.

You have written about the fragmentation amongst publishers, advertisers and handsets – how does that impact Buzz City, and advertisers?

When you run a network, you want fragmentation of advertisers and publishers. If there are only three publishers who control the entire market, there is no business for the mobile network. The largest publishers on our network account for around 15 per cent of the business, and then it drops very quickly. There's a pretty long tail of publishers after that. The advertiser curve is even flatter. Of the 500 active advertisers in the month, the top advertisers may account for 8 to 10 per cent of the spending. As a network, we want to be as flat as possible.

And in every single market, there is no one single handset that's controlling the entire market. Apple is at the very high end. In some markets such as Singapore and the UK, its share might be as high as 20 to 30 per cent. Then you have the Android, and then the Blackberry and Nokia offerings. The Chinese handsets come in then, in different flavours in different markets. With this kind of handset fragmentation, it would be very challenging for the app developers. In the US, you just need to develop apps for the iPhone. That's not true in India – the challenge in developing an app is quite high naturally.

This is why we believe most of the applications we see on the mobile will move to the mobile Web. We're investing time and technology in that.

So the mobile Web, as against mobile apps, is where the bulk of your business is…

Mobile Web would be between 70 and 80 per cent of our business. We don't differentiate; we want to offer good audience to the advertisers, whether it's on mobile or mobile Web. But we see more audiences coming on the mobile Web down the road.

I dealt with Central Department Stores, a big chain in Thailand. They wanted to target high-end iPhone and Android users, and built apps only on those platforms. But when they advertised it, they advertised through mobile Web to drive as much traffic as possible.

The app ecosystem for lower-end handsets is not as well developed as that for Apple and Android. You can't build an app and put it on some marketplace for people to download. It has to be pre-installed on the phone.

In India, we see 30 to 40 per cent of the traffic coming from MTK chipset-based phones, and there are hardly any apps there. So there is a lot of mobile Web access. In India, 90 per cent of ad inventory we serve is on mobile Web.

What is the cost per click in India, and how does it compare with other markets?

The cost per click is a reflection of the market supply and demand. In India, we are looking at something like 2- 4 cents per click. In Thailand it is something like 20 cents. In Malaysia it would be 10-20 cents.

Higher price is not necessarily good news for us. High price represents that advertisers may be operating very close to the break-even point. I am keen that they get positive results from whatever they spend. India has a bigger population base and the mobile Web ad serving price is also lower than in other markets. In this market, we have to work on advertisers to educate them on what they can do on the mobile and get more advertising dollars on the mobile. The low price indicates that there is a lot of potential for growth.

Beyond the clicks, the advertiser objectives vary. Some may want users to subscribe to their service, buy something, register for something, ask for a test drive for a car, sign up for mobile banking or an insurance product. That's acquisition. ‘X' number of clicks would drive one acquisition – that's the RoI. Advertisers want good leads coming from the click. Among the three basic models in digital or mobile advertising – pay per impression (CPM, or cost per impression), pay per click or pay per acquisition – publishers love pay per impression, but advertisers find it too high to pay. With pay per acquisition, advertisers don't pay anything unless the desired outcome has been achieved. Pay per click is a good middle ground. We don't offer cost per acquisition, but a small number of advertisers do choose the CPM model.

What would be the click-through rate in India?

In India, traffic is growing by 100 per cent year on year - we started four years ago. The click-through rate (CTR) has been averaging 0.5 per cent. It depends, of course, on where the ad is placed. The click-through rate hasn't gone down in the last two years even with the increase in traffic. So if we manage the site well, it looks like we could keep that CTR stable.

The mobile as an ad medium:

How much of your inventory served on the BuzzCity network is bought by media buyers?

Over 50 per cent of our inventory is sold through media buying agencies. Most of the direct buys are by companies in the mobile content space which try to sell their own content. The overall trend is that the agency share is getting bigger. When we start in any market, it is content providers who understand the usage and they come on board first. The agency share starts coming in with education on the category.

There is a view that the mobile is not a medium for brand building, but for communicating specific promotions and as a call to action. Your comment.

That is not the completely right approach to take. There are some examples of successful brand building campaigns that we have done.

There was a badminton tournament in Indonesia where the cigarette brand created a free app to get the game schedule and all the information relevant to that tournament. They distributed that app for branding purposes.

They saw how many people downloaded the application and how frequently they interacted with it, and the results were measured against brand building.

Amazing Thailand launched an application with all the tourist attractions. They counted how many people downloaded the application, the time spent, number of visits and so on.

The app was advertised through our network and the metrics were on brand building rather than buying tour packages.

Right now, it must be 50-50: there are more and more customers who are not looking at mobile ads only to increase transactions or acquisitions at that very point. You can argue that all advertising campaigns at the end have to result in a transaction. The closure time is getting longer in many cases, and mobile advertising is becoming part of a larger strategy.

Several publishers are yet to explore the mobile as a medium, at least in India. Are there lessons for Indian publishers from experiences elsewhere?

Three to five years down the line, I believe that the dominant mobile publishers would not be same names that you see on the Internet - just like the top names on the Internet were not the ones who were big in print and television.

We are still figuring out what kind of content people like to interact with on the phone. One proven category is social networking. That's a big traffic component on our network also. But how would a user interact with a sports site or an entertainment site on their mobile?

The evolved mobile cricket site might look very different from the online cricket site. You cannot translate a cricket Web site for the mobile and hope that it will become popular.

We're all searching for what will work. But I can make a prediction that the top cricket site on mobile will not be the top cricket site on Internet today. The DNA and the skills required to create that would be very different.

How big is the mobile advertising market, and how do you see projections for mobile and digital advertising in India?

Digital itself is very small in India, say one per cent of all advertising, and mobile would be a part of that one per cent.

In the UK last year, I saw data that put digital and mobile spend at 20 per cent of the total media spend. But it took 10 years to reach there. We need to look at media consumption time and user habits. Once people have mobile Internet, it is estimated that they spend 20 per cent of total time on media on mobile Internet. The advertising dollars follow.

In India, when the digital spends reach 20 per cent – I think in 10-15 years - the mobile component will be bigger, simply because the fixed line Internet will not grow much bigger, and the laptop and PC may not be so affordable in this market.

In emerging markets such as India, Indonesia and Africa, the mobile component will overtake the Internet component soon. I looked at the Zenith Optimedia projections on Internet spend. In the last two years, if I am not mistaken, they projected that in Indonesia the Internet spend would be $1 or 2 million.

Maybe they under-report (as they speak to a certain number of publishers), so let's take it as $2 or 3 million. What is interesting is that Buzz City alone is doing more than $3 million (mobile ads) in Indonesia alone. If I were to add the competition's revenues, it would be much bigger – maybe $7-10 million.

In that market, the mobile ad spend is already bigger than the other Internet spend.

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