Wireless Lights Up -- Mobile Web Advertising, By The Numbers

Is anyone making money advertising on i-mode? Conventional wisdom has it that banner ads don't work on the tiny screen, and since users are paying for every byte downloaded, click-throughs would be miniscule anyway. We asked Funk, a noted industry watcher, for his take on the situation.

How are mobile banner ads billed? In the wireless realm, online ad firm ValueClick only charges advertisers and pays-for sites by the click, whereas competitor Digital Advertising Consortium (DAC) charges advertisers by the view.

One article I read in a Japanese publication claimed that the advertisers pay DAC ¥0.33 per view, or twice the current rate for regular search engines (plus a fixed fee of ¥1 million per month). Interestingly, i-mode's high click rates are causing other firms to devise more sophisticated business models such as paying users to view advertisements. For example, a portal site called Keitai Net has created a service with the Japanese Postal Savings Account System to have money deposited in an account when people view an advertisement. Users currently receive ¥15 for each click. They can use the money to purchase products featured on the portal site or they can download the cash from the postal account. Keitai Net began its portal site at the beginning of June and by the end of June, it had acquired 17,000 subscribers, and was receiving 160,000 accesses a day. It also had eight firms advertising on its portal site.

Will the new models drive click-through rates down? While the click rates will probably go down, the traffic on i-mode is rising quickly. The i-mode menu probably receives between 10 and 20 million views per day. If click rates drop to 1.0 percent, which would be twice the PC rate, this would mean that an advertiser would pay ValueClick about ¥26 million per day, based on 20 million times 0.01 times ¥130, for the rate card fee, or ¥780 million per month. DoCoMo would receive about ten percent of that, or ¥78 million per month.

Compare this to DoCoMo's income from the site access fees, for which it now receives roughly ¥225 million per month, calculated as 10 million subscribers times ¥250 times nine percent--the standard DoCoMo content serving overhead. If this is correct, it looks as though the advertising income could start to rival the income from providing i-mode access.

What about the traffic that goes to the unofficial sites? This is important. By not providing this service themselves, DoCoMo is missing out on potential advertising income. Of course, the reason why the unofficial sites are in business is that they are making money from advertising and perhaps a little from charging for information.