Sunday, March 6, 2011

Mobile advertising in India and the growth of Android

Last month Fortune reported Piper Jaffray's estimation that Android could generate $1 billion in advertising for Google. To quote the analyst, Gene Munster, "We believe Google's ARPU on Android was $5.90 in 2010. We believe Google's average revenue per search user was $18.85 in 2010 and average revenue per user for Google's advertising businesses in total was $25.77 in 2010."

While this puts Google's ARPU (average revenue per user) from mobiles significantly below PCs, Munster notes that the revenue per user for mobiles will soon go up to $10, and with increased app downloads from Android marketplace, in-app advertising will also add significantly to revenue. This is Google's business model and the very reason for existence of Android as an open source OS that does not directly benefit Google.

Out of all the mobile OS platforms today, Android is poised for rapid growth owing to the huge manufacturer base and the inherent flexibility it offers to be deployed across a range of handsets. Today a Rs.6000 Micromax Andro and a Rs.35000 Dell Streak can both sport Android. This is the greatest strength of the platform and will be the key to its future success in India. Unless Android is available on truly budget handsets, its potential will remain stunted.

In case you are curious, the mobile advertising market in India is still very small - it is just Rs.100 crores (Rs.1 billion) according to this article on Rediff Business. Contrast this with the mainstream advertising which stood at nearly Rs.30,000 crore (USD 6.7 billion) in the period from June 2009-June 2010.

But mobile advertising is pegged to grow at 50-60% per annum. In a recent report, mobile media company BuzzCity rated India as the top mobile ad market in its network in Q42010, serving 4 million ad banners to Indian audiences in this period.

At 700 million + mobile subscribers, and growing, the captive audience base is huge. With 3G promising to bring in rich media and streaming content to our handsets, mobiles can actually compete with televisions as the first screen (arguably, many of us spend more time with our mobiles than watching TV). In fact, it has been proven that the advent of 3G has increased mobile ad spend across markets.

The only strike against mobile advertising is that we are worn out with all the telemarketing, unsolicited SMS etc. on our mobiles, most of which have continued even after the implementation of the DND (Do Not Disturb) registry. But on the other hand, if mobile advertising can subsidise paid apps and high quality content on the mobile, as long as it remains unobtrusive, I don't think anyone would be complaining. And I am sure that many advertisers would be keen to explore options given the steep mainstream media advertising rates.

If I were Google I would be quite excited with the prospects for mobile advertising in India. Maybe the company should take a cue from a certain prominent Southern politician who gives away free TV sets to his constituents (who will surely tune in to his family-run, vastly popular vernacular TV channel). He gets good karma and he gets eyeballs. Google, you wanna start giving away free Android handsets? You never know what could happen next...