"Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Russell Glass, CEO at Bizo.
Smartphones are dominating the mobile market.
With 1.4 billion predicted to be in consumer hands by the end of 2013, the most valuable digital real estate in the world is no longer the homepage of an online search engine like Google.com, but the home screen of a smartphone. However, no one has figured out a way to monetize it yet.
When Facebook came out with Facebook Home earlier this year, most missed the potential importance of this innovation. I believe Facebook was demonstrating that it understands the value of this underutilized real estate, and it is learning how to successfully build value in the guts of the Android platform.
It’s only a matter of time before someone will make a play for this real estate and develop the first completely advertising- and content-supported phone. Why?
The benefits to the market are endless. First, the cost of manufacturing a mobile device is relatively low compared to the value of this volume of rich, digital user impressions. With some simple math, you could see how a company could profitably fund a person’s device and supporting services just via serving home-screen advertisements.
Second, the opportunities for creating tremendous brand experiences are enormous because of the interactive nature of the mobile device screen. Third, in exchange for a free service and/or device, consumers would happily exchange information about their location, purchases, behaviors and other insights to allow marketers to hypertarget ads, as well as easily drive them directly to a relevant app or website.
So who is going to be the first on the market with a free service? Facebook seems like the most logical player, but I suspect they won't be first to market, as they’ll want to get the user experience right first. Microsoft is a contender and has the most to gain and least to lose given their distant sub-5% market share for Windows Mobile. It would be a hugely interesting play for them to try and disrupt the existing ecosystem with a free advertising supported phone.
Google has its Google Now product, which begins to touch on the home-screen value proposition, but it has to be very careful not to squelch Android competition for the home screen and potentially set off government antitrust alarms like Microsoft did by having its IE browsers shipping by default with the Windows operating system.
But I think what is most likely to happen is a team of ex-Google or ex-Facebook engineers will take the VC-backed startup route to develop the model. And I believe they will fail the first go-around. It is going to take a while to get the economics right; phone costs will drag the company under water because it won’t have mastered the consumer experience. But once the formula for an incredible mobile user experience is refined, the future of mobile advertising will change as we know it, and many smartphones on the market will be completely free to the user, in exchange for highly targeted and opt-in advertising on the home screen.