• by March 29, 2006

In the mobile content space, watching video on mobile phones remains in its infancy in the U.S.; only 3 million U.S. users will watch any sort of video on their phones in 2006, according to a new report from eMarketer. The report indicates that paid services delivering video clips or live TV have only been adopted by between 300,000 and 400,000 users.

But the market researcher projects that by 2009, 36 million users will be watching video on their phones. The flip side is that the number of users willing to subscribe to, i.e., pay for mobile content services will remain less than 10 million.

U.K.-based visiongain, a market researcher, projects that mobile marketing and advertising will grow to $1 billion in 2009, from $255 million Europe and the U.S. The growth is attributed to the increasing availability of multimedia content that has opened opportunities for sophisticated forms of mobile advertising. Visiongain says that as content that already incorporates advertising, like live TV programming, makes its way to mobile handsets, brands and entertainment content providers are beginning to see the value of presenting complete multimedia ads with programs.

The researcher notes that operators in the U.S. and Western Europe are currently either testing various forms of advertising with 3G services or are allowing ads to be served on their portals. A number of multimedia companies will launch advertising in 2006 within their multimedia offering. When search engines enter the mobile world, there are still more opportunities.

"The mobile phone is a very personal device that most people carry with them 24 hours a day. It affords advertisers an opportunity to present very targeted and time-sensitive information that is of interest to the user. That is a key advantage. With customer permission, advertisers can collect valuable demographic and behavioral information to hone the marketing message," said visiongain analyst Marcia Kaplan in a statement.

"3G technology enables the delivery of richer content to mobile phone users, but there is a limit to how many additional charges and subscriptions mobile phone users will accept. At some point, content will have to be sponsored or partially subsidized by advertising," Kaplan continued.

Visiongain notes that business models and revenue sharing agreements need to fall into place, as well as the type, length, and frequency of ads before the mobile content space can really take off. Operators will have to walk a fine line between maximizing the revenue potential of advertising, while at the same time not risk alienating subscribers and increasing churn by doing so.