• by Steve Smith , Staff Writer @popeyesm, April 19, 2007

That old and somewhat erroneous Web mantra that all content wants to be free is about to get a second life on mobile. This is going to be a long slow death march, to be sure, but I think the ad model on phones will not only be viable but dominant in several years. All the usual arguments about the feasibility of a fee-based content model on phones seem to be eroding.

After a solid year of arguing that mobile "convenience" and the inherent cost of the network justified the outrageous premium for over-air music downloads, Sprint finally lowered its Music Store prices to the sensible 99-cents-a-track model that operates in the real world. That is nice, and long overdue, but according to the latest Arbitron/Telephia research consumers may want an even better deal. A study of mobile audio content users (downloads, sideloads, mobile radio, etc.) found that more than three-quarters of them seem ready to swap commercial support for free content. While the carriers hoped that downloading music to phones would register as a value-add consumers would want to pay more to access, I suspect the opposite is true. For U.S. users, who have not yet embraced phones as an iPod replacement, music and streaming audio on cell phones is ephemeral media for which someone else should pay.

Vodafone is about to give us a test case in ad-subsidized content models. The global carrier announced just this week that it completed tests in several European markets and is securing ad partners for a U.K. rollout this summer. Apparently both Yahoo and Google are involved in this. Users will choose from three different models for mobile Web access and downloads: fully paid and no ads, partially paid with some ads, and free with ads. The head of Vodafone's advertising unit assured doubters that customers would not perceive those ads as intrusive because they would be targeted. Well, as I said, the death march of paid mobile content will be long. I am still waiting for the relevant ads I was promised on the Web ten years ago, so let's not kid ourselves that mobile advertising won't be intrusive in some way. What matters is that mobile ads are somehow perceived as less intrusive than increasingly expensive cellular bills.

Speaking of bills, I am not convinced that multiple models ultimately will work, either. I think consumers want simplicity and either/or choices when it comes to this kind of service. The value props are clear in free or fee, and an in-between solution only muddies things.

Arguments for maintaining tighter control over the walled garden of content also dissipate as direct-to-consumer marketing and content distribution emerge. In the last few months I have downloaded at least a dozen D2C Java programs that circumvented the carrier deck entirely. Most of these, like the Mobizines magazine reader or games from GameJump or HovR, are ad-supported free content. There have been few if any technical issues involved in these off-portal distributions. As for WAP usage, my impression is that media brands are experiencing some success pushing users to their mobile Web sites. Maxim's WAP site only launched a few months ago, and even with limited promotion it is getting between 500,000 and 1 million page views a month. More than anything else, I think the growth this year in D2C end runs around the carrier deck will help push the networks further into the ad model.

Ad support also will accelerate mobile content usage in a couple of ways. By lowering or eliminating the cost of the content itself, the model will do for mobile what it did for TV and radio -- super-charge its mass distribution. But on the mobile platform, ad subsidies have a doubly good effect. If the carriers can get themselves into that ad revenue flow, then they can justify flat fee unlimited data usage plans. One analyst of the Japanese wireless market tells me that the content ecosystem took fire there when the carriers started introducing unlimited data plans. Once you take people off of the data clock, they will use more. Ultimately, advertising is going to reduce costs to consumers and to carriers.

The writing is on the wall, and the pressure on the fee-based mobile content model is mounting from all sides. Advertising will not only become welcome on the deck; it is going to be the major underwriter and distribution engine for the mass adoption of mobile content in the U.S.