With a certain inevitability, the first (I think) company has announced that they’ll be offering a free mobile phone service if users agree to watch ads on their phone. The more they watch, the greater discounts they get, until the 3G service becomes completely free.
The company in question is Israeli based, Orange.
This sounds like a flashback to 1999, when we had these kind of business models. Certainly, someone launched a company offering free computers in exchange for ads. Buy.com decided to sell high priced products at a significant loss and intended to make up the difference through ad sales. And someone even launched a free search engine service, with the crazy idea of making money through selling ads. So, there’s nothing wrong with the concept then!
But I’m very sceptical about this one. As you know, the ARPU in Israel currently stands at $36.36 per month. (If you’re not from these parts, ARPU stands for Average Revenue Per User). So, that’s what they need to cover in advertiser contribution to offer it free.
This seems awfully high to me. If you look at in Cost per Thousand terms on the web (and I know there’s other ways to do it), you’d have to see between 24 ads a day (at a really high $50 CPM) and 240 (at a more realistic $5 CPM, which isn’t that low either), which seems a lot.
It’s not just a lot to watch, but it’s a lot of ad inventory to sell too. And if I sign up for the free service and there are no ads to send me, I’m going to be very unhappy at having to pay my bill when I was promised that I wouldn’t have to.
One of the other issues with this sort of idea is that it tends to attract people who are money poor and time rich. In fact, as New York business consultant and author Rita Gunther McGrath is quoted as saying:
‘The people advertisers tend to want to reach are the ones with more money than time. So you actually create a self-selected group of particularly undesirable users for many offerings if you offer this to the general public,’
Finally, my problem with this idea (and you’ve probably noticed I’m really not that keen on it) is that it looks at the user and advertiser in completely the wrong way. It sees the relationship in a very old fashioned light as advertising that is something that’s inflicted on the viewer or has to be endured in some way to get at the good (non-advertising) stuff.
If you’re a contemporary marketing thinker, you should be over that way of viewing the world. You should know that the key is to engage with your customers and produce marketing that they want to see. That they want to seek out and tell their friends about, that uses the IDEA principles that I wrote about before. Advertising must offer the recipient:
Information
Deals
Engagement
Advertainment
In other words, add value to their lives, not to seek to waste their time with rubbish they resent.
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