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According to the most current US Census Bureau (2004), the US median household income is about $44,400, with a mean of about $60,500. Brian Wieser (of Magna Global) wrote in his July 2006 edition of Madison and Wall that “in 2005, only 27% of households earned more than $75K, while 39% of households earned between $30K and $75K, and 34% of households earned less than $30K.” He also wrote about income distribution inequality caused by economic growth even as average household income rises.

I think this impacts the business models for media consumption by the masses. DVR subscription services and pay-per-download online video have revenue streams. However, their adoption is encroaching on saturation levels of early adopters. Paying a monthly DVR subscription fee (on top of regular, already-rising, cable/satellite tv fees) and/or $1.99 per episode of a tv show on iTunes, may turn off those not in the top 27% percentile of household income. The majority of media consumers would rather not pay, preferring to consume free content on tv and/or radio in return for viewing ads. Nowadays, consumers are savvy enough to make that trade-off themselves. And giving them that option allows for self-selection, leading to win-win for both sets of consumers.

Research has shown that consumers are willing to view advertising in return for free content, regardless of distribution methods (old fashion over-the-air television, online streaming video, etc…) Of course, relevancy and entertaining are important factors to an ad’s effectiveness. That is exactly what Joseph Jaffe emphasized in his book “Life After The 30-second Spot”. When it comes to new media (online video and the like), original ad content is more effective than repurposing an existing ad from television. Moreover, there isn’t any rigid time constraint anymore. And repetitive ads are annoying the consumers.

A company called Spot Runner may help ads be more relevant (by location anyway) and less repetitive. By making it easier and cheaper for businesses to advertise on tv within their local area, those ads become more relevant (location-wise) to their audiences. Moreover, households who don’t subscribe to DVRs services (and skip ads) tend to be households that frequent local businesses more-so than higher-income households who skipped ads with their DVRs. So, Spot Runner is targeting to the right self-selecting audiences, whether by design or serendipitously. The more local businesses advertise on tv, the more variety of ads will be available and repetition is reduced. Well, one can only hope.

Note: email me directly (kwlowwg01 (at) g mail) if anyone wants a copy of Brian’s paper. It’s not available for download online but I can forward the pdf.

he's got the whole world in his hand

Last week, MobiTV received $70M for their 3rd round of funding. That’s a lot of money for a $10 monthly service that cracked its 1M subscriber back in early April 2006 – That’s at least $10M in monthly revenue. Since they are mum about their future plans, one can only hypothesize that those plans might include driving adoption further with more streaming TV services (advertising & promotions won’t use up that much funding) and most likely, developing new products to stream those TV services to and through different distribution methods. Well, Moconews.Net suggested those. I am inclined to believe that they would try to set up some advertising platforms to subsidize streaming content and bring down subscription fees.

Some stats to back this up - Emarketer reported that by 2009, 36M users would watch video on phones (that’s a little less than 10% of the US population) but only less than 10M of them would be paid subscribers. These early adopters are willing to pay a premium for bragging rights. Another Telephia report pegged that mobile tv subscribers pay about $40 more ($94 versus $54 on average for non-tv mobile subscribers). With these numbers, it’ll be difficult to convince the mainstream to pay 75% more (~ $40 / $54) to access mobile tv content. So, advertising would have to make up the difference in order to drive further mobile tv adoption.

Using to the anecdote that “consumers do not hate advertising, they only hate irrelevant ones” as a guide, mobile advertising is a brand new unspoiled world that advertisers can start afresh in. With so much is learned recently from web traffic analytics and even online behavior targeting, those disciplines can be translated to mobile traffic, in order to stream the most relevant ads to mobile users. I think creating a good user experience is crucial to fast adoption. In short, for mobile ads to be accepted, they have to be

(i) free to users (no costs to minutes, data streamed, etc..)
(ii) relevant to content or user (context or behavior targeting)
(iii) pleasant user experience
(iv) most importantly, mobile ads have to be “opt-in” – (not a problem if they are incentivized properly)

Also, the young users that advertisers are supposed to covet, are also not earning enough income to pay for premium subscription fees. The same Telephia report also stated that 18-24 year-old subscribers has the highest penetration rate for mobile tv and video usage, more than 2x national average (at 1.5%). That rate can only be higher if their barrier to entry (ie premium subscription fees) is lowered. So, double reasons for advertisers to subsidize content.