Is Mobile Best for Branding or Transactions?
Rhythm Bets on Branding!

Interview with Ujjal Kohli, CEO of Rhythm New Media, one of the leading mobile advertising startups. Ujjal believes that mobile is best suited for Branding as opposed to Transactions. Rhythm has launched a successful ad-funded video service with well known brands and recently announced impressive numbers: 15% subscriber penetration in 3 months, and 75% ad message recall rate. We interviewed Ujjal at the Cannes Lions Advertising Festival - read more to see Rhythm’s strategy and future plans. Also see the article on the ad-funded video service that Rhythm is running for 3UK, and the latest press release from Rhythm on off-deck banner ads.

Hi Ujjal. First, could you tell us why you decided to start up a company in mobile advertising?
I got interested in the world of advertising first through my work at AirTouch, and then in late 90’s and early 2000 watching the development of online advertising. I started to think about what’s the next very large problem in advertising that one could solve.

Online advertising has done a great job of what I call “transactional” advertising, where you want the consumer to engage, click, and buy something. But no one has yet really addressed the issues of “brand” advertising, where an impression is made just to warm up the consumer. You want them to know you, you want them to like you, but you are not trying to sell them anything at the moment.

Television is the king of brand advertising, but there are some problems and these account for a lot of money. So I started thinking how one could come up with a solution.

What is the basic premise behind Rhythm?

We wanted to offer something of great interest to consumers, and great value to operators. Our first service is free, ad-funded videos, where the ads can be targeted by age, gender, and can also be varied by viewing pattern, frequency capped, storyboarded, etc.

We offer a turn-key service. First we source the content that we think will be of interest to consumers – in this case short video clips. Then we sell the ad inventory. And finally we have systems that can stitch the ads into the content at the very last minute and deliver it without delay.

(for an example of the content and ad service from Rhythm, see post on the 3UK service)

Most advertisers and agencies say that one of the biggest barriers today is the lack of measurement capability in mobile advertising. Are you addressing this issue?

In ‘transactional’ advertising, measurement is sort of built in, as the number of people that click is a pretty good indication of how well the ad worked. This is why it’s so accountable and growing so quickly, people like that. In the world of brand advertising, classically you run your TV commercial, then a month later you engage an agency to run a survey or a focus group. They comeback to tell you if the ad worked, but 3 months have elapsed. In our case there’s a measurement tool running in the service itself - people take a survey directly on the phone. There are simple questions about whether they remember the ad and what they got out of the ad – so its basically ad recall and message recall (for more details, see the post on the the 3UK service). So its very simple, but an advertiser can start a campaign and have results 2 days later. And the results have been very good.

I feel it is the worlds most advanced, most real time brand measurement tool. I don’t know anything else like it in any media.

What is it about mobile that you think makes it such a good medium for brand advertising?

Several things. First of all, it’s an “uncluttered” medium and an immersive, full screen experience. Unlike the PC, viewers don’t have a chat screen open and an email screen open at the same time.

It’s also not like you have a TV-style commercial break where 6 ads go by so you might want to put down the phone and go to the kitchen. And there is no ad-skipping like with a Tivo. So it’s not surprising that the recall is very high.

So let’s talk about targeting.

Our belief is that it needs to be done just right – under targeting or over targeting can be a problem.

Most advertisers that are trying to do branding on mobile phones are big brands with big budgets and the ads will also be running on TV. The target framework for brand ads is generally two or three variables at most. The first two are always age and gender – that is how TV is bought. On top of that if you can have some sense of spending power – that’s as far as brand buyers can go on a very large scale.

There are other variables we can use for targeting. For example an advertiser like Nike may decide they only want to be on sports content. Or for movies and cars, and advertiser may want to do Thursday night, as Friday and the weekend are the big shopping times for these items.

So that is all possible, but in general the targeting for branding is age and gender and income, that’s all the eco-system can support at scale.

What about location information?

Real time location as to where the subscriber is at this moment might be more relevant for transaction advertising. When you think of cars or consumer packaged good, its far less relevant to them where you are standing at this very moment, what is most relevant to them is whether you fit the demographic profile they want.

Storyboarding is an interesting concept, do you have experience with that?

We have the capability for precise storyboarding, but have not implemented a campaign - yet. Another thing we are about to offer is a combination of brand and transactional ads that are coordinated at the individual level. So you might say: “show the individual my video ad that has the brand proposition 3 times. Once they’ve seen that, then show them the banner 4 times that actually makes an offer”.

You said that most advertisers who doing branding ads on mobile are also on TV. Do they use the same creative, or develop something specific for the mobile format?

What we have seen so far, and what I think we will see for the next 6 months is that advertisers are taking TV commercials and re-purposing for mobile. We at Rhythm have editors that can take your ad and tweak it, and make it nice for mobile. It works reasonably well, but it’s not spectacular.

Given the momentum that we have, we’ll soon get to a phase where people will make separate cuts for mobile, and then finally we’ll get to a phase with entirely made for mobile ads. Making video ads is expensive, so until the medium has a certain momentum, it’s hard for agencies to justify making a made for mobile video ad.

In your view of the overall market, what things do you think are holding back the emergence of mobile advertising?

I think that first of all we have to get a workable “Eco-system” going. By eco-system, I mean there are three sets of players that have to play together in a way they never have before. The three “gorillas” are the people who provide content, the advertisers, and the mobile operators. They are all very large, very successful companies that have to adjust to a comfortable way of doing business together. There’s a lot of push-pull still going on as to who owns what and who’s really in charge and how the pie should be split.

Secondly, I think standards will help a lot. If not, it will confuse the ad agencies. Regarding ad formats, they know how to make a 30 second TV ad, and they know how to deal with print, but mobile is still awfully complex. Another standard is regarding terms and conditions for sale of media. In TV, people can make deals on the phone because the T’s & Cs are well understood – you don’t negotiate a new terms sheet each time. The internet took a long time to reach this level, and I don’t think mobile is there yet.

What about the consumers, are they ready? The agencies?

I think the consumer is ready, absolutely. In terms of the agencies, I don’t think they are, but mostly because they don’t see an eco-system to engage with yet. If they saw all the players together offering them a simple way to engage, they would be all over it. Every agency has someone with a business card that says “mobile” on it, and they are looking at it. But at the moment they don’t know what to actually do when they get to work on a Monday morning.

Lets talk about the importance of pricing.
Well, clearly the “free” element helps a lot. If you ask someone to make ads for mobile they always say “how many people can I reach?” When you offer things for free, you get explosive growth in consumer adoption– our first month ramp up after launch was faster than YouTube.

When we say “free”, we actually mean that the service we offer with 3UK is in fact “zero-rated”. This means that there is no charge at all for the data – the customer doesn’t even need a data plan. So you could even have a prepaid subscriber whose minutes have run out so they can’t make a call, but they could still watch the ad-funded video service.

So clearly this is an “on-deck” service. What’s your view of the “off-deck” world?

The main two disadvantages in “off-deck” are that you don’t have the targeting, and you can’t zero-rate. I think that the off-deck people can really succeed in low bandwidth applications. For example with banner ads you can be off-deck because you don’t need a zero rating for that – there’s not too many bits flowing. But for video, there is no economic off-deck model possible.

One last thing – would you care to give us any predictions about the future of mobile advertising?

One very interesting question for any new media is whether the media is best for “branding” or “transactions”, and therefore which form of advertising will be the biggest. My prediction is that mobile is a better tool for branding, and in a 2-year time frame the money for branding will exceed what’s being spent for transactional advertising. Most companies are premised on the opposite assumption, but here is my reasoning.

Two things make online transactional advertising massive. First you have high-ticket, juicy items like financial services, travel, personal injury lawyers, or any high-priced goods. These generate a very high click through price. And secondly you have a very “long tail” of another 10,000 categories.

But the phone is more for impulse. So you don’t have high-ticket items - people aren’t buying life insurance, travel, or plasma screens on their mobile. And second you don’t have 10,000 categories. Once you get past the first 5 or 6 categories of products, there is really no long tail at all. So until people change their buying behavior and start using their phone to buy plasma TV’s and search for thousands of other items, I am hard pressed to see how there will be a lot of mobile transaction advertising.

However, when people are enjoying short video clips, which is a TV like entertainment experience, then car brands are in, clothing brands are in, movies are in, CPG are in, restaurants are in, every large category is in. These are the advertisers we’ve got on our service, and this is why it’s my theory that branding is where the big money is.

Thank you very much Ujjal.

Ujjal’s closing slide from his speech at Cannes Lions

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