The trouble with video ads on mobile

Trouble trouble trouble….

Recently, Rhythm New Media – a company with a truly cutting edge video on mobile tech solution – and that sold the first dynamically targeted video (post and pre-roll) ads, shocked when they announced that they were pulling out of the UK. (Disclosure, I used to work for Rhythm)

Remarkable since they already had deals with 3, T-mobile, and others in the pipeline and more remarkable considering how strong and mature the UK advertising market is.

If Rhythm could not crack ad funded mobile video in the UK, we might rightly ask, who will?

One key problem though, unlike 3 most mobile operators in the UK have not zero rated the price of video usage on mobile.

Video is bandwidth hog. Rhythm managed to get good quality audio and images through a tiny hole at 100kbps for video and 12.2 kbps audio. That’s 112.2 kbps (kilobits per second). Impressive.

Lets compare.

The standard SMS message contains up to 140 bytes.
That’s 1.09 kb for one SMS.

Let’s say the average length of a video clip is 30 secs (its actually more, sometimes up to 3 minutes), plus a preroll ad of 10 secs. That leaves us with 40 secs times 112.2.

That’s 4488kb for a short video and ad compared to 1kb for a SMS.

Let’s compare some more. What about loading a Facebook page? Say when browsing with a ‘normal’ internet browser using your iPhone?

Well I downloaded my busy Facebook front page including my personal newsfeed with pics of friends and more on my Mac (yes I’m a proud Mac user!) and was quite surprised. It’s all of 220 kilobytes.

Quite big for a web page. Now kilobytes and kilobits are not the same thing. Do the conversion and you get 1760kb for the Facebook home page.

Still its less than half the size of 40 secs of artfully squeezed video.

(As an aside, this is probably one of the reasons why Facebook has created an application so users can access Facebook on their mobiles – to cut down on the bandwidth)

Nevertheless it is clear why mobile operators love SMS so. If they charge on average 4p for every message sent, and if Rhythm sells each ad for a CPM (or cost per thousand – a standard in advertising) of £40 (That’s a solid CPM let me tell you, a CPM which they normally share with the operators) the difference is striking.

The revenue per thousand from SMS messages is also £40 AND the operators don’t have to share it. But the bandwidth used is infinitely (more than 4000 times) smaller.

Video simply don’t look that good as a revenue opportunity when looked at that way. No wonder operators are not falling over themselves to zero rate video usage.

But their is also problem of demand when it comes to video.

Even on an operator with zero rated video data costs like 3, and who has customers paying for SMS, still send far more SMS than stream video. This says a lot because the group that sends most SMS, 18 – 24 year olds, are cash poor and quite price sensitive.

As Facebook’s personal news feed proved, news about our friends and interacting with our friends seem to be far more entertaining and interesting to us than a one way flow of news on distant Hollywood, Amy Winehouse and the Credit Crunch.

Which is the reason why mobile operators have been zero rating the data costs of the use of MySpace and Facebook. (See the Orange ad below promising free usage of MySpace I took on the Tube this week).

It’s something their customers really want: being connected and in conversation with their friends. A real compelling reason to switch to Orange.

For the operators it’s good news also because using and promoting Facebook is not eating the same amount of bandwidth as video would, but its making their customers sit up and take notice of their service offerings.

But the operators should be careful. Techcrunch’s Michael Arrington recently opined that his Facebook address book has almost replaced his mobile one. Facebook could easily turn the operators into dumb pipes.