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Upcoming Data Caps on Mobile Phone Plans could have a chilling effect on Advertising

by Scott Hoffman on June 22, 2010

Recently both both AT&T and Verizon announced that they will institute new data plans that will cap data usage over their networks. This cap will have a chilling effect on advertising. The reason:

Consumer will have an economic reason, real or perceived, to NOT click on mobile advertising. Every click on a mobile ad, and the data to deliver the advertisement to your mobile phone will be counted against the cap.

This behavior will be exacerbated by Marketers who deliver a more engaging mobile advertising experience. In my experience, the more engaging an advertisement is, the more data it will require.

Take for instance the Apple platform for iAds. The video below is from June’s WWDC, in which Steve Jobs, CEO of Apple, gave a demo of iAds. In the demo, he showcased three advertisers, Nike, Toy Story 3, and Target.

If a consumer had done the same “demo” on their own phones over a 3g connection, it would have required roughly 14MB. That is 7% of the monthly cap on the entry level data plan from AT&T (200MB for $15 a Month); the equivalent of $1.05 of bandwidth charges. (Methodology below video)

While the demonstration looked cool, once the average consumer gets wise to this (unintended?) byproduct of the new data plans, they will think twice about clicking on mobile advertisements.

14MB figured from listings in iTunes app store, Nike App = 7.3MB, Target App = 2.0MB, Toy Story 3 App = 4.7MB (Averaged from other two Apps)

Let me know what you agree or disagree.

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