Telefonica Stakes A Claim On The Mobile Ad Space: Six Million O2 More Users

Do mobile operators have what it takes to be a killer force in the mobile advertising industry? Telefonica’s UK mobile operator O2 has recently released some figures that — while they might not be a sign of operators definitely winning in that space — certainly show they are out to be a contender against the Googles and Apples of this world: it says that six million of its subscribers in the UK, 23 percent of its user base, have opted in to its mobile marketing and advertising service, O2 More.

Advertising is one of the fastest-growing mobile services around: Gartner forecasts that mobile ads will bring in more than $20.6 billion in annual revenues worldwide by 2015, compared to $3.3 billion in 2011, as operators, Internet giants, agencies and dozens of specialized mobile ad outfits all vie for a piece of the pie. But even so, that number is tiny compared to tens of billions of dollars that mobile operators collectively make from basic offerings like voice, text and data plans on a quarterly basis.

Still, the promise of generating even more revenue from customers — and the desire to make sure the likes of Google (NSDQ: GOOG) do not control the game — has continued to drive operators to mobile advertising to try their luck.

O2 says that the six million users signed up to O2 More works out to more than the number of people who tuned in to the premier episode of this year’s Big Brother series (5.1 million), and more than the circulation of the News Corp-owned Sun (2.8 million), the country’s biggest newspaper.

O2 has attracted some high-profile advertisers for the platform, too. They include Starbucks (NSDQ: SBUX), McDonalds and consumer-goods giant Unilever. A lot of the ads on O2 More are delivered to users using one of the least fancy features on the phone — messaging — which gets turned into a more enhanced service when combined with newer technologies like location-aware targeting and video.

In fact, O2 claims that part of its success with the service so far has been down to its targeting technique: those who opt in for the service are asked about their preferences, and then these are combined up with data that O2 keeps on users, such as phone usage and location (especially location). Together these are used to deliver what O2 calls “highly personalized” ads.

“Most forms of mobile marketing are still trying to replicate the web with banners and those kinds of formats,” Shaun Gregory, MD of O2 Media, told mocoNews. He claims that O2 offers an “intelligent conversation” with customers. “Everything that is delivered to customers is relevant to them,” he says.

Gregory says that a campaign earlier this year for Starbucks sent out nearly 300,000 coupons to all opted-in O2 users within half a mile of a Staurbucks — it was for 50p off a Via instant coffee — and 14 percent of users redeemed the coupons, and in all 93 percent said later that they recalled the ad.

While O2 More has been going for nearly two years, it now looks like O2 is starting to build out more services around the basic marketing platform. In August, the company launched a new service, Priority Moments, which offers users Groupon-style deals on selected services and goods as a part of the marketing service.

Gregory says that another enhancement that will be in place by the end of this year is billing: customers will be able to redeem that same Starbucks coupon but make the payment directly with their devices. Ditto integration of O2 More with the company’s free, UK-wide WiFi effort.

There is also the prospect of extending O2 More to other operators in the Telefonica (NYSE: TEF) footprint: that, at least, is the promise of Telefonica Digital, the new initiative announced last week that will bring together all of Telefonica’s “new services” to look at how best to extend them throughout the whole operation.

One down side here is that O2 is not yet releasing any numbers on revenues from these marketing services — and definitely no figures on whether they are turning a profit. That lack of transparency leads one to wonder if the company is making much at all out of this. Reach can be a deceptive metric in the mobile advertising game: it doesn’t amount to much if advertisers are not also in play. O2 More may have more eyeballs than Big Brother, but it only amounts to something if enough advertisers care.