Many large retail brands are starting to manage their mobile marketing development in-house, instead of using service providers. How will this change affect mobile marketing in the future?
One guess would be that the competition would increase greatly with less fish – a.k.a brands – in the sea looking for services such as application and mobile Web site development, database/CRM, location-based services, QR code efforts, SMS/MMS and mobile video.
“Generally speaking, it is smart for companies that can afford it to take as much mobile technology as possible in-house via acquisitions,” said Wilson Kerr, vice president of business development and sales at unbound Commerce, Boston.
“By acting fast, they’re out ahead of the curve and block their competitors from using these tools,” he said.
Buying up mobile
Amazon has been acquiring mobile companies like Snaptell and Yap, PayPal bought Fig Card and VeriSign, and Walmart brought its app development in-house through its purchase of Small Society.
Left and right the industry has been seeing mergers and acquisitions. The daunting part is that a lot of this M&A activity is brought on by big brands that are truly investing in mobile long-term.
Is this good for the industry? Yes, because it means that companies finally understand that mobile will end up being one of the most disruptive technologies of the 21st century.
On the other hand, if there are fewer brands that need to turn to mobile marketing service providers like app developers, LBS providers and others, then these companies may be at risk.
“There is a big difference between technology or payment platform giants like eBay, Groupon, and Visa and a consumer-direct retailer like Walmart,” Mr. Kerr said. “Walmart stands out, because they have embraced a holistic, long-term strategic vision regarding the impact of mobile and social commerce.
“And they are investing heavily,” he said. “They acquired One Riot for ad targeting, Kosmix for social media search and, most-recently, Small Society, a mobile agency.
“They not only lock up the technology, but the hard-to-find, fresh-from-the-mobile-front-lines personnel. Walmart Labs has 60 employees and another 25 openings listed on their site. They claim to be defining the future of commerce and mobile clearly sits as the cornerstone of this roadmap.”
Retailers with mobile teams
In 2012 expect that more retailers will bring services like check-ins and deals in-house and incorporate them into their branded apps instead of working through third-party apps such as foursquare and Groupon.
The consolidation that is going on in the mobile industry points to the importance of mobile to retailers and the overall growth in retail apps. It is also evidence of the fact that retailers are looking for more control over their customers’ mobile experiences. They don’t want to have to share their data with third parties.
Expect to see further consolidation among app developers in 2012.
Online guys go mobile
Deloitte’s purchase of Ubermind last week points to an increased interest by old-school Internet companies to jump aboard the mobile train. Deloitte wanted to amplify the professional services it offers to brands.
Another example of a traditional Internet company investing in mobile includes WPP’s launch of Possible Mobile, a mobile commerce agency.
There have been 41 mobile-related acquisitions worth approximately $780 million in 2011 and 39 investments worth $314 million. Mobile marketing deal activity in 2011 increased 150 percent from 2010, according to Petsky Prunier’s summary of 2011 M&A and investment activity.
Service providers are also consolidation in the mobile space. Some of the noteworthy mobile acquisitions in 2011 included Motricity’s $93 million deal for mobile marketing provider Adenyo, Augme Technologies’ $45 million purchase of mobile marketing firm Hipcricket and Lenco Mobile’s $42 million acquisition of mobile marketing company iLoop Mobile.
“The recent acquisitions we’re seeing in the mobile space bear striking similarities to the Agency of Record (AOR) relationships that formed in the traditional advertising sector 50-plus years ago,” said Jessica Legg, product marketing manager at Digimarc, Beaverton, OR. “In the Mad Men era of agencies, we saw a model established where brands created retainer agreements with big ad firms—based on the two-for approach of tapping a resource with a broad range of capabilities at an all you can eat price.
“But those glory days are gone, as the media landscape has become more fragmented and complex, the Agency of Record is in decline—because no agency can do all things well,” she said. “Less CMOs are hiring traditional creative AOR’s, and instead are opting to work with a mixture of firms with highly specialized areas of expertise, including mobile service providers.”
Brands that still have traditional AOR’s are still funding big budget programs with other service providers—often because their main agency does not have the bandwidth, is not agile enough, or does not have expertise in that area, per Ms. Legg.
“There are some comparisons that can be drawn to what’s going on in the mobile arena,
” Ms. Legg said.
“No developer can be all things. Unless a brand has the capital and a justifiable amount of ongoing work in each area to acquire mobile firms across the spectrum of capabilities—there will always be a market where mobile companies with unique and compelling service offerings will thrive,” she said.
“It’s up to mobile service providers to find out what the thing is they do really well, and do it better than anyone else.”
So is all of this mobile M&A activity good or bad for service providers?
Brennan Hayden, vice president of WDA, East Lansing, MI, believes it is good news.
“These acquisitions are a welcome validation that competent mobile executions are critical to a healthy marketing program, and that expertise is in short supply,” Mr. Hayden said. “With these acquisitions, it is now in even shorter supply.
“Even for those vendors looking to do business with the companies mentioned, I would go so far to say that the volume of external expenditure on mobile services at these companies is about to increase dramatically,” he said.
Mr. Hayden believes that the volume of work still exceeds the resource available, and the acquisitions are being made primarily to provide leadership and core internal functionality that necessarily resides in-house.
Once these essential elements are in-place, the ability of these acquiring companies to out-source will increase, simply due to the speed at which they need to move, per Mr. Hayden.
“The bottom-line in that you can’t outsource what you can’t manage, and you can’t manage what you don’t understand,” Mr. Hayden said. “That has been the fundamental problem in mobile marketing budgets for years.
“These acquisitions mark a very encouraging turning-point in this regard,” he said. “Companies can no longer punt on the subject of mobile marketing.
“They have to get serious, they have to understand and invest in that understanding. These acquisitions are a sign of that investment, and I would suspect there are definitely more to come.”