The Third and Fourth Screens

Microsoft’s strategy for its emerging advertising business is interesting.

Given that the first screen (TV) is not one they can dominate and the second screen (Internet) is one that they missed the opportunity to dominate, they are working hard at dominance on the third and fourth screens, that being cell phones and games.

Microsoft has already purchased Massive which many believe is the leading provider of in game advertising solutions. If Microsoft manages that acquisition correctly, it can be a bigger player advertising in games than its Internet competitors Yahoo! and Google.

And the Wall Street Journal reported on friday that Microsoft is close to sealing a deal to acquire Third Screen Media which is one of the leading providers of advertising on cell phones.

Cell phone and in game advertising are both miniscule compared to internet and television but they are interactive, measurable, and may represent as much or more consumer face time as the internet and TV does already.

So these seem like smart moves to me.

A lot will hinge on the ability of Microsoft to manage these acqusitions.  The problem with buying companies is that the people eventually leave. AOL made a very smart acquisition of advertising.com several years ago that has made them a significant player in the online ad network business, but now that they key people are leaving advertsing.com, there is a big question about whether AOL will be able to maintain the momentum of advertising.com.

The same question lingers over these acquisitions by Microsoft. But I applaud them for taking the initiative and wish them luck with them.

Comments

[mark slater]

Third screen is far less significant fred than you might think. 3rd screen is in a category of wireless marketing enablement platforms that have largely failed as a category to set the world alight. Such others are Enpocket, Upoc, M-cube, and on and on - over 20 as of our research last month.

Their market and approach is fraught with potential flaws in the model. one time VS recurring model (they are selling campaigns which ever way they want to slice it) - lack of take up in WAP use - carrier bureacracy - which your partner brad seemed to know alot about, - questions over data plan use and the potential proliferation of free SMS through this IP gateway, WISPAM, aggregators and so on.

Now 3rd screen may be doing something different, and i wish them well, but as someone that has sold and is in the process of buying in this sector - i fail to see why MS is in this? its not tech. And i dont believe they buy customers.

[Giordano]

There are several non-US companies operating in the same space with better business models, revenue streams and products than Third Screen. Mobile is one of the few industries where probably you have to look out of the US to find excellence.

With the same worldwide vision, it´s obvious that mobile content is potentially a much bigger business than Internet content, since there already are nearly 2 billions of mobile phone versus much less Interet users.

[Robert Dewey]

Isn't advertising within a cell phone kinda like advertising on the internet? The only way I see ads via cellular devices making a big impact is if they are presented in the same manor as they are on the standard web. For example, if I go to the mobile MySpace or mobile Yahoo site, then ads would be acceptable. If we're talking about spamming via text messages and cold calls, that's something completely different.

Thoughts?

[Giordano]

Well.. there are tons of mobile advertising biz models. Apart from the "spamming" one, that obviously works (barely) only in short term and pisses off everyone, since mobile is the most personal media around, models already deployed include:
1) Ads in mobile search (a la adwords)
2) Ads in WAP sites (banners etc.)
3) SMS marketing campaigns (shortcode on consumer product, send sms to enter sweepstake or similar... some of those generate tens of millions of SMSs)
4) Bluetooth marketing (I pass near a bluetooth enabled point, and it asks me if I want info and/or free relevant content... for example, in front of movie teathres).
5) Interactive SMS advergames
6) WAP push-based marketing to access data rich promotions
7) Location-based marketing and advertising actions
etc etc.. there are several others, those are the first I can remember.
Surely, some are similar to Web ones, but others are completely typical of SMS. Right now, SMS marketing campaign linked to sweepstakes, protomotions etc are by far the most effective.

[mark slater]

But back to the point - Why is this attractive to MSFT? i'd be amazed if it were.

[Greg]

Eh. Advertising in games is vastly overhyped; it makes sense for <25% of games (sports and racing, yes; fantasy no), and at present Massive's model is feasible only for PC games and the few users of XBox Live. As for "dominating the third screen," meaning mobile, MS has been notably ineffective at spurring adoption of Smartphone OS, because nobody else in the value chain wants to surrender that much power to them. That future belongs either to Symbian or Linux for small devices.

[Altay]

But, Fred, doesn't it seem like the "first/second/third/nth screen" distinction is becoming increasingly arbitrary?

As we're already seeing with screen 1 (TV) and 2 (internet), they'll probably all just be different ways of accessing the same big pool of content. Won't the ads be tied to the content, rather than the delivery platform? A few years down the line, if you're still using Gmail, you'll probably be looking at Google ads when you read email on the go.

Gaming will certainly be the laggard in convergence, though, for two reasons: a) it requires specialized hardware that you can't yet pack into a mobile, and b) the nature of the user interaction is so different compared to any other kind of content. So I'd definitely agree that Massive was a really smart purchase for Microsoft.

Speaking of games, when you say "the first screen (TV)," are you referring to TV-like content -- short-length videos -- or do you mean "the media hub in your living room"? If the latter, Microsoft is arguably positioned pretty well, with the success of the Xbox.