Author(s): Kester Mann
O2 in the UK recently announced a deal to buy out network partners EE and Vodafone from their joint venture, Weve.
The decision to break up Weve was perhaps unsurprising given the mixed fortunes it has endured since launching in 2012. These culminated in the abandonment of its mobile wallet project that was scheduled to launch early this year, with a principal reason likely to have been strong competition from services such as Apple Pay and Google Wallet.
Operators have a somewhat dubious track record in collaboration, and going it alone may enable them to more effectively offer services. EE says that it has a market-leading contactless service in Cash on Tap, while Vodafone is promoting its SmartPass mobile payment offering.
O2 has not fully withdrawn from mobile payments — the company is investigating a mobile parking scheme and continues to allow customers to buy iTunes vouchers through their mobile bill. However, it sees greater potential in the fast-growing mobile advertising opportunity. Director of digital at O2, David Plumb, explained to me that the company's heritage in digital services places it on a firm footing to make the venture a success. Mobile advertising clearly plays to the strengths of operators as they sit on a wealth of data including demographics, location, affluence and Internet browsing habits.
Mr Plumb said that Weve will achieve greater scale by bringing on board O2's 14 million Wi-Fi and 6 million Priority customers. The larger amount of data will prove more attractive to advertisers, and Mr Plumb added that being accountable to a single shareholder makes the venture more agile and efficient.
According to O2, the UK mobile advertising industry nearly doubled in 2014 and is worth about £850 million. This seems certain to increase strongly this year given the inexorable growth of connected devices.
Mr Plumb pointed to Monarch as a customer case study — the airline wished to promote discounted flights, and Weve identified a target segment of people aged 25 or over living within one mile of selected airports and with a keenness to travel. The resultant campaign saw an impressive 28 percent response rate.
Privacy is understandably a principal concern, but O2 says it has stringent rules that ensure data is completely anonymised and not shared with third parties. Another important consideration is the frequency of messaging — O2 expects that subscribers will only tolerate one or two adverts per week. It justifies this by saying that only about 2 percent elect to unsubscribe each time.
Operators are right to consider investing in new segments as revenue from traditional sources continues to fall. O2 has already achieved success in the nascent smart metering sector, and a greater push into mobile advertising could help to turn around its financial performance.