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ESPN exec reveals mobile monetization tactics

BRISTOL, CT -- During an exclusive one-on-one interview, an ESPN executive chatted about the sports network's mobile strategy and discussed mobile advertisers such as automaker Lexus and gaming giant EA.

John Zehr, senior vice president of digital video and mobile productions at ESPN, oversees product development on the digital side, which includes and Internet-video property ESPN360, but his focus over the past couple of years has been on mobile. He announced the roll-out of version 2.0 of ScoreCenter, ESPN's free, ad-supported iPhone application that has been sponsored by Lexus and currently contains banner ads from EA promoting its Madden 10 game.

"We're in the world of big-brand advertising -- ScoreCenter 2.0 is ad supported, and we've seen great success so far," Mr. Zehr said. "We're seeing that as a gateway to get people hooked and then getting them to up-sell with house ads within the application pushing our paid apps.

"We have push notifications, which offer packages for premium alerts you may have to subscribe to, in addition to the more basic free alerts we offer," he said.

Media companies with a brand name as strong as ESPN's -- not to mention its trove of exclusive sports content -- its easy to attract eyeballs to the mobile screen, and brand advertisers will follow.

Lexus has bought inventory within the iPhone application as a presenting sponsor, with brand campaign elements including video.

From Lexus's perspective, the iPhone audience is early adopters, probably affluent, so the automaker is targeting a specific consumer segment by advertising within an iPhone application.

EA banner ads are currently in the application.

From a brand perspective, EA is a good example because it has the Madden game and applications in the App Store to promote, so they can run a cost-per-click campaign driving people to download its applications.

"Advertisers that mobile works well for are ones looking for a branding play and a call-to-action if they want to push their app in the App Store -- it's not easy to find something you don't know exists," Mr. Zehr said.

Three birds, one stone
ESPN's mobile strategy includes three monetization channels: direct-to-consumer via pay-per-download and subscription, business-to-business -- primarily mobile content deals with carriers -- and brand advertising.

"In the mobile space we're focused on developing handset software for the iPhone and BlackBerry, building out new products and services for our three customer sets," Mr. Zehr said. "Fans are obviously important, although I'm not sure how much of our revenue will be coming from direct-to-consumer plays.

"Most of our revenue comes from B2B -- carriers pay us to host our content," he said.

Verizon Wireless offers the ESPN MVP application on as part of the V Cast subscription service.

ESPN MVP is also available on SprintTV and AT&T Cellular Video.

ESPN also provides mobile TV content via two linear network distributors, MobiTV, which has deals with AT&T and Sprint, and MediaFlo's FloTV, which is available on AT&T and Verizon Wireless.

Both of those companies are using broadcast spectrum that became available during the digital transition. AT&T and Verizon Wireless are among the carriers selling mobile TV devices in the U.S.

Mr. Zehr had several such devices in his possession, ready to show off ESPN mobile TV content.

"Mobile TV devices haven't really been marketed that extensively, as there are certain challenges," Mr. Zehr said. "When TV was first introduced, free services launched, then pay services launched.

"Cable was marketed as having better reception and a wider swath of programming, and it was successful because people had already been introduced to it via the free networks," he said. "In mobile, the paid model has launched before free TV, and many people are not willing to plunk down $10 a month for something they haven't tried.

"Free, ad-supported mobile TV will help to accelerate growth in the mobile TV space, and in near future you'll see more and more people watching mobile TV, probably a lot of kids programming and live events, because if you're not in front of the big screen, you'll be happy to watch it on a small screen."

ESPN is investing heavily in mobile, and says that the mobile advertising ecosystem is still in its early days and has plenty of room for growth.

"Some stuff will be sustainable with ads, but I do think you're going to have to have a mix of subscription and advertising to monetize mobile platforms," Mr. Zehr said. "Newspapers have struggled with a purely ad-supported model, and mobile advertising is immature -- it's still very new, and the screens are small.

"If I'm an agency or a marketer, say, Budweiser, and I want to wow people with Clydesdales marching, you can't bring that feel to a mobile screen," he said. "The execution of advertising on mobile screens hasn't quite been figured out yet."

Location is one area where mobile has a unique advantage over other media.

"If a coffee shop owner is experimenting with mobile marketing, he can use mobile to build a deeper relationship with customers buying a latte," Mr. Zehr said.

"Local marketing will grow in popularity, because if you leverage location-based services, companies will want to use mobile to reach people in local markets," he said.

"Mobile devices are held by people when they're out and about, and their purchase decisions could be affected by what they see on their handset."

ESPN uses a mix of monetization strategies, including ad-support, subscription and pay-per-download.

However, the company -- like many publishers -- would like to see the subscription model win out, as they see it as more reliable than advertising, especially in a down economy.

"We'll continue to look where the market is going and respond," Mr. Zehr said. "The App Store has a ton of free apps, which brings value to Apple and consumers, but there aren't a lot of publishers of applications making a ton of money.

"Consumers are going to have to pay as the content and experience get better," he said. "Good quality experiences take money to develop, so as people build valuable applications, if consumers find value, they will pay."

That said, mobile advertising isn't going anywhere, and will only continue to grow in importance.

"The mobile advertising aspects will get bigger than people think, because mobile is location-aware and immediately actionable," Mr. Zehr said. "It's a screen that's indispensible to people -- everybody's got their phone all the time.

"The first thing people do when they get out of bed is check their phone," he said. "Everybody can text, you can do it from every phone, so as a call-to-action it can be the glue that connects all other media.

"Mobile is a connection point providing a chance to build relationships, and it's ubiquitous."