How going over the fiscal cliff will impact the US mobile industry
By Chantal Tode
December 26, 2012
If the federal government is not able to hammer out a new budget deal before the end of the year, the results could be disastrous for the economy. However, the mobile industry is likely to not be affected as strongly as other industries, according to several industry experts.
Talk of the United States going over the so-called “fiscal cliff” has reached a fevered pitch lately as warnings spread of the potential negative impact on the economy if no new deal is reached. The strong level of interest – during a time of year when many are with families and not glued to their desktop computers or other traditional sources of news – could give mobile a boost, as it is likely to drive up use of mobile sources for staying abreast of the latest developments.
“With regard to mobile publishing, the fiscal cliff is a top of mind topic that triggers both curiosity and concern increasing inquiries to news related sites,” said Harry Kargman, CEO of Kargo, New York . “ It will help increase adoption to mobile during this holiday season as many people in the business community who are on vacation will be compelled to stay connected.
“Mobile is a key medium to help concerned Americans stay on top of current events when out of the office and the fiscal cliff is certainly a compelling issue to watch,” he said.
The shift to mobile
Concern over the fiscal cliff could also accelerate the transition already taking place in the marketing sector, where ad budgets are increasingly shifting away from traditional media to digital and mobile media.
ZenithOptimedia recently revised its global ad expenditure projections downward, with traditional media earmarked for almost zero growth and Internet media at 15 percent growth.
However, mobile ad spend – while still a small percentage of overall budgets – is growing quickly and, with its lower costs and strong engagement rates, is likely to get another boost if no budget deal is reached.
“The reality is that with companies such as Mondelez committing 10 percent of its budget to mobile, there is a necessary shift from non-connect-screen advertising to connect-screen – mobile - advertising. This distinction is clear and growing with brands and retailers,” said Gary Schwartz, author of “The Impulse Economy” and “Fast Shopper, Slow Store .”
“Any negative news on the fiscal cliff will mean precipitous drop off on non-connected-screen media budgets,” he said.
“Brands will be looking to their agencies to show a ROE – return-on-engagement and drive to accountable conversion metrics. Two things that connect-devices with their social and proximal layers can deliver.”
Over the past few years as the economy has struggled, the mobile industry has consistently bucked the trend, with consistent growth in hiring, investment in mobile technology, consumer adoption and ad spend. Mobile commerce and mobile payments have grown as well – with the current holiday season one of the biggest yet.
The growth points to the significant shift in consumer behaviour caused by mobile.
The momentum already behind mobile will help to keep the industry moving forward even if the country slips into a recession if a new budget deal is not reached.
“If you look back over the past few years – during what everyone called the “economic downturn,” the mobile industry was one of the few that continued to grow,” said Ritch Blasi, general manager of mobile services at Comunicano, Del Mar, CA.
“The combination of new devices, applications and service plans became a way to actually curtail spending—for consumers, many dropped landline services, and for businesses -- who realized that mobility had to be a key component of their operational strategy – it offset other expenses such as maintaining office space and the equipment therein in favor of remote workers,” he said.
“Because this industry continues to grow, feeding an ecosystem that offers consumers and businesses millions of applications, services and devices…and supports growing markets including gaming, mHealth, M2M, etc…investment in network capacity, quality and coverage as well as hiring shouldn’t be impacted [by the fiscal cliff]. I would expect the opposite.”
Of course, any impact depends on just how bad the economic situation becomes, with some predicting that personal incomes will be significantly impacted.
One area of mobile that could feel the pain are the mobile startups and app developers that relatively small operations – sometimes one or two people. Any increase in taxes could affect these companies.
"Personally, I don't think the fiscal cliff is going to affect mobile economically unless it triggers a recession and ad spending cuts,” said Kargo’s Mr. Kargman. “In this case, this is the least of our concerns as we are on a path back to 2008.”
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