Media: All About ... Vodafone's content investment

The operator is gearing up to be a modern media owner, Ian Darby writes.

It's been a lively year for Vodafone so far. We've witnessed boardroom splits, resignations, oustings and general turmoil against a backdrop of the sale of Vodafone's Japanese business and an interim results statement that contained more bad news for shareholders - a previously undisclosed tax bill of £5 billion and a warning that the company's growth is slowing.

There has been City and shareholder unrest at the strategy pursued by the chief executive, Arun Sarin. Sarin, who was reported to have had a bust-up with the out-going chairman, Lord MacLaurin, has responded with a radical management shake-up, which has split the company into three divisions.

Central to this is a renewed focus on Vodafone's key European markets, but another element is the creation of a new-business and innovations division, which will look to build more partnerships with content providers. Vodafone is gearing up to become a modern media owner and a purveyor of a wide array of content.

In the UK, Vodafone already offers a wide variety of content via its Vodafone Live! 3G portal in addition to other content for non-3G users.

Then, in March, Vodafone announced that it had a new UK marketing strategy linked to live music. O2 and T-Mobile are already well established in supporting live events, but Vodafone has gone down the route of creating its own content to support its greater involvement with music.

1. Vodafone launched as Racal Vodafone in 1985, the brainchild of Sir Ernest Harrison, the chairman of Racal Electronics. It has since grown to become the world's largest mobile phone company. The acquisitions of the US company AirTouch in 1999 and the German giant Mannesman in 2000, for £101 billion, helped Vodafone build global scale. It has more than 16 million UK customers.

2. In the UK, the bidding frenzy for 3G licences in 2000 opened up the possibility of mobile companies offering users a wider range of content. Vodafone paid £5.96 billion for the 3G licence that had the largest bandwidth among the five on offer.

3. Vodafone Live! launched in key markets such as the UK in late 2002. A full global launch followed in November 2004. Content on offer included TV programming, music and games. The programming included Premiership football highlights, ITN news reports and a special stripped-down version of 24. Users could access 300,000 music tracks and download them for £1.50 a time, while a selection of games and ringtones were also on sale. This didn't come cheap - the basic package, excluding music downloads, was priced at £40 a month.

4. Content is central to Vodafone's music strategy. It is creating branded content for a Channel 4 live music showcase called Vodafone TBA and a weekly radio show on the GCap and Emap networks called The Vodafone Live Hour. OMD Fuse worked on the strategy, with the Endemol division Initial producing the TV show. Behind all this is a website, vodafonemusic.co.uk, that offers customers interviews, competitions and the chance to vote in the Vodafone Live Music Awards. Vodafone will hope the stronger link with music will drive download sales through Vodafone Live!.

5. Vodafone and its rival mobile operators are in the process of launching their own advertising platforms. O2 announced this month that it is launching an advertising portal following a trial in Germany. Vodafone responded with the news that it is finalising plans for its own advertising service, expected to launch by the summer. Paid-for search is likely to feature alongside ad sites on Live!.

6. In February, Vodafone announced a tie-up with Google to integrate search capability into Vodafone Live!. Google already had a similar agreement in place with T-Mobile, and Vodafone argued the deal was necessary because of the increased volume of mobile content available. Google will only deliver results of mobile-friendly sites and it is likely the relationship will underpin Vodafone's paid-for search operation.

7. Last year, Ian Shepherd, the managing director of Sky Interactive, joined Vodafone as its director of commercial operations. He focuses on customer retention but also on developing Vodafone's sales model as it looks to leverage its content.

WHAT IT MEANS FOR ...

ADVERTISERS

- 3G portals such as Vodafone Live! offer content that is increasingly attractive to advertisers, but consumers' reaction to TV-style brand advertising on mobile phones is still relatively untested.

- In the short term, paid-for search is likely to prove the more attractive option to advertisers with the portability and convenience of mobile phones providing a powerful direct sales medium.

MAINSTREAM MEDIA OWNERS

- Perhaps they do not need to worry about Vodafone and other mobile companies as a huge threat to revenue. Figures from Jupiter suggest that mobile advertising is worth just £75 million across Western Europe.

- However, with this projected to grow to £471 million by 2010, the likes of Vodafone could become sizeable competitors to internet-based content providers.

- Mobile companies have strong links with other content providers. Sky News services are available to Vodafone users, for instance. But often, in terms of content, Vodafone bypasses rival media owners and does deals directly with producers - such as HBO and 20th Century Fox.

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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).