RNM's U.K. Closing Signals Slow Mobile Video Uptake

Rhythm New Media’s decision to pull out of the U.K. market last week suggests that consumers and advertisers aren’t taking to mobile video as rapidly as some had expected. Meanwhile in the U.S., users appear to be embracing the format.

RNM specializes in pre-roll mobile video advertising, and has provided technology and sales for some of the U.K.’s major mobile network operators and publishers. Ultimately though, it appears it has struggled to generate revenue from a stagnant U.K. user base, forcing it to concentrate on more lucrative markets. The company also said it will shutter its office in India.

“We have decided to build on our recent successes in the U.S., and focus on this market. In making the shift we have decided to close our offices in both London and India,” a company spokesperson said in a statement e-mailed to ClickZ News.

RNM had relationships with major European network operators, including 3 Mobile, Orange, Vodafone, and T-Mobile. The firm had also secured deals with publishers such as CBS, EMI, ITN, Ministry of Sound and Sony BMG.

RNM declined to comment any further on its U.K. closure, but in reference to the Mountainview, CA-based U.S. operation, the spokesperson stated, “We feel we are accurately positioned for future growth.”

“[RNM] was probably banking on a more sizeable U.K. audience,” said Alistair Hill, analyst at comScore m:metrics. “There’s a reason for them to be and a place for ad-funded video, but there are a few things working against them in Europe at the moment,” he continued.

According to comScore m:metrics data, on demand video usage in the U.K. dropped by 6 percent from December 2007 to June ’08. Usage in the U.S., however, grew by over 30 percent in the same period.

This difference could be attributed to the relative scarcity of unlimited mobile data plans in the U.K., presenting a major hurdle for such a bandwidth-intensive medium as mobile video. As mobile operators begin to lower the cost of data plans however, mobile video usage may pick up. As far as RNM is concerned, Hill suggested the firm was just too early to market.

“Mobile itself is still very much an emerging advertising platform. Ad agencies can get their heads round mobile banner ads probably a lot easier than they can mobile video advertising. It will be a slow education of planners and buyers before they get round to mobile video.”

He added that he was skeptical of mobile video in the medium term, primarily because of a poor user experience, particularly in comparison to online video.

However, Hill pointed out that the poor performance of video was not representative of U.K. mobile advertising as a whole, and that mobile banners and SMS ads in particular were currently experiencing a great deal of activity. Although the majority of mobile ads are still for operators or mobile games companies, consumer brands such as Adidas, McDonalds and Cadbury’s are making increasing use of the channel, he said.

Despite this, mobile has seen almost a complete lack of investment in the past year, according to ContentNext’s Online Advertising Deals report, released Monday.

The report charts M&A and venture capital activity from Q1 ’07 to Q2 ’08, and concludes that mobile advertising saw no major investment in that period, despite substantial investment elsewhere in online advertising, such as ad networks.