The risk Xiaomi runs as it admits to incorporating ads in mobile software

Xiaomi has admitted to adding ads on its in-built android software called MIUI. The software houses music apps and settings menu, according to multiple media reports. Xiaomi had responded to a media outlet and said:“Advertising has been and will continue to be an integral part of Xiaomi’s Internet services, a key component of the company’s business model. At the same time, we will uphold user experience by offering options to turn off the ads and by constantly improving our approach towards advertising, including adjusting where and when ads appear. Our philosophy is that ads should be unobtrusive, and users always have the option of receiving fewer recommendations.”Marketing has contacted Xiaomi for comment.Xiaomi's inclusion of ads on its software came as no "surprise" to industry players Marketing spoke to. This is especially as the company seeks alternate revenue streams in the form of ads. Jan Mascarina, senior marketer from Construct Digital said that Xiaomi has been open about its business model and sells its devices at near-cost and makes its margins from post-purchase upsells within its operating system, MIUI and has now added ads into it.He added that Xiaomi's business model allows its devices to be accessible to certain demographics whom previously were not able to."It gives users a choice of choosing something with slightly better hardware, and make their profit post-sale," he added.However, this business model is not new in the industry as Amazon has adopted a similar strategy with its Kindle devices for years. A cheaper version of the Kindle comes with ads, providing an affordable option for consumers and a higher priced Kindle has no ads installed in it. He added that choices are always good for consumers.Although Xiaomi does not follow the same implementation of giving a choice with ads on its hardware, the smartphone manufacturer has a wide product range. Mascarina said that Xiaomi should have been upfront about the devices which come with ads and make an exception to switch off ads function on its top-tier products."Clearer communication with which models will come with ads and which without, would help allay fears from a more discerning group of buyers. These are for buyers who aren't purchasing Xiaomi products for their price advantage alone, and ensures their phones will not start serving ads in the near future," he said, adding that he owns a top-tier Xiaomi phone himself.Xiaomi should also add an option for ads to be switched off which comes with a fee. This is because users might think they can live with ads as a trade-off during the purchase, but might change their mind after."Users who purchase a cheaper Xiaomi model with the trade-off of coming with ads, might also be the same users who are more 'price sensitive' towards data in their mobile usage," he added.A small inconvenience?Although unsightly, according to Mascarina, ads are but a minor inconvenience that users are willing to trade-off for lower cost-to-entry for better devices. This is especially in emerging markets in Southeast Asia. In addition, Mascarina also disagrees that such ads are exactly "intrusive" due to the way it has been implemented."[The ads] exist and live in-line within Xiaomi-apps and the UI, making scrolling past the ads almost a natural response, and not as pop-ups that need to be dismissed before you can get to specific functions and features," he explained.He also said that this addition of the settings menu will not "alienate" users as the software is not accessed as frequently as the other apps such as Facebook and WhatsApp, which are widely surfed on a daily basis.If Amazon could get away with its ad installation, Xiaomi could as well, he added. That being said, the move might unexpectedly alienate advertisers, Mascarina said."With how carefully crafted the ads are crafted to ensure that they do not hinder user experience too much, the ads could easily be glossed over in many instances," he explained.Other concerns would be the possibility of users not being in the right frame of mind to be advertised to as they are not exactly looking for ads when navigating their phone menus and features. This means that while ad placements within MIUI could placate the average marketer's addiction to impressions, it might not actually bring meaningful conversions.Betraying the trust of the consumer?Avtar Ram Singh, head strategy at FALCON Agency said that it is unfortunate that companies with mass scale such as Xiaomi "resort" to customer data as a source of revenue, adding that it betrays the trust of the user.It raises bigger and scarier questions about how much Xiaomi truly knows about its users."Our lives are lived online, so Xiaomi technically should be able to know far more about its consumers than the likes of Facebook or Google would, purely because they own the entire physical device you're using," Singh explained.As such, this places bigger brands such as Apple in a "stronger position". Singh explained that when Apple came out earlier this year and said it would never monetise user data, this was the exact situation they were looking to avoid. It was also to address questions that they were looking to avoid ever answering.Pradeep Harikrishnan, CEO of IPG Mediabrands Indonesia said that advertising itself is "intrusive", yet is accepted on every medium. He added that by making the ads "more relevant" such as using the user interests as context could be adopted by brands to not tip off its customers.In addition, Harikrishnan said that brands could also have a frequency cap to the number of ads served per day and provide the option of switching of ads completely by the user for a fee, also a similar approach by Amazon.For Jeffrey Lim, general manager from Carbon Interactive, mobile phone brands should start to adopt the design thinking mindset. They also need to focus on creating the "best" hardware that aims to meet the users’ functional, emotional and social needs.He added that the profits should be derived from these as an exchange of superior goods in return for revenue, which also creates a loop for better products with more customers and even better, more satisfied repeat customers.After all, we are living in an era where user experience is key. Relevant experiences will rise above all the noises in this crowded space.