What's Holding Back Mobile-Ad Spending?

Measurement, Several Other Factors at Play

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Put it this way: Not using mobile advertising is a bad idea. Consumers are crazy for smartphones, and thanks to wide availability and devices that range from the high- to low-end, more consumers are buying internet-connected mobile phones today than just-for-calls feature phones in the U.S. Smartphone subscribers numbered 98 million in the U.S. at the end of 2011, according to ComScore. Add aggressive marketing for data plans and smartphones from the likes of AT&T, Verizon Communications, Samsung and Apple and, at this rate the devices will be in the pockets of most U.S. consumers by year-end.

If mobile is so pervasive, why is mobile-ad spending still relatively small?
Good question, considering that U.S. mobile usage is starting to overtake traditional media. Americans spend more time with mobile devices than with print media, according to eMarketer projections. Lack of accepted measurement is what's holding back massive spending. Tools for tracking ads online don't work the same way on phones. Trade groups and sellers ranging from Google to startups like BlueCava are looking for a measurement advertisers can believe in to get money following into mobile ads en masse. Even so, the market is projected to grow rapidly -- 50% or more annually for the next few years. Mobile-ad spending is expected to top $2.6 billion this year and climb to $10.8 billion by 2016, according to eMarketer. That's hardly small change.

Does marketing on phones look like it does on the internet?
While investment in mobile might look a lot like it does on the internet (with search advertising making up most mobile-ad spending, followed by display and video ads), mobile opens up an entirely new arena as customers use these devices more in stores. Sending coupons to consumers' phones is relatively easy via mobile display ads or text messages, said Sal Candela, mobile director of media agency PHD.

What can prove difficult is redemption if retailer point-of -sale systems can't read mobile barcodes that carry the discounts, Mr. Candela said. There are quick fixes in place, such as unique numbers that replace a barcode scan. Soon enough, old cashier systems will be phased out for new ones. Even mobile-payment efforts like Google Wallet, which let customers pay with the tap of a phone at chains as expansive as Macy's and Subway, can relay coupons when a purchase is made.

Ad Age Insights' Mobile Marketing quarterly series explores how location-based services and couponing can enhance mobile marketing, how to use the metrics currently available to figure out a mobile strategy and best strategies for mobile commerce. Buy the series, or just one of the issues, at AdAge.com/whitepapers.

What are the key differences between Google Mobile Ads, Apple's iAd and independent services like Millennial Media?
Google is clearly the mobile-ad market leader, with more share than any other company in search and display. Even though it's selling rich-media placements in mobile, Google is increasingly selling mobile ads as it does online search. That is evidence Google is looking to make its mobile inventory part of a suite of products to sell advertisers audiences on any device rather than just placements by channel. Recent changes in its privacy policy also indicate that Google wants to make data portable between ad products, so that , for example, targeting a mobile ad can be informed by search or online behavior.

Apple, admittedly new to selling advertising, came to market with high-end, rich-media mobile ads that looked more like mini-apps. But Apple is ironing out its pricing to be in line with industry standards. While iAds, informed by sales data from iTunes, are attractive to advertisers looking to get at the 315 million consumers worldwide toting Apple devices, it's important to note that Apple is in the business of selling iPhones and iPads: Advertising means developers can build businesses out of making apps for the devices. More money for developers means more apps and more reasons for people to buy Apple.

The strength of ad networks like Millennial Media, which is on it way to a public offering, and Jumptap is their size. They're leaner, meaner and mobile-only, and a source of innovation in the young mobile market. "Millennial has a dominant position as an ad network and [has] smart people who have been able to maintain agile product cycles," said Paul Gelb, mobile practice lead for Razorfish.

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