Why Marketers Just Can't Crack Mobile

The Third Screen Dominates Engagement, So What Gives?

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AT&T's 'Mobilizing Your World' spot
AT&T's 'Mobilizing Your World' spot

While AT&T, the nation's second-largest mobile carrier, is venturing into car connectivity -- and bidding for DirecTV -- it mostly sells one thing: access to phones. It is also the nation's fourth-largest advertiser, spending about $2 billion on media, according to Ad Age DataCenter.

And where did it spend almost all of those dollars? On TV. "We're TV-first," Charlie Hinton, exec director of marketing analytics at AT&T Mobility, said on stage at the Mobile Marketing Association conference this month.

TV is familiar terrain. The ads stick and reach a wide, knowable audience -- "set it and forget it," as the industry mantra goes. Mobile, meanwhile, demands advertisers be flexible, fragmented and fast. "Literally, you need 365 plans for mobile a year," Ms. Hinton said.

AT&T's experience illustrates the challenge ahead. Mobile is, without a doubt, the first screen for a great many users. Consumers spend 23.8% of their time with media on mobile devices each day, according to eMarketer, compared with 37.2% with TV. It may soon surpass TV as the screen claiming the most consumer time.

And yet ad spending remains almost the mirror image. Advertisers spend 17¢ on TV for every hour of U.S. adult consumption of the medium; they pour 83¢ into each hour spent with print. For mobile, it's 7¢, according to eMarketer.

Brands have witnessed the proliferation of an ideal marketing platform -- a connected device that consumers obsess over and carry everywhere -- and not come close to cracking it.

"Part of it is cultural," said David Petersen, VP-mobile at YP, the fifth-largest beneficiary of mobile-ad revenue. Advertising, like any institution, can move glacially. Brands and agencies are just getting comfortable with SEO and banner ads, tactics now becoming obsolete.

What marketers expect from the device is shifting markedly as well: They want engagement, not simply impressions. "Mobile should be a performance medium, not a branding one," Mr. Petersen said.

As a performance barometer, however, mobile is shoddy. Attribution remains a constant headache. Many of the hotly anticipated fixes for tracing consumers from the mobile ad they see to a purchase, such as geolocation tracking, in-store beacons and mobile payment systems, are still in their infancy.

'Second wave of hell'
The rapid adoption of smartphones also came almost too soon after digital media jolted the advertising industry. One mobile-ad insider calls it a "second wave of hell" for brands and publishers. In some ways, a third wave followed: As quickly as consumers turned to smartphones, they moved to mobile apps, which now command a vast majority of users' time.

Apps present a vexing problem for brands. They are expensive to build, hawk and maintain. (One media-agency expert estimates that an effective app requires at least a $500,000 investment.) And tracking users inside them usually requires inking deals and sharing data with third parties.

Some mobile marketers argue that apps can be more effective than paid display, particularly if the app solves problems for customers in the right context. Johnson & Johnson is noted for its smart mobile execution. Rather than creating a mobile portal for baby goods, it built an app for parents with advice on infant sleep behavior. Naturally, its directives involve Johnson & Johnson products.

Forrester Research predicts marketers will spend $189 billion over the next five years to build the back-end on mobile apps, spending that will not necessarily be reflected in measured-media estimates.

But releasing an app pits brands against the commandeering forces of social media and games. "Unless you have something that's an incredible application in terms of utility, it's just a tree falling in the forest," said Scott Galloway, a marketing professor at NYU. "No one hears it."

Publishers have been burned by the platforms, too. A few years ago, several poured resources into developing pricey apps for tablets to replicate glossy magazines. But tablet sales never met rosy expectations. Nor did mobile-ad dollars materialize for publishers who lost revenue channels to ad exchanges and social-media powerhouses like Facebook.

"There's a lot of once bitten, twice shy," said Ryan McConville, a publishing veteran who is now a senior VP at mobile-ad network Kargo. "[Publishers] dumped a lot of money into mobile and none of it came back."
To fill the gap, Kargo is positioning itself as a provider of "premium" inventory -- units with top-shelf publishers reserved for big-name brands using rich-media formats like mobile videos. Other networks are making similar pitches. They like to tell cautionary tales of CMOs who find their brands in unexpected places, tacked on slivers inside unknown mobile websites.

Despite lofty promises from networks, though, mobile-marketing dollars are increasingly cornered by juggernauts Google and Facebook. And many media companies are shedding traditional mobile banner ads in favor of what they hope are more lucrative pastures: going native.

The New York Times introduced a news app in April that came packaged with its new native mobile-ad product, Paid Posts. The newspaper expects to integrate it with its other apps. Others are following, although the legacy print operations must compete with nimble digital publications such as BuzzFeed, which is building purely native channels customized for mobile.

Brand advertisers are paying lip service to native and advanced formats as well. Tom Donovan, digital manager for Haworth Marketing & Media, which runs Target's mobile strategy, said the retailer is advancing more rich-media formats and geolocation tools, and slimming its number of publishing partners. "We'll be more selective," he said.

Will that mean Target shifts resources from TV ads? "That's not going away," Mr. Donovan said.

NYU's Mr. Galloway claimed agencies entrenched in the more-profitable TV ad industry are holding back expansion into the small screen. A mobile-ad landslide, he said, is awaiting three or four brave brands, not a perfection of performance metrics. It will mimic the pattern on social media where a few advertisers charged in with social-media strategies and became players.

"No one could figure out the ROI on Facebook," Mr. Galloway said. "We can wait for attribution modeling, or we're going to dive in. My sense is it's already started."

On stage in May, AT&T's Ms. Hinton noted that the telecommunication giant was looking intently at ways to sharpen and expand its mobile-ad budget. "It's the wild, Wild West," she said, repeating a common aphorism about the mobile-ad world.

She added another, more telling descriptor: "It's so much different than TV."

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