Don't Let Growth Fool You: Mobile Advertising Is Still Failing

Interruption-Based Banners In Mobile Won't Scale

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A couple years back I had a conversation with my accountant. He told me "money is dangerous because success can hide failure."

This is a good way to describe the conundrum now facing the mobile ad industry. While declarations of growth are abundant, the reality is that most mobile advertising is failing.

Large percentage rates of growth look great, but that 's coming off a tiny base. The truth is ad dollars are dripping—not flooding—into the mobile, even though nearly 60% of U.S. mobile subscribers now carry a smartphone. This reason for this is not overly cautious marketers, however. It's because the mobile platform simply isn't all it's cracked up to be.

Yes, a handful of mobile vendors are beginning to see a handful of six-figure deals. But in a year when the market cap of a mobile ad network like Millennial Media has surpassed the entire mobile ad market you know you're looking at an industry built on hype .

Companies are doing amazing things with big data. 4info has collected data on 330 million devices across 97 million households in the United States, knitting together a road map of demography, geography and behavior that equips advertisers with the quick-strike capability of a U.S. drone.

But all this targeting is useless if we can't take advantage of it.

Mobile advertising vendors will roll out jaw-dropping presentations showing amazing "app-like experiences" replete with digital awesomeness. Auto brands, you can take a virtual test -drive to an astonishing new level, they promise.

But it's completely meaningless when the fulcrum point between big data and big experience is a 120x20 pixel banner ad vying to interrupt your game of Paper Toss.

Bring that up and those vendors will laud comparatively higher click- through-rates for mobile versus those of the traditional web. They'll likely forget to mention the recent report by Goldspot Media showing that 38% of all mobile clicks are due to fat, clumsy thumbs.

At the end of the day, this kind of interruption-based advertising is never going to be a great success. People simply don't want these ads on their phones.

Of course, there are bright spots.

Stock has climbed from under $19 to $27 per share on the news that 14% of advertising revenue now comes from mobile and that they are planning to launch a mobile ad network. A new eMarketer mobile revenue estimate indicates revenue is growing. The reason they have been successful is that they are creating units that are minimally interruptive. A user scrolling down on their Facebook feed quickly learns that simply tapping down on an ad for a brand page their friend has liked doesn't interrupt the experience.

That optimism should be tempered. 120x20 pixel banner ads will still suck—no matter what data is used to target them. Facebook could deploy the same minimally interruptive ad units that are working in their app across the mobile web, but marketers are becoming wise to the fact that their ability to reach their brand fans is diminishing. Meaning they'll be willing to pay less.

Native Mobile Ads.
Foursquare got some bad press recently when people found out there are only ten million or so active users on the platform, but ask Walgreens social media manager Zach West and he'll tell you customers redeeming coupons delivered through Foursquare at the register "consistently exceeds our expectations."

Look for other native ad units to find their way into your mobile ad strategy. Those that provide value to consumers will be the ones that prevail—even if that value is just a coupon.

Mobile Video.
Adding mobile video to your pre-roll buy is usually as easy as checking a box. And more and more video that is being consumed is being consumed on mobile devices. Play Words With Friends lately? You've probably watched a movie trailer between moves. There's still a lack of quality inventory available, but that should change in the months to come.

It is very easy for marketers to chase direct response. To use cell phones instead of newspaper circulars as a coupon delivery mechanism. That's what's easy to measure. That's what will fit neatly into their ROI spreadsheet. But that 's not what's going to make meaningful impact. That's not going to create new revenue streams or increase market share or raise the share price for stockholders.

The real mobile opportunity for brands is to fundamentally enhance the value of their product, differentiate themselves and deepen their relationship with consumers. I haven't bought a pair of Nike 's in over a decade, but I got on a health kick recently and started jogging. I use the Nike + app on my iPhone to track my runs and motivate me to run farther. Nike is my companion. And the next time I buy a pair of shoes, I'll probably give Nike a look.

Ideas like this brought to life are what will make huge impact for brands. Understanding where to make these investments should be at the very core of your mobile strategy.

The power of mobile is at our fingertips. That power is not in teeny-weeny banners ads. Until we understand that , mobile advertising will continue to be a failure.

Adam Kleinberg is CEO of Traction, an interactive agency in San Francisco. Follow him on Twitter at @adamkleinberg.
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