Overview of Mobile Advertising

Today, the mobile phone can be used for doing many more things than just the voice calls. SMS, internet, games, content download and many other things are possible on the mobile phone which gives marketers the opportunity to connect with consumers beyond traditional and digital media. Mobile advertising is in its infancy but is still catching the imagination of the marketers. Most of the organizations have increased the outlay for digital media and it is expected to lead other forms of advertising in terms of growth.

Size of Mobile Advertising

There are many estimates on the current size of mobile advertising and they vary a lot due to differences in definition and methodology. Similarly the forecasts also differ substantially but all the analysts have the same conclusion – the growth in mobile advertising is huge and is likely to exceed any other form of advertising. Recently, Juniper Research estimated that in 2009, the market size for mobile advertising globally was $1.4 billion and is expected to cross $6 billion by 2014. Strategy Analytics expects the mobile advertising to reach $10 billion by 2012 from $1 billion in 2008. Gartner estimates that it would exceed $12 billion by 2011. Wow this is getting bigger and bigger!!!

Kelsey forecasts that the US mobile advertising would increase from $160 million in 2008 to $3.1 billion by 2013.

Benefits of Mobile Advertising

Mobile phones are personal devices and have managed to add so many features that it offers many advantages over traditional advertising:

  1. User base – There are over 4 billion mobile phone users across the world compared to only 1 billion internet users and 1.5 billion PC owners. It is likely that on a few years time there would be more users of internet on the mobile than on the PC. The high penetration of mobile phones is an opportunity that most of the marketers cannot afford to ignore.
  2. Targeted – Mobile phones have typically one user per phone and hence the advertisements can be personalized. Studies have shown that the personalized advertising is more effective. Carriers have a lot of data on the user including his usage pattern and that is very handy when it comes to advertising.
  3. Locally relevant advertising – Mobile phones have the ability to provide information on location using GPS or Cell-id. This enables targeting users in a specific locality. Local shopkeepers can give ads in a very cost effective way to a selected audience.
  4. Viral Advertising – Mobile phones users can easily share content with friends and family and if an ad is catchy, it is possible to trigger viral marketing. We have already seen the impact of viral messaging in various countries where revolutions have taken place against dictators by viral messaging
  5. Ubiquitous – user carries his mobile phone at all times and he also reads everything that comes on the mobile. This means that the ad would at least be read and hence there is a more likelihood of action on it.
  6. Interactive – This is one significant feature that mobile phones bring to marketers. They are interactive devices and their users will invariably use them to receive and originate communications. Marketers therefore do not have to battle to get their audience to respond and interact as in traditional forms of media.
  7. Permission based advertising – it is possible to take user permission for the advertisement. The advertisements in this case become more targeted and highly actionable.
  8. Multiple Forms of Advertising – Mobile phones have various features like SMS, MMS, gaming, etc. and hence the opportunities to advertise are also many times more.

Forms of Mobile Advertising

Mobile phones provide various opportunities to interact with the user and hence an opportunity for advertising. A few forms of mobile advertising are listed below:

  1. SMS/MMS Based
  2. In-Game
  3. In-Application
  4. Display on Web
  5. Search
  6. Bluecasting
  7. Mobile Coupon
  8. In-Maps

As per Strategy Analytics, Search, In-Game and In-Application form of advertising has the maximum potential as they are non-intrusive and pull based and hence there are no privacy issues in it. The figure below gives the split of mobile advertising across various forms.

Mobile Advertising Ecosystem

The mobile advertising ecosystem is a complex ecosystem with varied entities. The role of the operator is the most critical in the user experience but the role of handset vendor cannot be ignored. The value chain and the ecosystem entities are depicted in the figure below.

There are multiple handset types (basic, enhanced and Smartphone) with multiple features that make the permutation and combination tough to deliver the mobile advertisement consistently. A advertising agency might decide to send a MMS ad without realizing that only 25% handsets have MMS capability or the banner ad may be seen differently depending on the screen size. Hence it is critical that the advertisers, advertising agency, handset vendors and operators work in tandem. The ad network is in the middle of the value chain and hence assumes higher responsibility in managing this complex relationship.

Measurement Metrics

There are a few measurement metrics that mobile advertising has directly borrowed from the online advertising and then there are a few measurements that are still in the development stage. A few established measures are:

  • CPM (Cost per Thousand Impressions) – Each time an advertisement loads onto a user’s screen, the ad server counts that loading as one impression. CPM is the cost of thousand such impressions. In other words, if CPM is $2, then for every thousand times the ad is viewed, the advertiser has to pay $2
  • CPC (Cost per Click) – In this method, the advertiser pays only when the advertisement is clicked. Most of the advertisers are unsure if they would be able to get visitors only by way of impressions and hence are interested in paying only when a consumer clicks on the ad and reaches its site. In such a scenario, the ad platform may decide to quote a CPC rate based on the performance it expects from the ad placement. The ad agency/platform calculates the CTR (Click-Through Rate) by dividing the number of users who clicked on an ad by the number of times the ad was delivered (impressions) and then quote the rate on CPC basis. E.g., for a CPM of $2 and expected CTR of 1% (i.e. one out of 100 people who saw the ad would click on the ad), out of 1000 ad impressions, 10 people would click on the ad. To recover $2 CPM, the CPC based rate should be $0.2. However, this is only an indicative way of determining CPC rate and there are two primary models for determining cost per click: flat-rate and bid-based.
  • CPA (Click per Action) – This is method in which the advertiser pays for each specified action (a purchase, a form submission, and so on) linked to the advertisement.

Other measurements that are still under development are branding measurements (ad recall, purchase intent, etc.), reach and frequency and the viral impact.

Future Drivers of Mobile Advertising

  1. Better feature handsets – Smartphones
  2. Evolution of local search
  3. Faster networks – 3G/EVDO/LTE
  4. Flat Data Plans
  5. Better Web Browsers – xHTML
  6. Better location capabilities – GPS
  7. Highly Localized Communication – WiFi/Bluetooth

Issues that need Urgent attention

Despite the clear advantages, mobile advertising revenues are still small. There is a distinct need to address a number of key areas if mobile advertising is to truly take off and gain credibility among its marketing counterparts, as well as securing a sustainable business model. Below are a few areas for consideration:

  1. Privacy issues – Users do not want to be disturbed which means the operators would need to strike balance between revenues from mobile advertising and respecting the privacy of its subscribers. Consumers place their trust in their operator – and they cannot afford to abuse this trust by delivering irrelevant or unwanted content to their mobile device. At the same time, they must drive wider user acceptance and illustrate the tangible benefits of mobile advertising from an end-user perspective. The only way they can balance these two requirements is by providing the option for the consumer to easily opt-in/opt-out and by ensuring that the content that is delivered to them is relevant, by enabling subscriber control of the advertising experience through Ad Exposure Management. The legislation on privacy is also weak around the world
  2. Ecosystem – The players in the mobile advertising ecosystem are from different industries and backgrounds. The operators need to engage with different entities to be able to effectively secure the revenues. With the opening up of the mobile ecosystem, the influence of operators is diminishing. New entities are appearing in the mobile ecosystem that now have an enhanced stake in the mobile revenues. The operators still have inherent advantage of having more data about its subscribers and hence they can make the ads more targeted. However, the operators would need to understand that they cannot do everything and would need to let go of the advertisement platform development.
  3. Measurement – Informa also recently revealed that Proctor & Gamble, the world’s largest advertiser, spent approximately $6 billion on advertising in 2008, of which $10 million (approximately 0.17% of its total advertising budget) was allocated to mobile advertising. From both perspectives, the difficulty of effectively measuring the success of a mobile advertising campaign is often cited as one of the main reasons why this channel remains unproven by the advertising industry. The industry is still working on CPM model as it still does not have the capability to measure CPA and CPC forms. Similarly, clarity is needed on how to price and measure ads on maps.
  4. Technical Challenges – The mobile audience is fragmented across multiple platforms, with multiple sellers, multiple carrier networks, multiple devices, and multiple business models, all of which hinder consistency of execution. In such a highly fragmented landscape, identification of a user, user session, browser, or device can pose a significant problem, hindering the ability to deliver the right ad to the right user at the right time. We need to find a solution to this.

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