The 3 missing ingredients of mobile advertising

Advertising has become a less favorable form of engagement for consumers over the past decade. Despite smartphone penetration nearing close to 51% in the US, spending on mobile ads still lags spending on online ads by a huge margin. Specifically, close to $30B was spent on online advertising last year compared to $1.6B for mobile ads. What are marketers doing about this?

Over 10% of internet traffic is generated by mobile devices according to data provider StatCounter Inc., but the ROI on mobile ad spend remains unclear. Ad rates (eCPMS) on mobile are approximately 5 times lower than on desktop, according to the Kleiner Perkins Internet Trends 2012 report that came out last year. Some of the key reasons for this lag can be explained by a lack of retargeting tools available on mobile, especially due to a lack of cookies.

The main money maker on mobile is search. Google claims that 9 out of 10 mobile searches by users result in some kind of action such as a purchase, a call or a visit to a business. This clearly shows that consumers are very intent-driven when they search on a mobile device. Google controls about 95% of this market,eMarketer estimates, and draws in about half of all mobile ad spend. Search ads eclipsed display ad spend as display leads to a lot of accidental clicks and can be interruptive to the user experience.

Rich media and video ads are on the rise, however, because of the engagement they offer. Video, animation, photo galleries and interactive elements represent the future of advertising. Combine this with location-based advertising and you can see what the future is looking like. Companies are striving to take and mix location data with behavioral profiles to deliver more relevant ads to people. Leveraging the unique properties of mobile including interactive advergames and coupons is the vision Apple co-founder Steve Jobs had. Mobile is providing the opportunity to rewrite the rules of advertising.

Banner ads won't be going away any time soon, hinting at the nascency of mobile advertising, the same way web pop up ads dominated the marketplace a decade ago. Banners are an inevitable first step in a new ad medium. Research by eMarketer projects less than 2% of all U.S. market spend (~$2.6B) will go towards mobile advertising. Challenges remain as companies attempt to navigate consumer privacy issues that remain difficult to get around. One thing is clear, however, that the massive migration of users towards mobile has begun driving down mobile ad prices. What can marketers do about this?

As mentioned, unique interactive properties of mobile such as touch and location and the advent of mobile wallets present an actionable opportunity for marketers. Location, however, needs to be further studied. Although brand advertisers have been tapping into 'geofencing' to target users when they are within a local store, research from various companies have not found being near a store to drive a lot of action, but we can expect this trend to start capitalizing on impulse buying once we understand what a user's intent is. We 'have' to take into account behavioral insights. Using a user's social and historical data can give insights into where users are shopping and eating, allowing marketers to reach very specific groups of people at the correct times.

The first step is to understand location data over time and determine behavioral traits from that. The second step is to apply predictive analytics to behavioral attributes. For example, if a user is at a store and leaves, marketers can target and re-target them when they are no longer there. It's important to understand where mobile fits in the shopping funnel. People are using mobile to research when they are in-stores. By taking into account peoples intent and location, marketers can then tie-in the third powerful aspect of mobile: wallets. Many brands have begun experimenting with coupons and offers which users can redeem at stores directly through their mobile devices, thus allowing advertisers to attribute and track the value of their ad spend.

Location-based advertising is set to reach 6.5B Euros by 2017 according to Berg Insight AB's new report. Technologies driving the growth of location include both outdoor and indoor location technologies as well as the increasing consumer acceptance of location-based services in general. Location based advertising isn't just for national retailers, it is also great for small businesses.

We here at Warply have been at the forefront of combining contextual data with behavioral insights to provide advertisers a robust solutions to deliver interactive advertising that can attract above the line budgets, thus bridging the gap between commerce and other binary forms of advertising such as television. and the more we can provide relevancy to the customer and the ROI to the advertiser, the better off we will all be. In the next issue, we will further expand on mobile payments, what's holding them back and how they tie into the overall equation of advertising.