Mobile Devices Reshape Advertising, But Pose Hurdles

Mobile device use is increasing faster than Internet use grew in the 1990s, yet most firms are failing to capitalize on this fertile marketing ground, according to a Google executive.

“The mobile audience is enormous and is only growing,” Ted Lazarus, Google’s senior counsel, said Oct. 4 at the National Advertising Division’s annual conference in New York.

According to Google data, 93% of the U.S. population have mobile devices and 40% have smart phones. The percentage of smart phone users has doubled from a year ago and will pass 50% this year.

“By 2015, we expect more people will access the web via mobile device than desktop computers,” Lazarus said.

“Yet, many advertisers treat mobile as a way to spend their leftover digital budget.”

Encouraging firms to change their approach, he noted Google has seen 32% year-over-year growth in mobile web browsing and 90% growth in mobile application use.

“But users aren’t just browsing. They are buying,” he said. “Your mobile device is the ultimate shopping companion.”

A recent Google user behavior study showed 79% of smart phone users use their device to help make their shopping decisions and, of those, 74% make purchases as a result.

“Users aren’t just browsing. They are buying. … Your mobile device is 
the ultimate shopping companion.” – Google exec Ted Lazarus

Consumers might check their mobile phone in a drugstore to learn more about active ingredients, side effects of drugs or to compare reviews to help them decide which OTC drug or nutritional supplement to buy. From the perspective of firms marketing these and other products, websites under their control are the best places to reach consumers at the point of purchase because they determine the message.

Consumers also might use their mobile devices to look for coupons, which could be the deciding factor between purchasing a brand and private-label product.

In addition to firms marketing products, retailers must offer convenience and value to consumers, including creating links between loyalty programs and their use of mobile phones, Kantar Retail advises (Also see "In Brief" - Pink Sheet, 11 Jul, 2011.).

Missing The Calls

Most advertisers, however, are not positioned to take advantage of this last-minute point of communication.

Lazarus noted 79% of Google’s largest online advertisers do not have mobile-optimized sites and, on average, most advertisers spend only 3% of their budget online.

As a result, mobile device users often reach websites that have fonts that are too small, unreadable or unusable forms and off-screen images, Lazarus said. “It is absolutely terrible.”

Beyond creating an optimized website, advertisers can reach mobile users with ads in standard search text, display or video, just as they do desktop users.

An App For That

Advertising within applications is one of the most promising upsides of mobile marketing. “People have increasingly turned to apps for a mechanism via which to view content on their phone,” Lazarus said.

He explained application-enabled ads can appear as a banner or in richer formats such as video before, during or after consumers view content on their phone.

However, there is a “thorny legal issue” associated with ads within applications: Cookies cannot be used with the apps, Lazarus warned. This means if a network wants to target or cap the frequency of an ad to a particular user, an advertiser must find another way to identify the individual device.

Location-based advertising is another benefit “particularly useful for advertisers,” but it, too, can be particularly tricky legally.

Location-based ads, which allow consumers to see ads for stores they are near, accounted for 19% of mobile ad revenues last year. Lazarus expects location ads to account for 35% of mobile ad revenues by 2015.

Unlike most of the other formats, location ads rely on consumers’ private information, which must be protected. So, advertisers must notify device users about how they can identify their location, obtain opt-in consent to receive the ads and allow consumers to revoke consent later.

Making Marketing Fast, Personalized

Mobile advertising offers many benefits that other marketing formats do not, including a sense of immediacy. Lazarus said most people use their device because they want to do something immediately, such as find directions, call a store or buy a product at a store where they are.

Mobile advertising also is more personal and ads can be tailored better for consumers. “Generally, there is one unique user for one phone,” and “it is always with us wherever we are, which means that advertisers can reach consumers with targeted ads when they are near a store or at the point of purchase,” Lazarus said.

Finally, mobile complements other media in a way desktop computers do not. According to Nielsen, 86% of mobile phone users browse online while watching TV, so advertisers can direct TV viewers to their website for more information and deals, Lazarus said.

Standardization, Privacy Pose Hurdles

Mobile advertising also poses several substantial challenges, which might explain why some marketers are slow to embrace the new format.

For example, mobile ad formats are not standardized and as a result creative costs are high.

“Every time you want to run a campaign, you have to construct a different ad for each publisher and a new ad for each network. That results in higher creative costs and means people are less likely to be enthusiastic about growing mobile campaigns,” Lazarus said.

Additionally, ad servicing for mobile is unreliable because it is new, making predicting and tracking impression volume more difficult. This means not only will the ads cost more to create, but firms cannot track easily their effectiveness.

“There often are discrepancies to reporting and challenges to accountability. That means more billing disputes and more difficulty calculating return on investment,” Lazarus said.

Further, the personal, local nature of mobile devices raises privacy sensitivities around which marketers should tread lightly.

Some consumers might feel like advertising pushed to their phone is a violation of their privacy and could advocate for protective regulations. They also could harbor ill will towards a brand if their plans do not include free or unlimited texts and pictures and they have to pay for the unsolicited ads, Lazarus cautioned.

The small screens on most devices also make inserting disclosures or obtaining consent for targeted ads “virtually impossible,” Lazarus warned.

Despite these challenges, the Google executive predicts “we are about to see an enormous increase in ad spend on mobile campaigns as users are spending more and more time with their devices,” and the ability for consumers to compare prices and get coupons with their phones is an invaluable opportunity for marketers.

By Elizabeth Crawford