Mobile Advertising Goes in a New Direction

Posted by on November 27, 2012

Mobile Advertising Goes in a New Direction
The mobile web is bringing strange and wonderful new developments to the world of digital marketing. No longer just a pocket-sized version of you desktop computer, smartphones and their features are being leveraged to change the way that digital marketers sell their products, by combining smartphone features like call ability and GPS tracking with targeted advertising to reach out and convert customers like never before.

Imagine for a minute that you’re visiting a new city for the first time, and you need a place to sleep for the night so you pull out your phone and Google “hotels” to view the results. Google automatically takes your location into consideration when generating both ads and search results, so everything you see is relevant to you, but with one extra feature – a “call” button next to each one of the listings. The best looking one is the one at the top of the listings (no surprise here), so you hit the call button and are instantly connected to the hotel’s front desk.

This feature, known as “click-to-call”, is being touted as the one of the future avenues of digital marketing. Since an increasingly large number of people are connected to the web via smartphone and other mobile devices, it makes sense for advertisers to try and reach out to them there. So far, mobile ads are nothing more than miniature versions of their desktop counterparts, but more marketers are beginning to see the value in taking advantage of smartphone features, like click-to-call, to boost the effectiveness of their ads. In the somewhat near future, you’ll be able to not only book a hotel room, like in the scenario above, but also be able to get directions beamed straight to your phone, and even GPS direction.

There is obviously a lot of potential in this industry, and marketers are taking notice. At present, advertisers have spent over $2.6 billion on mobile advertising. This is a tiny amount compared to their overall marketing budgets, but its triple what they paid for the same in 2010.

But despite the giant increase in spending, it’s not all smooth sailing just yet. Though the potential is there, the technology has to be developed. Parties on all sides need to work together to develop and improve the platforms and technology in order to make it more attractive to advertisers.

One of the biggest challenges the industry faces is the lower price that advertisers are willing to pay. This is largely due to the fact that users are less likely to make a purchase through their phone. Making matters worse is speculation that a percentage of these clicks, are “accidental” clicks, be it due to user error, or a malfunctioning phone.

Furthermore, it’s not easy to measure the conversion rate of mobile ads; that is, the number of people who view a mobile ad and then walk into a store to buy something. And since the prices are lower in this space, each ad sold nets companies like Google less profit than a regular online ad would. As a matter of fact, Facebook’s share value recently took a dive because investors feared that it wasn’t making as much money on mobile ads, and even Apple’s mobile ad project, iAd, hasn’t picked up steam the way anyone thought it would.

In spite of all that, however, there are signs that mobile advertising is set to overtake online advertising in terms of revenue. In its latest report, Facebook’s third quarter earnings were 14% mobile ad revenue, and in another report mobile ads made up 58% of Pandora’s revenue. Mobile ad exchanges are beginning to pop up, and are thriving.

Google, in particular, has done well for itself in this space. They’ve taken advantage of the fact that mobile phone usage is often more telling of a person’s habits than online browsing, specifically with regards to their location. For example, a person searching for jeans on a desktop computer is more likely to research styles and colors, whereas a person performing the same search on a phone is probably looking for the best place to buy a pair of jeans. They’ve also noted that people performing searches on a phone are more likely to be ready to buy something, and have tailored their ad strategy accordingly.

Google’s most successful mobile ad type is the aforementioned “click-to-call” ad. Starwood Hotels, whose marketing effort includes mobile ads, reported a 20% increase in bookings after running click-to-call ads. Google’s even started showing similar ads on the mobile version of Youtube, but for movie trailers. If someone watches the trailer, Google makes money.

But, by far, the growth of the mobile ad space is the biggest concern for digital marketers. With more and more people surfing the web on their phones, it’s simply not practical to stay away. Of the most prominent digital marketing companies, Facebook, has the most to gain, since 60% of their users are on mobile devices, but their transition from desktop to mobile has been far from smooth.

Facebook ads usually show up on the right side of the screen, but on most mobile devices the right side is cramped, leading to display issues. Facebook has developed a work-aroudn for this by displaying advertisements in news feeds, between friends’ updates. They’re also putting up a mobile ad network of their own, to deliver ads to people on other cellphone apps, based on what they like. It can be assumed that they’ll tap into the large amounts of data they collect on their users to further refine their ad targeting systems.

If initial efforts succeed, and there’s little reason to feel that they shouldn’t, then the next thing that digital marketers and other ad space retailers have to do is to convince companies to spend more than 2% of their budget on mobile ads to make it more profitable.

The current pricing situation brings to mind the late 90’s back when the Internet was relatively young. Prices were low, nobody was very interested, but advertisers won’t have any choice in the end, since they have to go where customers are, and all customers these days are on mobile.