Multimedia Case Studies
Mobile Advertising: The Next Big Thing Hasn’t Arrived (But It’s On Its Way) - Capabilities and Challenges
By David LaFontaine
The mobile platform has been anointed as the “Third Screen,” the latest technological miracle that could dominate our lives and information consumption.
But as with every new technology, the nagging issue is figuring out how to make it pay. There are a number of ad products that have been developed for mobile devices, but because this is such a new and rapidly growing field, the techniques and technologies involved are the subject of much dispute.
Put simply, there’s a lot of hype about the potential of mobile advertising, but actual measurable results are still in short supply.
"You're out on the bleeding edge with mobile advertising,” says Mark Jenkins, founder of Marquis Mobile Solutions. “We're just now trying to implement the business models we've all been talking about for the last 15 years. The challenge is that we don’t know which model, or models, are going to actually work.”
Most analysts agree that only one in 20 of mobile advertising start-ups will ever show a profit, but a Gold Rush mentality has taken hold, and companies are scrambling to get in front of the Great Mobile Advertising Wave of The Future.
Thus, mobile industry conventions are clogged with legions of start-ups, all touting wild revenue and user adoption projections.
Attractive Audience, Missing Metrics
It’s the raw numbers of users that make this advertising space so appealing. Last year, more than 1.15 billion mobile phones were sold worldwide, compared to only 271.2 million personal computers. In other words, more than four times as many mobile phones were bought than PCs.
The total number of mobile phones worldwide is between 2.7 and 3.0 billion, and analysts project that 1 billion more people will be added to the global market in the next few years. Most of those people will have their first look at the Internet via the screen of that mobile device.
The numbers have made believers out of some fairly significant tech players. No less an authority that Google CEO Eric Schmidt said in Germany earlier this year, “The next big wave in advertising is the mobile Internet.”
Google could be saying this because they’ve invested millions in developing “Android,” their software platform for mobile phones. They hope to become the Microsoft of mobile – everyone is going to have to play using their toys, which will allow Google to take its growing monopoly on online advertising and simply transfer the simplicity of buying AdSense words against content onto this brand-new market. As with so much else in this space, there are compelling and contradictory reports on Android’s potential for success.
Meanwhile, experts are extrapolating and applying trends in other countries to the U.S. market. Japan’s mobile ad spending was $621 million last year, up 60 percent, while the rest of the ad market was flat. This kind of growth is certainly impressive.
Unfortunately, the same problems bedevil mobile ads in Japan as they do here in America: accurate measurement, weak mobile search algorithms, and overly complex media buying mean that advertisers are basically spending money on mobile with no clear, established blueprint as to whether or not their campaign actually worked, or if it was ads on another platform (TV, print, the Internet) that were responsible for the success/failure.
Integrated Campaigns: The Potential and the Obstacles
The mobile ad industry seems fixated on just a few visions of what a truly integrated ad campaign that takes advantage of mobile’s strengths will look like. One, of course, focuses on the 2002 Steven Spielberg movie “Minority Report”, a sci-fi action thriller. In that film, as Tom Cruise’s character walks past store displays, retinal scanners determined his identity, and instantly started blaring ads using his name, aimed at him based on his past buying habits. Another example often given is “walking past a Starbucks and your phone offers you a 20 percent-off coupon.”
“Seriously, we need to come up with some new paradigms, because these two are just beaten to death,” says Placecast CEO Anne Bezancon. “We’re lacking a clear vision of where we’re headed right now, because this whole area is still so new.
“There are several components that all have to start coming together for these fantasies to become a reality, and we cannot start assembling the components until we have a proper toolbox. That means strong, well-thought-out analytics programs that show what kinds of results you get from what actions.
“The problem is that you won’t know what works until you try. But people won’t try anything really new because they don’t know if it will work.”
One of the few case studies where the results were made public was by Superpages.com, which says pilot projects through that company have yielded the following results:
| Advertiser | Ad spend per month | Cost per call |
Conversion rate | Gross revenue per sale | Sales ROI |
| Florist | $1,200 | $4.50 | 82 percent | $64 | 12:1 |
| Musical theater | $2,500 | $13 | 47 percent | $147 | 5:1 monthly 60:1 annual |
| Local delivery | $1,100 | $12 | 30 percent | $1,800 | 47:1 |
| Skilled tradesmen | $300 | $35 | 74 percent | $89 | 2:1 |
| Lasik surgeon | $700 | $3.70 | 58 percent | $1,999 | 309:1 |
If you can invest $1 in an ad campaign and get up to $300 back, why isn’t everyone doing this?
The answer lies in the complexities of mobile campaigns. Reaching out and touching a consumer right as they’re about to make a purchase – say, telling a person shopping for cars who is about to pull into the Chevy dealership about 0 percent APR, nothing-down loans down the street at Ford – means that you have to know when that person is in that exact location. (For more on the state of mobile local search, see “The Tipping Point for Mobile Local Search.”) Even assuming that’s possible – a prospect that makes many uneasy about privacy issues – who’s to say that it wasn’t the billboard down the street, the ad on the car radio, or the sudden recollection of a TV jingle that was the real influencer?
The mobile ad industry is working to develop the mobile analytics and measurement tools that will start connecting the stimulus to the response.
One significant obstacle to the spread of mobile advertising campaigns has been the reluctance on the part of the big carriers – AT&T, Verizon, T-mobile, Sprint – to change their core business model of charging millions of people monthly for cell phone service.
“I would pitch a fit if I started getting ads shoved onto my phone,” says Classified Intelligence Editor Peter Zollman. “I pay for every byte of data sent to my phone, which means that I’d be getting charged now to look at spam I don’t want? No way.
“But – and this is a big but – mobile advertising is going to take off like a giant rocket the day that the carriers start saying ‘We’ll take 30 bucks a month off your phone bill if you let us send you three ads a day.’ ”
Consumer Attitudes
Significant growth in three areas may change consumer’s attitudes towards digital content sent to their phones: 1) less expensive and unlimited data plans, 2) a “pay to play” model, or 3) more phones with built-in wi-fi, so users don’t have to pull down data from phone networks.
Until these conditions change, the one fixed rule of mobile ad campaigns is that they must be “Opt-in.” Consumers must be asked for their permission, whether it be through clicking on a link in a story on the phone, or using some of the newer technologies to trigger the phone to access content. Many mobile ad campaigns are based around a call to action appearing in traditional media content – such as a code appearing as part of a display ad in a newspaper – which the reader then texts to the advertiser, triggering the ad to get served to the phone.
“One of the great advantages of cell phone content is also one of the great dangers,” says Mimi Ito, a researcher at the Annenberg School at USC. “Because you take your phone with you everywhere, you develop a very personal, trusting relationship with it.
“So if your personal friend were to start spying on you, and then spamming you with ads, you naturally would feel angry and betrayed. Those feelings persist for a long, long time.”
Cell phone companies fear that unregulated and uncontrolled advertising could quickly morph out of control the way spam e-mail messages did with the Internet. They are closely monitoring the effect of increasing mobile advertising on something they call ARPU (Average Revenue per User).
“Mobile companies are sitting around conference rooms 3 days a week, beating their brains out on how to jump the ARPU from $53 to $55,” says industry consultant Jenkins. “Because when you have, say, 4 million subscribers in a metropolitan area, that $2 turns into an extra $8 million a month in revenue.
“Newspaper ad strategies that help carriers boost their ARPU will get an enthusiastic reception. But anything that even looks like it could cut ARPU will run into a brick wall. And then blow up.”
Part 2: Banners and 2D Codes
Banner Ads – The Same Thing, But Different
At first glance, migrating advertising to the mobile platform looks easy. Take a banner ad from the Web site and stick it on the screen on the phone. Done, right?
Not so fast.
All kinds of considerations come into play when displaying ads on phone. These include:
- Screen resolution – most often expressed as “screen width,” this refers to how many pixels wide the screen on the phone handset is.
- Color depth – usually expressed as 8-bit, 16-bit, 24-bit; if you are old enough to remember the early days of computing, video screens could display 8 colors, then 64 colors, then 256, and finally, millions of colors. Same here.
- File size – particularly crucial in mobile advertising, since phones typically don’t have the RAM and hard drive storage that computers do.
- Phone processor speed– just like in computers, the speed here is constantly improving, which means that phones are starting to be able to render and display video.
- Software/operating system on the phone – FlashLite, Microsoft Windows Mobile, Android, Apple’s iPhone OS
- Functionality – clicking on the ad can cause a script to run that causes your phone make a phone call, launch an application or go to a browser page.
At first glance, the technical challenges seem daunting: handsets in the U.S. market have 31 different screen widths coupled with different color depths.
On closer inspection, however, we find that 91 percent of the handsets fall into four very simple, standard display widths. The Mobile Marketing Association’s Mobile Advertising Guidelines, last updated in April 2008, offers some standardization on the chaotic cell phone ad market (see sample chart below). The latest report is available through MMAGlobal.com.
There are a plethora of issues that arise because of the nature of the mobile display environment. For example, besides the cramped space, the Internet connection is still somewhat slow or problematic through many mobile networks. Therefore, mobile pages should be limited to no more than 10 images per page, so that the phone doesn’t have to make so many “roundtrips” to request, access and render data, which is just one of the things that can make mobile Web pages so maddeningly slow to load.
The MMA has also issued guidelines for what should happen when a user responds to an ad through its Code of Conduct for Mobile Marketing. “It is only through industry support of strong privacy guidelines that the power of mobile marketing can reach its full potential,” according to MMA. Essentially, the Code of Conduct attempts to ward off situations where unscrupulous advertisers send out unwanted messages, some of which could a user’s phone to dial numbers in foreign countries that rack up huge hidden charges on their phone bills, discourage “phishing” for passwords or financial information, or deter other “bad actors” just waiting to offer you millions locked in a Nigerian Prince’s frozen bank accounts.
BEYOND THE BANNER
Although the easiest migration path for newspapers looking to sell their existing advertisers the same thing on a different platform is banner ads, it is in an array of new ad products that the real growth opportunities abound. Most of these ad products are still in the very early stages of development, but the responses that experimenters have been getting are eye-popping.
“All these ad products and strategies are very new and mostly untried,” says Erica DeLorenzo, Senior Director, Industry Practices for the Internet Advertising Bureau. “We don’t want to stifle innovation by doing too much line-drawing, and it’s very early to start issuing definitive statements.
“The one thing we can say for sure is that advertisers and content creators both have to start thinking less in terms of mass reach – and more about targeting.”
Common Short Codes (CSCs)
Common Short Codes (CSCs) are a short series of numbers, usually five or six digits, to which a user can send a text message that will trigger a response message from an advertiser sending back information or content, or enter the user in a contest (the classic example being the FOX show American Idol, which encourages viewers to text “VOTE” to a number corresponding to their favorite contestant).
Such short codes are called “common” because the codes will work no matter what wireless carrier is used – an important feature, since an ad that only T-Mobile customers can respond to would miss and frustrate the rest of the market.
CSCs are an important step in the evolution of mobile advertising; they are more interactive and “engaging” than a simple banner, yet simple enough to deploy that they are usable by 205 million (out of a possible 213 million) mobile phone customers.
The rate of response to CSC ads is phenomenal. According to a study done by industry analysts M:Metrics, 36.6 million (or 17 percent) of cell phone users received an ad in the last year, and 3.7 million (or 12 percent) responded to that ad. More people voted for the first American Idol winner than voted for President Bush in the 2004 elections.
The reasons these numbers are so high are the focus of a growing controversy. Proponents say that the response rate is high because the greater and more accurate targeting of mobile ads makes them effective at reaching people at just the right time and place to influence their decision making. Detractors say it’s because users still regard mobile advertising as a curiosity, and that as the market gets flooded with other ads, users will start turning off and the numbers will fall in line with every other media outlet. (For more on setting up and running text message programs, see “SMS Programs: Potential in 160 Characters or Less.”)
Quick Response Codes
These printed checkerboard-looking codes were originally created by Denso-Wave in Japan in 1994 to track auto parts. They’ve been appearing in the U.S. on FedEx or Amazon.com packages and are spreading quickly.
“In Japan, these Quick Response (QR) codes have really taken off,” says Annenberg’s Ito, whose work can best be described as youth-culture technological anthropology. “In Tokyo, you run your phone over a sandwich, and it tells you not only how many calories are in the sandwich, but where the ingredients come from – which is a huge concern in that culture.
“In malls, stores have printed QR codes on the handrails of the escalators. When you point your phone at them, up pops a coupon for 20 percent off a haircut at the salon up on the third floor, along with photos of the latest haircuts. It’s amazing.”
QR codes work this way: Each code can contain up to 4,296 characters (or a string of 7,089 numbers). Users with cell phone cameras and the right software installed, can take a picture of the QR code, which causes the phone’s browser to launch and redirect to the URL contained in the code. The codes can appear on newspaper pages, signs, buses, business cards, or any object that you can print a decent-resolution image on. Although the technology is promising, many phones do not have the required software that allows camera phones to read QR codes. Google’s Android platform will reportedly include this software.
In San Francisco, ScanBuy partnered with Citysearch to produce QR codes that were placed in the windows of 580 restaurants. Customers with the ScanLife software on their phones can point their cameras at the code in the window to be automatically taken to a Citysearch review of the food and drinks available. Not to be outdone, Antenna Audio is putting QR codes at tourist attractions in San Francisco, where users can point their phones at the codes, and then are treated to an audio tour of the site, and an explanation of its history.
The technology to create a QR code is free and available on the Web at: http://www.viooli.com/qrcodegenerator/demo.php .
Google’s print newspaper ad program includes QR codes as an option. More information is available at http://www.google.com/adwords/printads/ads/barcode/.
Image-Recognition Advertising
Similar to QR, image-recognition advertising allows the reader to take a picture of an advertisement in a magazine, send that image to the publisher or advertiser, and in return get exclusive content (wallpaper, ringtones, coupons, etc.).
Men’s Health and Rolling Stone were the first print publications to take advantage of this new product. Created by SnapTell, the ads deliver the kind of “360-degree” ad campaigns that big advertisers increasingly demand.
“Static print advertisements now become a measurable, two-way communication with target consumers,” said Gautam Bhargava, CEO and co-founder of SnapTell.
This technology faces some initially daunting challenges – many cell phone cameras produce blurry, dim images; sending those images can be expensive or complicated; and, the computing power required to process and recognize those photos is not insignificant. But if the pilot projects start showing some traction in the marketplace, this could quickly become a key way for newspapers to leverage their existing print ad space to provide added value for both advertisers and readers.
Coupons
Touted as “the coupons that you never forget to take with you,” mobile coupon companies such as Cellfire and Xtra Mobile Coupons aim to replace cumbersome paper newspaper inserts and direct-mail ValuePacks. The mobile redemption rate of 5 percent has already attracted big advertisers like Hollywood Video, 1-800-Flowers, Sears, Virgin Music, SuperCuts, McDonalds and others to start experimenting with delivering coupons to mobile phones. The Tampa Bay Tribune (see case study) is one of the many newspapers experimenting in this space.
Proponents point to the way that mobile coupons, like QR codes, can deliver demographic information about the users, on top of motivating them to come to a store and make a purchase, and that the capability of mobile to deliver a coupon to the user exactly when and where it will do the most good, creates an immediate and personalized “call to action” that results in instant gratification (i.e. the aforementioned “Starbucks coupon that appears on your phone as you’re walking past the store”).
Juniper Research estimates that by 2011, about 3 billion mobile coupons will be redeemed for $7 billion in discounts. Research done by Michael Hanley at Ball State University shows two-thirds of college students (one of the most hard to reach and eagerly pursued demographics) are willing to change their behaviors if they have coupon incentives. The list of coupons they are most eager to use contains at least one real surprise:
- Sit-down restaurants (because although they may be broke, they’re still hungry)
- Movies (for dates or entertainment)
- Dry cleaning (because sometimes mom just isn’t available)
The mobile advertising start-up Dizgo is testing a combined mobile search and discounting program in Boulder, Colo. Restaurants and stores in local malls can choose keywords that they want associated with their products, such as “sushi,” “Italian,” or “Latte.” Users who then send text messages that correspond to these keywords receive coupons and specials from restaurants that are near that user’s current location (as determined by cell zone or GPS).
Consumers can also sign up to receive news alerts when their favorite store, restaurant or bar is having a sale or special offer. The system requires the user to read aloud to a clerk the code that is sent.
This brings into sharp focus the major snag with mobile coupons: because the coupon bar code appears on a phone’s LCD screen, many older laser barcode readers are unable to process the information.
“The truth is that you can count on one hand the number of big retailers who have systems in place to take advantage of mobile coupons,” says Placecast CEO Anne Bezancon. “In the foreseeable future, franchise owners and mom and pop stores down at the local level are not going to have a lot of love for the idea of tearing out their existing expensive point of sale equipment just so they can read coupons on mobile phones.
“Technological attrition will eventually take care of this, but this is not going to be an overnight revolution.”
Part 3: Classifieds, Videos and Other Formats
Classified Ads and Social Media “Piggybacking”
Some optimistic analysts see classified ads on the mobile platform as an opportunity for newspapers to reclaim lost classified ad revenue.
They point to the way that developers are working on porting social media applications like MySpace, Facebook, Hi5 and others to cell phones as one of the key applications that may make it possible to once again marry local content to local advertising. The thought is that if newspapers make it easy for social network users to discover, share and respond to local content, that targeted local audience will also want to take advantage of the presence of their peers to buy, sell and trade things.
“We expect our ads to be contextual and relevant,” says Zollman of Classified Intelligence. “What could be more targeted than a video clip of a house for sale that plays on your phone as you’re driving around a neighborhood that you want to move to?
“Nothing is more valuable to the user than to get that kind of relevant information when and where they need it. And nothing will have a more valuable price point than this, when someone finally cracks how to make it work.”
The New York Times Co. and other newspaper companies are already experimenting with real estate classified mobile advertising through mobile ID codes in the print newspaper and mobile real estate search capabilities. The New York Times’ program allows computer users to send real estate listings to a mobile phone. It also allows mobile phone users to “click to call” the listing agent for a property. The company reported both realtors and home buyers are pleased with the program (see case study).
Since the element that the mobile Web adds to the Internet is geotargeting, the possibility at least exists that newspapers can start leveraging their local content to sell small local ads.
“The question is will there be enough early adopters willing to take mobile classifieds to market at a stage when it’s not immediately profitable?” Zollman asks. “If they are willing to do this and start working the kinks out, this could change things.”
Video and “Rich Media”
Many in the mobile ad industry consider video ads on cell phones to be a “holy grail” that will unlock untold riches to the practitioner who first figures out how to make it work.
The challenges are absolutely daunting. The restrictions on banner ads seem quaint when considering the demands of serving up video or animated content to a cell phone. A humble, low-resolution YouTube video can take up three to five megabytes of space, which means an iffy cell phone connection or a “dropped call” will mean that the content and ad never get seen. The phone has to have enough processor power to render the video, enough storage space and RAM buffer to hold the data until it’s ready to stream, and the carrier has to have a server backbone sufficient to deliver the files.
All this being said, advertisers are still panting at the thought of getting video ads on cell phones. Although conventional wisdom holds that nobody really wants to watch video on a 3-inch screen when they have a theater-like widescreen HD experience, that conventional wisdom does not apply to the “snack size” videos on YouTube or other sites.
“Mobile video is experienced at times and in places where the user partakes of what we call ‘cocooning media,’” says Ito. “In Japan, the youth curl up on a train or a bus, put headphones in their ears, and separate from their environment and into whatever it is that they have cued up on their mobile device.”
A recent pilot campaign for BMW ran in England, targeting upscale buyers in the 25- to 34-year-old segment. Combining video and banner ads led to a click-through rate (CTR) of nearly 8 percent, and a 67 percent increase in mobile traffic to the Web site. Also, users are not as resistant to video advertising, as 54 percent say they recognize that ads are a fair way to pay for free, professionally produced video.
Screen Digest believes worldwide mobile video advertising will hit $3 billion by 2012; the Kelsey Group pegs the local video ad market in at $1.5 billion by 2012 in the U.S. alone.
Meanwhile, the carriers are not so sure. Nokia describes its mobile TV efforts as “in turmoil,” and the only video applications in Europe and Asia gaining any traction on the mobile platform are – well – porn, according to Adult Video News.
Downloadable Applications and Immersive Environments
One of the fastest-growing areas in mobile advertising is also the most technically challenging. As advertisers have desperately chased after the attention of 14- to 24-year-old males, they hit upon putting up real-world billboards and ad messages in video games. Research shows that in-game advertising performs 28 percent better than comparable TV spots, because once again, the users are so focused on the screen.
Now that video games have migrated from arcades to living rooms to handheld devices, the advertisers are going the extra mile and creating games and applications that will take that trip with their intended audience.
Mature brands are latching onto the possibility of creating applications that provide an immersive “experience” for their customers. For example, Diageo, owners of a chain of brand name liquors, launched a mobile campaign built around Smirnoff vodka. The application loads onto the user’s phone and seeks to guide them through figuring out how to incorporate Smirnoff vodka into having a fun evening out. The users can enter the social situation they find themselves in – a business dinner, night out with the guys, or first date –and then receive suggestions as to what cocktail order would be most appropriate for the situation.
The application even takes advantage of cross-promotional opportunities, suggesting bars and restaurants that are strategic partners, located in cities around the world, so that a business traveler can find an appropriate place to go while in a strange city. And at the end of the night, the application will even call you a cab and give you directions back to your hotel.
The level of programming required to construct an immersive environment such as this may be quite high, however an application built to take advantage of a special local event – Mardi Gras, the World Series – would allow a newspaper to offer both readers and out-of-town visitors a constant “point of contact” to valuable local news and information.
Companies such as AOL and Sega have launched ad-integration efforts into their mobile games, and a start-up called Greystripe bills itself as a “mobile ad integration specialist.” Greystripe’s GameJump site offers more than 800 games for free to mobile customers. The catch is that Greystripe’s AdWRAP technology makes the players watch at least two ads before playing a game and two more after they are done.
Despite the very strong engagement that video, games and immersive environments on mobile devices offer, that kind of media consumption has some challenges that will limit its adoption.
“The rich media applications that require people to look at and interact with the mobile screen will always be very niche markets,” says Brightcove Vice President of Marketing & Strategy Adam Berrey. “I can’t watch a video while I’m working out at the gym – I’ll drop a barbell and hurt myself.”
“Consumer behavior will always dictate how widely this technology is adopted and how the information is consumed, and right now, audio is super-portable. This may change, but we’re really not seeing major traction in the market from rich media yet.”
First Published for NAA:
July 31, 2008