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The problems with mobile advertising

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Welcome to the brave new world of advertising.

Mobile devices such as smartphones and tablets are already transforming consumer behavior and, with it, the very nature of advertising. And as advertising changes, it will work its way into the very DNA of businesses that need to perpetually reinvent their interface with customers. As for the media business specifically, the acceleration of mobile bodes well for the likes of Google and Facebook, and poses yet another challenge for the digitally battered publishing sector.

Advertising’s age-old “push” model of broadcasting messages to all, in the hope that someone pays attention, is being replaced by micro-targeted “pull” campaigns that effectively co-opt the customer into accepting messages and even bonding with the advertiser. That means businesses must learn, with the help of their ad agencies, to leverage data about the characteristics, preferences and even real-time location of mobile-addicted consumers.

The speed of change adds to the urgency for business. It was only 7 years ago that the iPhone was launched. In the past two years alone, the number of Americans who own smartphones has more than doubled from 33 per cent to 75% per cent. According to a forecast from market researcher IDC, in 2013, tablet sales outpaced laptop sales for the first time. Tablets are expected to surpass total personal computer sales in 2015.

Until now, advertising dollars have not kept pace. The new mobile “pull” methods vary wildly, with similarly divergent results, as will happen on a fast-changing frontier.

The earliest mobile advertising took the form of display ads: Banners and boxes, scaled down from the ones seen on larger computer screens.

In contrast to banner ads, the most successful transition to mobile has been in search advertising, where Google rules, draining away ad dollars from old-guard media.

Google users are already looking for information. So when Google responds with results, whether on a PC or a mobile device, it does not feel like an intrusion, even though consumers know some of those results are paid for.

But even for Google, mobile is still a work in progress. It wasn’t until recently that the company made it possible for advertisers to manage online search campaigns and mobile buys through a single process.

Going past search-based advertising on the scale of consumer utility can produce not just a hookup but brand affinity.

Facebook has enjoyed steady growth in its mobile advertising since sales began in 2012. Research firm eMarketer estimates Facebook’s worldwide mobile revenue will pass $2-billion (U.S.) this year.

The draw is the sheer amount of time people log on the social network: Facebook checks account for one out of every four minutes U.S. users spend on smartphones. Sponsored messages are designed to appear as part of the “news feed” that users willingly read every time they check in.

One way content producers can make ads more relevant is by using location-based and other data to better target consumers.

Facebook is currently struggling to find the right path on monetizing its service. A major obstacle thereby is that an increasing number of users surf on Facebook through their smartphones, with their physical limitation of screen size, they evidently offer less space to place adds.

But, tiny screen are not the only issue. Advertisers are also willing to pay less for mobile ads, because consumers make fewer purchases on their phones.But that is changing rapidly as consumers get used to the convenience and security of using a mobile wallet.

On computers, referral traffic from Facebook can easily be analyzed to measure add effectiveness, but how is one going to measure if a smartphone user walks into the next store and buys the advertised product? Interactions between online and offline world are still difficult to measure.

Surprisingly, mobile adds have higher click rates than their non-mobile relatives. Advertisers however still wonder if this is attributed to the “fat finger effect” – accidental clicks on smallish touch screens.

If the retailer is solely a bricks and mortar store,this is where that business will have difficulty in monetizing mobile advertising. This is because,when you see an online advertisement, you are more likely to click on their E-commerce site in real time versus driving to their nearest physical store. In other words, E-commerice sites that are thriving have learned how to maximize the effectiveness of mobile ads, even if they have no physical store.

Successfull bricks and mortar retailers will be ones that have both a physical and online presence. In industry parlance this is known as “clicks and mortars.”

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