The whole IT industry has high hopes for mobile advertising, but it's still in its infancy and has many hurdles to overcome before it can deliver on lofty promises of billion dollar revenues, according to analysts and ad agencies. Vendors are more upbeat.
Estimates vary widely for how much the mobile advertising market will be worth. M:Metrics found that mobile display advertising was an approximately US$200 million industry last year. In 2011 the global mobile advertising market alone will be worth over $12 billion if you ask Gartner, or $19 billion if you ask ABI Research, whose figure includes both mobile search and video advertising.
But if mobile advertising is to take off on such a large scale, the vision being laid out for it has to be realized, according to Nick Lane, lead analyst at Direct2 Mobile.
"If you have been to industry events in the past two years it's the same people saying the same things, but the industry hasn't delivered on what we have been promised: a personalized, contextualized, real-time location-based mobile advertising platform, and the industry is still a long way from delivering it," Lane said.
The market is current on a Internet-based advertising model using mobile phones with few advantages, according to Lane.
"Probably the only additional benefit that I can see is that potentially you've got a connection from the brand to the handset, so you can see how the handset responds, but that doesn't really tell you much about the user," Lane said.
Mark Newman, chief research officer at Informa Telecoms and Media, agrees: "The market is still very immature; all that we are looking at is companies dipping their toes in the water. At the moment all that's really happening is that some adverts that might be on the Internet are on the mobile phone."
Newman is also convinced that the next step must be to add more segmentation and also location-based ads to take advantage of the benefits of the mobile phone. "But that is probably still a good three, four, five years out," Newman said
The fact that there are still relatively few mobile Internet users and a fragmented market isn't helping either. Advertisers have to turn to multiple sources to get a large enough footprint and ads have to be customized to different phones. "To actually buy the inventory on mobile is incredibly difficult and takes a long time. So when people say that a lot of companies don't get it, they don't get that companies can't be bothered with the drawn-out process," Lane said.
Pricing is also far too high; it's still a trial medium and should be priced accordingly, according to Lane.
His advice is to simply go where the traffic is, which is voice and messaging, not data. Companies like Smaato and Blyk have the right idea, according to Lane.
Smaato shows ads on the incoming call display and after each call, and mobile operator Blyk offers subscribers free telephony and messaging (up to a point) in exchange for receiving up to six commercial messages per day. "That's when you look at the screen," Lane said.
Ad agencies echo many of Lane's and Newman's opinions.
"Interest in mobile ads is still low, our customers are more interested in developing mobile applications and services," said Anders Nystr
Mobile ads need to be relevant to the user in order to succeed, and in order to become relevant location is one important element, according to Nystr
"The mobile phone is a much more personal device than the PC, users expect to get more use from the phone, and that goes for advertising as well," he said.
The vendors paint a slightly different picture of the sector.
"I think it's fair to say there are still some perceptions in the industry that mobile advertising is hard to do. This is something Google is trying to change by evangelizing the mobile space and helping advertisers develop integrated mobile campaigns that make full use of the platform," Gareth Evans, spokesman at Google, whose mobile platform Android debuted on the T-Mobile G1 recently.
The forward momentum of mobile advertising is aided by the move to unlimited data packages, which helps click-fear go away, according to Russell Buckley, managing director at AdMob in Europe.
"You can now see a difference between the old PC model and the mobile phone, a sign that the industry is taking a step forward," he said.
Ads can also deliver better results than on the Web, according to Diana LaGattuta, head of global marketing at Nokia Interactive.
"I was speaking to one of our advertisers last week and he was telling me that his ads on mobile where outperforming his Web ads by eight times," LaGattuta said via e-mail.
Nokia has seen mobile ad click-through rates fluctuate from 2 percent to 20 percent, but they are consistently higher than online. "Mobile is still an uncluttered medium. We run one banner ad on a mobile Web page. I just went to the NY Times online home page and counted 17 banners," LaGattuta said.
The most successful campaigns offer immediate gratification: click for a free download, click for the smallest bartender, click to take a quiz, according to LaGattuta.
As for location-based ads, the whole industry is pushing that feature, which will play an important role. "Integration with maps and navigation we think is going to be very exciting for mobile advertising, because it will enable us to target and serve relevant and useful information, and also allow us to reach local advertising. When you can target locally, that really opens the field to every mom and pop store on the corner," LaGattuta said.
There are other areas that need improvement if companies are going to spend more on mobile ads.
When LaGattuta asked the advertiser who got better results on his mobile ads why he didn't spend more money on mobile, the answer was that he doesn't have the landing pages, where users end up when they click on banner ads. "We are trying to educate the agencies so that they know how to build properties for mobile, so there are more reasons for brands to advertise," she said.
Measuring whether a campaign has been a hit is a key to successful mobile advertising, but that's easier said than done on mobile phones. "Advertisers need better tools to measure conversions and user behavior -- this is made more difficult when devices are so different," Google's Evans said.
LaGattuta agreed that knowing the audience is one of the biggest challenges. "Right now we don't have a lot of data, nobody has, and the industry as a whole has been working on how to quantify the audience," she said, adding that Nokia has a bit of an edge because of the research it does on its customers.
AdMob recently introduced Mobile Analytics, a free tool for getting more useful information from mobile site visitors, Buckley said.
Challenges aside, the number of mobile phones makes mobile advertising an opportunity too good to take a pass on. "There are about one and a half billion desktop and laptop connections globally, while there are over 3 billion mobile handsets -- so the opportunity is huge for advertisers," Evans said.