Mobile Advertising: The Next Generation

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You're in the market for a new car, and at a bus stop you see an ad for one of the models you’ve been considering, inviting you to scan a QR (Quick Response) code with your smartphone. Your phone then downloads and launches an app that projects a 3D image of the car that you can manipulate to view from different angles, along with balloons that highlight salient features.

At the mall, you launch another app that engages your phone's camera, superimposing butterflies on the screen everywhere you look. By waving the phone, you can capture butterflies, which then turn into coupons and offers that you can redeem simply by presenting the phone to a participating retailer.

Welcome to the nascent world of mobile marketing: Ford ran a marketing campaign in the United Kingdom using scannable codes and 3D technology to launch the Ford Ka, while Japan's Mobile Art Lab has an entertaining concept video of its augmented-reality iButterfly app on its website.

With mobile device adoption enjoying hockey-stick growth, stakeholders in the mobile ecosystem--carriers, app and platform developers, and of course advertisers--are scrambling to figure out new ways to capitalize on consumers’ mobile habits. However their efforts play out, it's pretty clear that Web advertisers are no longer in familiar, banner-ad-dominated desktop browser territory.

Mobile Art Lab's iButterfly app
Mobile Art Lab's iButterfly app uses your phone's camera to see where deals are in your vicinity.
Aside from limited screen real estate, the main problem is the sheer diversity of platforms. On desktops, most Web interactions take place within a handful of popular browsers: Whether you're reading CNN or checking out restaurants on Yelp, for instance, you're doing so in a browser that will process most content in a similar fashion according to prevailing Web standards.

But on mobile devices, people use applications to get very specific content and services, and the OS landscape is much more fragmented. Apple's iOS and Google's Android may lead the pack, but significant numbers of users have devices based on BlackBerry OS, Windows Phone, WebOS, and a slew of less sophisticated (but still data-enabled) underpinnings. All of these platforms work differently, and all of them support different business models--a chaotic situation for developers and content providers trying to make money for their endeavors. "It's a little more complicated than developing for a website," says Dale Carr, CEO of Leadbolt, an online advertising agency that offers application developers the means to make money with several ad technologies.

For consumers, the result is a hodgepodge of applications that they pay for up front, applications that make money from advertising, and so-called freemium apps--those that may offer limited functionality for free, but impose charges for full functionality.

While the paid-app business is undeniably healthy--Gartner earlier this year predicted that app sales will top $15 billion--the ad-supported app business is clearly gaining huge momentum. J.P. Morgan has projected mobile marketing expenditures of $1.2 billion this year, nearly twice the 2010 levels as estimated by the Interactive Advertising Bureau.

Potential Pitfalls

Although it isn't difficult to tell whether an app is serving up ads, some consequences of mobile marketing may not be readily apparent. In testimony before Congress this spring, following widespread coverage of the way the iPhone operating system collected and stored geolocation data, privacy expert Ashkan Soltani explained that cell phones and tablets must access phone networks via a unique alphanumeric identifier that is tied to every data request. The identifiers are the mobile equivalent of cookies--except that unlike cookies, they cannot be deleted and they don't allow you to opt out.

Those mobile identifiers allow carriers and platform developers such as Apple and Google to track a device's whereabouts based on cell tower, Wi-Fi, and/or GPS coordinates encoded in the data request. If you use any apps that support location-based services, you've probably consented to having that information used (if only under the numeric identifier) so that the app can provide better service.

That consent typically also allows the app to deliver highly targeted marketing based not only on your location but also on what you're using the app for. As a result the ads you get may be more relevant--for example, if you're looking at restaurant reviews on Yelp, you're more likely to receive a coupon for a nearby restaurant than an insurance offer. The marketers probably don't have access to your name, but they might have a lot of information about your habits derived from aggregating the data you request and the physical location of your mobile device. If you haven't read an app's terms of service carefully, you may be surprised at how well it seems to know what you're up to.

Another potential source of consumer concern is how much data such marketing content consumes. With most major carriers now imposing bandwidth caps, consumers who experience overages may resent having to, in effect, subsidize the delivery of advertising.

Mobile marketers are looking for ways to solve that problem. Mahi de Silva, executive vice president of Opera Software's Consumer Mobile division, says Opera's software development kit for marketers supports the ability to have Wi-Fi-enabled mobile devices hold off on downloading high-bandwidth marketing content until the device is using a Wi-Fi connection rather than a mobile broadband connection. Also, de Silva adds, the HTML 5 Web standard will support more efficient ways of sending advertising.

Michael Becker, North American managing director of the Mobile Marketing Association, an industry trade group, says some brick-and-mortar retailers are already starting to use Wi-Fi-proximity technology to deliver marketing content (such as coupons) to shoppers.

More Than Just Information

Aside from their ability to target consumers based on sophisticated analytics, mobile apps also enable interactive marketing strategies. Google-owned AdMobi, for example, allows consumers to initiate a phone call merely by clicking on a mobile ad.

Advertisers are trying to use apps to facilitate shopping
Advertisers are using mobile apps to facilitate shopping, but too much advertising may rub consumers the wrong way.
Opera's de Silva says developers and advertisers also appreciate mobile apps' ability to deliver "uniquely immersive" experiences without making the consumer leave the application. For example, tapping an image in the Wall Street Journal iPad app can launch a marketing video--or even let you complete a purchase--without launching a video player or a browser, so that when you're done, you're back in the Wall Street Journal app. A Web ad would not necessarily produce the same result.

However, de Silva warns, the availability of sophisticated new ad-delivery tools won't matter if content providers and app developers don't exercise good judgment in the placement and frequency of ads. The MMA's Becker agrees, but notes that if excesses occur, it's more likely to be because the industry is so new and complex. He says some people have expectations that he considers unrealistic regarding the mobile marketing industry's maturity.

Leadbolt's Carr notes that consumers have easy recourse if a mobile app misbehaves. "Because applications are so easy to download, install, and uninstall if you don't like them, there is no huge problem with advertising overload," he says.

"The real test here is how the publisher manages the tension between creating a compelling content experience and monetizing it," de Silva says. "You have to be very, very careful…. If you cross that line and lose the consumer, they won't come back."

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