What you need to know about the state of mobile advertising

marketingland.com

Columnist Aaron Strout takes a look at the types of mobile ad formats that exist today, as well as the technology and data that powers them

In my last column, “10 Mobile Statistics Marketers Will Love,” I called out the explosive growth of mobile usage. Of particular note is the fact that there will somewhere around two billion mobile users in the world this year.

Considering the fact that a little over one-third of the world’s 7.3 billion inhabitants are either under the age of 14 (26 percent) or over the age of 65 (eight percent), that means that right around 40 percent of the rest are using mobile. And they are using it a lot.

Based on my opening statement, it shouldn’t surprise you to hear that mobile advertising is the fastest-growing area of paid spend by marketers in 2016. In fact, mobile advertising should top an estimated $100 billion this year.

Considering how little real estate we have on smartphones and how little we like to be interrupted on our personal devices, one might wonder where all this advertising is going to go. And what shape and form will it take, given the current lack of real estate.

To help answer this question, I drew upon some of my history (I co-authored the book, “Location-Based Marketing for Dummies“) and also asked a few of my mobile expert friends to get their take. To that end, I have grouped the “future” predictions into two buckets: the first, the technology and data that powers mobile advertising, and the second, the shape and form.

It’s worth noting that I tackled this same topic back in 2014 with a greater focus on does mobile advertising work? It is heartening to know that many of those same formats are the ones I predict we will see much more of in the future.

Technology

For this area, I consulted two mobile experts. The first is our own head of user experience here at W2O Group, Andrew Korpf. His background is heavy on mobile (Razorfish and NativeX).

When I asked Andrew about the future of mobile advertising, he came back to me with an unexpected answer. He is currently interested in artificial intelligence (AI) and the future of conversational interfaces in the mobile context. This was particularly interesting, given Google’s acquisition of API.AI last month and its recent unveiling of Pixel phones powered with AI.

While it took me a minute to wrap my head around this one, it started to make sense when we think of how often we consult these amazing “pocket-sized oracles” for information. Whether it’s for restaurant reviews, flight status, directions, weather or movie times, we as consumers are increasingly expecting smartphones to use the overwhelming amount of context they have to give us better answers.

To that end, platforms like Facebook are starting to leverage clues we provide (combined with their own data) to offer us Uber rides when we mention the service on its Messenger service.

Imagine companies being able to insert offers and recommendations contextually as you’re group chatting. Obviously, the AI behind these opportunities needs to be smart (well beyond offering you a link to Uber when you mention the service), but this could and should be a game-changer if done correctly.

The other friend I consulted for this post is Ian Karnell, founder and former CEO of One to One Interactive and current GM of Monetization Platforms at mobile service provider Phunware. Karnell has been doing “digital” for 20-plus years and is a guy who deeply understands the world of display advertising.

When I first asked him for his take on the current state of mobile advertising — and more importantly, where it was headed — he gave me some insightful information. But after digesting it, I realized the information applied to all display advertising. (Hint: That is part of the answer right there.)

Karnell told me that it was really about smarter data, brands moving away from trading desks and doubling down on programmatic advertising.

So when I pushed him a little harder on the “mobile-specific” part of the equation, he came back with what I hoped would be the answer — i.e., it’s all about the volume and precision of the data:

“The data/audience dimension is uniquely different with mobile vs. desktop,” he said. “As users go about their daily lives with their smartphones, they leave a digital trail that tells brands who they are, where they have been, their preferences and where they will go next.

“Consider the contextual audience building and targeting opportunities that exist, programmatically, leveraging insights from a user’s digital trail. Although brands can’t personally match a device ID to an individual user, they can identify trends that can make an impact. (Device ID 1234 attended the last five NFL home games, visits a bike shop 1x/month, and goes to Joe’s coffee on Thursday mornings). 

“Brands can also combine location data with demographic data from their CRM for insights like: the user’s place in the purchasing process, the shows they’ve been binge-watching, and how much they spend on groceries every month. Next [generation] mobile programmatic platforms like Applovin are helping brands retarget specific audiences, across the bid stream, that exhibit similar behavioral traits to drive user acquisition, cross-sell/up-sell, and retention campaigns. These campaigns are being measured and optimized more and more on a CPI basis, and less on a CPM basis.”

Thank you, Andrew and Ian, for your incredible insights!

Mobile formats

Several different types of mobile advertising exist today. I covered the bulk of them in an earlier post from 2014 questioning whether mobile advertising worked. The good (or bad) news, depending on how you look at it, is that many of these same formats still exist.

Display

A majority of the ads marketers buy today are the equivalent of display ads that you see on your desktop or laptop. They come in the form of banners, pop-ups or take-overs (ads that cover most of your screen until you click through or close the ad with the “x” in the corner).

Similar to traditional display ads, this form of advertising is not only disruptive, but often poorly targeted. I honestly don’t see this form of mobile advertising surviving more than another 18 to 24 months, and it will continue to be one of the least effective forms of mobile advertising around.

In-app

Other than paid social and native advertising, in-app ads are probably the most effective form of mobile advertising. One of the main advantages is that marketers have more control over where ads show up in the experience and who the ads target, since they own the overall experience.

As Karnell pointed out, the app makers also have a good amount of data (even if anonymized) on the users who are targeted based on their behavior.

Streaming

If you use the free versions of apps like Pandora or streamed local radio stations, you have probably heard ads similar to what you might listen to on terrestrial radio. These are ads that are embedded into the streams and made so that users can’t skip over them (without paying for a premium version of the service).

Similar ads appear via fitness apps like MapMyRun. And while not particularly effective, are more welcome than mobile banner or take-over ads (Who wants to buy shoes right after they’ve finished their workout)? The upside of this style of mobile advertising is that it can be targeted locally, giving advertisers an additional leg up.

Video

As mobile video continues to proliferate across Facebook Live, Snapchat, Instagram and, of course, YouTube, the ability to mimic television-style advertising is becoming increasingly possible. While many people still don’t love to watch video ads before being allowed to see the content they want to preview, many of these “pre-roll” videos are kept short and sweet and usually allow users to skip after 10–15 seconds of watching.

Smart advertisers in the future will realize that these video placements are the perfect place for storytelling, and they can meaningfully engage their customers using this tactic.

Text/SMS

What’s old is new. Even though text messaging as been around for over two decades, it’s still one of the most-used features on mobile phones. One of the advantages of text or SMS messaging is that not only can smartphones use it, but so can feature phones, which are still prevalent in developing countries.

Dozens of messaging apps like WhatsApp (acquired by Facebook) and Facebook Messenger promote SMS-like communications. This is a space that will only continue to grow and get smarter to allow for more visually rich experiences.

The one major thing to watch out for here is that using this very personal channel comes with a higher level of responsibility. While marketers can gain a level of access similar to when users opt into email, the expected value from the end user is several times higher than it would be in areas like in-app, video or display.

Paid social/native

Paid social and native advertising on both the desktop/laptop and mobile are arguably the most effective format of mobile advertising today. Depending on how much one uses a particular social network, paid social and native ad companies know a tremendous amount about their customers’ behavior, likes, dislikes, friends, political views and so on.

As programmatic and CRM continue to extend beyond email and web, advertising in social platforms can also be better informed by behavior in other channels.

Similar to social ads, native advertising facilitated by companies like Outbrain and Taboola are effective, not so much because of their targeting (although that is a component) but more because they look like editorial content on sites that users regularly visit. Chances are if you’ve ever been to Huffington Post or USA Today and seen the links at the bottom of an article prefaced with “You May Like,” you’ve been exposed to native advertising.

Similar to paid social, this isn’t unique to mobile, but as consumers are using social media and digesting content more and more on their mobile devices, these forms of advertising are becoming increasingly mobile in nature.

Location-based

As Bluetooth beacons and other location-based targeting technologies find their way into retail locations, marketers now have a way of hyper-targeting their customers. Offering incredibly relevant information to help target ads obviously makes this type of advertising powerful.

To date, however, this is still a fragmented space and one fraught with privacy issues. It’s probably one of the areas most ripe for opportunity but still 12 to 18 months away from realizing its potential.

In conclusion

We still haven’t found the silver bullet when it comes to mobile advertising, but we are getting closer. Better data for targeting, artificial intelligence and smarter smartphones and tablets are helping.

When we get there is anybody’s guess, but let’s hope that marketers realize that in this intensely personal space, just because you can get there doesn’t mean you always should.