Despite Promise, Mobile Ads Come Up Short

Mobile advertising, long tabbed as the next big thing, is finally getting its share of attention. Google and Apple, poised in a battle for dominance in what’s being hailed as the successor to the PC Internet, have spent a combined $1 billion to buy mobile ad networks AdMob and Quattro Wireless. And Microsoft last week at the Mobile World Congress in Barcelona, Spain, previewed its next mobile phone platform, Windows Phone 7.

Yet despite the excitement over the potential of mobile ads, they currently come up short for the kind of advertising most appealing to brands. In the words of Apple CEO Steve Jobs, as reported by BusinessWeek last month, “Mobile ads suck.”

To be sure, there are exceptions to this statement. Dockers ran a lauded campaign targeting iPhone users that let them make an actor dance by shaking their phones. And Universal Pictures is running a mobile ad campaign for The Wolfman that features video edited specifically for mobile, with close-up shots that work best on the cell phone’s limited screen real estate.

For the most part, however, mobile ads are reminiscent of the early days of the Internet, when formats were typically static banners or spare text links. AdMob, the mobile network Google inked a deal to buy for $750 million last November, boasts serving over 161 billion mobile ads, but over half those placements are text links.

“We’re still creating that format of the future,” said Tony Nethercutt, vp of sales at AdMob. He sees issues more pressing than creative limitations, including the ability to quantify a mobile audience similar to what GRPs do for TV, and integration within the digital ad system in third-party ad servers.
 
Brand advertisers instead have placed more focus on building their own applications to directly reach consumers. These applications can range from utilities, like mobile banking apps, to pure entertainment experiences, such as a soon-to-be-released app from Miller Lite, Tip ‘n Spin. The game, tied to the NCAA men’s basketball tournament, has players see how long they can balance a digital basketball on top of a Miller Lite bottle. Those kind of experiences aren’t available through static banners, although mobile ads are critical to gaining distribution of those applications, said Nethercutt. (See also: “The App Flap”)

“Everyone discounts the [mobile] banner,” he said. “I don’t discount the banner. It’s like discounting the 30-second spot.”

Mobile ad networks point to enviable engagement rates for banners. Jumptap reports click rates of 2 percent, far above the typical .1 percent for Web banners. And Dynamic Logic has studied over 75 mobile ad campaigns and found the mobile placements two to five times more effective in metrics like recall, awareness and intent.

“The medium isn’t cluttered,” said Ali Rana, vp of emerging platforms at Dynamic Logic. “The ads themselves are simple. They’re going back to the early days of online. [This] resonates with folks.”

Many chalk up the early positive results, particularly the click rates, to a novelty factor. “Part of the reason mobile banners worked is the same reason banners work in the early Internet: they were new,” said Eric Litman, CEO of Medialets, a specialist in rich mobile ads. “But those numbers dropped quickly.”

Litman believes mobile will only convince marketers to make serious commitments if it moves beyond the focus on scale with standardized, run-of-the-mill units. The risk is mobile will follow the same path as the PC Internet and become dominated by direct marketers rather than advertisers used to creating demand via TV ads. “There’s only so much you can accomplish … with a banner,” he said.

Mobile ad execs admit there’s much to be done to improve the quality of the ads.

The problem, they say, is not everyone has a phone capable of running the type of rich ad experiences brand advertisers want. Even the much-hyped location-based aspects of mobile aren’t that pinpointed: most networks target at the DMA level, not down to specific locations. That’s unlikely to change in the near term. Apple early this month warned app developers it wouldn’t allow them to track user locations unless it was critical to functionality, and ruled out tracking location solely for ad purposes, saying it would disallow apps that did that.

For those reasons, some see mobile advertising as not living up to the hype.
 
“How early is it?” said Scott Shamberg, svp of experience distribution at Critical Mass. “Mobile has been around for a while. People have been saying mobile, mobile, mobile for four years. I’m not a big believer in the click-to-where-I-want-you-to-go model.”