Facebook, Google, Twitter May Be Threatening Rewards-Based Mobile Ads

Native mobile ads become industry's new focus

Over the last few years, a handful of mobile startups have emerged in what might be called the rewards-driven ad space. SessionM, Kiip and others have promised a better advertising model, providing consumers with credits for games, credit card points or brand samples in exchange for consuming ads or content.

But lately, Facebook, Google and Twitter have come to dominate mobile ads, threatening the momentum of the reward programs. “There is a place for the rewards-driven model,” said a top mobile buyer. “But right now it’s not the core. This is more like coupons or infomercials”

Jeff Malmad, managing director, mobile at Mindshare, said that while companies like SessionM and Kiip suffer from a low profile on both coasts, clients like Ragu have seen success. “You don’t always see these ads,” he said. “I don’t think they’re scaling up as they’d like to, but our clients do work with them and we’ve seen good results.”

SessionM is betting that mobile consumers will get hooked on accumulating its proprietary mPoints currency, available on apps like Weather and others. CEO Lars Albright said the startup tripled revenue in 2013 and is on pace to do so this year. “The market shifts highlight the need to be more than a rewards model,” he said. “What’s really resonating is direct relationships with consumers.”

Kiip CEO Brian Wong said his company works with brands such as General Mills on more than 2,000 apps, including Star Wars Pinball and FitStar. He contends mobile banners are under threat, not his category. “The only way you can get attention in short bursts on a personal device is a value exchange,” he said.

Wong noted that advertisers are still just warming to mobile as a branding vehicle, arguing that Facebook's recent surge is driven largely by mobile install ads, not Coke and Pepsi. And he's got a point about mobile banners; Yahoo just dumped them altogether, per Digiday.

Still, you don't see the ESPNs and CNNs of the world shifting en masse to rewards-driven mobile ads. It's native or in-stream ads that are hot.

"The last thing consumers want is another points system to manage," said Derek Thompson, managing director, mobility, Starcom. "Asking busy moms to download more branded apps or accumulate points is silly. The worst thing to happen for advertisers is that we train people that our stuff is so bad that we have to pay you."

Thus, Thompson argued, providing real utility to users is key. "Brand experiences have to mesh with the essence of what you are engaging with."

Search ads on Google's mobile apps probably meet that criteria. Facebook and Twitter's mobile ads? Maybe, maybe not. "Facebook and Google aren't yet delivering rich immersive brand experiences in mobile," said eMarketer analyst Catherine Boyle. "But I think their growth helps everybody. I don't think [Kiip, SessionM and the like] get squashed."

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