The Real Reason Mobile Ad Revenue Struggles To Keep Pace With Forecasts

Ever since the early 2000s, entrepreneurs, analysts, and media have seized upon the miniaturization of high powered computing, increased bandwidth for things like web browsing and content consumption, and developers and consumers eager to make a market for services that work on mobile devices as evidence of a booming mobile economy that lurks just around the bend.

Yet, every year also seems to bring cautionary observations from others, myself included, who note that one aspect of this industry – the amount of money spent on mobile advertising – has not kept pace with rather bullish forecasts. As 2013 winds down and expectations grow for how mobile will play a bigger role in e-commerce, brick and mortar retail sales, banking, television viewing, social media, and more, stories like this one are emerging that report the mobile advertising business isn’t growing as expected.

Forrester Research now predicts that mobile ad spending in the U.S. will top $6 billion in 2013. That’s up nearly 100 percent from 2012, but down considerably from eMarketer’s August forecast of $8.5 billion. Bad news, right?

Wrong. That’s because the people who design these forecasts appear to have missed a critically important element of mobile’s role as an advertising vehicle. A more nuanced assessment, I believe, would actually show that marketers are getting smarter and more efficient with the way they go to market as a result of what mobile options can deliver, thus spending relatively less to achieve the same or better outcomes.

The eMarketer forecast for ad spending includes the following categories: search, display ads, messaging and “other,” which includes things like email and classifieds.

That leaves sizable gaps, though. What about all the apps and mobile websites so many companies are building to attract and retain their mobile-inclined consumers? That spending goes unmeasured because it doesn’t look like a more familiar media transaction. Yet the two phenomena are awfully similar. Ads often require a creative agency to build them and a media agency to deploy them. Building an app often requires a production agency or equivalent internal talent, too.

Both an app and an ad are deployed to service some point in the customer journey. An app might drive sales, for example, by delivering a targeted coupon or offer, or increase loyalty or repeat usage by featuring recipes that offer new and creative ways to use a company’s food product. Traditional ads can help drive awareness all the way to purchase and retention, too.

Lately, I feel dismayed when I see articles that call attention to how the mobile advertising business is falling short of expectations. I think they deter people from wanting to participate and perpetuate a perception that mobile should exist at the margin rather than the core.

When I consider the billions spent building apps and mobile websites, I see companies bypassing traditional consumer gatekeepers in places like television networks, newspapers, and radio stations and going direct to their customers. These apps and websites are capable of generating and consuming all sorts of data that enable them to be precisely designed and targeted to measurable audiences, considering traditional factors such as demographics but also layering relatively new data sources, such as location and time of day.

The result are tools that permit companies and brands to have one-to-many engagements with their consumers, and vice versa. They also facilitate transactions involving money and information, which makes measuring ROI easier. These tools certainly have limitations, as any tool does. For example, they may work best as customers get closer to purchase and therefore may not be capable today of displacing alternatives that work best at generating pure awareness, such as television advertising.

Smart marketers are figuring this out, though, and now are able to deploy their marketing in ways that are far more efficient than ever before. That’s because they now have better tools for attacking every stage of the customer journey.

Studies like eMarketer’s don’t measure the enormous value mobile has unlocked. That doesn’t mean we should doubt its existence.

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2 comments

  1. Muralidhar Sridhar · · Reply

    Matt, unless Ads in the mobile apps, stop looking like Ads, I think this industry will not realize its full potential. Those banner Ads inside of Apps, look hardly interesting or of any value, irrespective of how much targeting is done. There is a need for a disruptive invention in Mobile Ads to create a hockey stick in the graph.

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    1. You’re right, Murali. Advertisers and publishers alike need to rethink how they engage consumers via advertising. I see positive developments in what Facebook is doing on mobile, and I expect Twitter to follow suit. Banners aren’t the answer, though.

      Like

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