Mobile Advertising: The Next Big Thing

Mobile Advertising: Powered by Smartphones

Mobile advertising, especially via smartphones, is quite small when compared to more traditional forms of media in the US. There are a number of valid reasons for this but given the record setting pace of new smartphone ownership and the inherent performance advantages of mobile phones suggests that a dramatic shift in allocation is inevitable.  There is little doubt even among skeptics that mobile will become a coveted format attracting billions of dollars of advertising annually and the data indicates that if the early obstacles are overcome, it is likely that mobile ad revenue powered by 3G and 4G smart phones will eventually surpass radio and newspapers.

Mobile Advertising:  Tip of the iceberg

Mobile advertising accounted for a little more than 1% of total media spending in 2010 which amounted to about $64 billion.   Roughly half went to broadcast and cable channels, about 18% was spent on magazines followed by 12% on newspapers, 10% on radio, about 6% on online display ads and under 2.5% for outdoor.   Mobile advertising accounted for about $750 million which on the surface appears to be disproportionate to the growing size of the smartphone market and the increased usage of smartphone owners.   More than one third of all mobile phones are smart phones (about 80 million vs. 235 million) and that these mobile owners are actively using their devices over 80 minutes per day which is equal to 10-15% of their daily media usage.  But since a third of that time is spent talking on the phone or messaging and 10% is taken up with emails, overall daily usage number has to be discounted.  And we also have to consider that only a third of the mobile phone market is made of up powerful 3G mobile browser capable smart phones while the other two thirds represents fairly simple handsets.  We can make this more complicated by adding back an assumption for mobile tablet usage which is rapidly growing but not nearly as fast as smartphone take-up.   Additionally, tablet usage for the most part is done within the home while our phones are with us and track us practically every moment of the day.

To simplify things, assume that some type of advertising, be it display, video, ads within apps, SMS, etc can be placed during 40 minutes per day when smart phone owners are accessing things like games, maps, various shopping or music apps and social networking.  Those 40 minutes per day equates to roughly 5% of daily usage/attention and that represents about a third of the mobile universe, then mobile advertising conservatively could be worth about $1 billion today which is not too far from the 2010 number.

Mobile Advertising:  More efficient and effective

Beyond the sheer size of the growing market there are indications that smart phones are potentially a much better medium to effectively advertise to consumers.  A recent study by Insight Express suggests that mobile ads are four times more effective vs. online advertising in recalling brands without prompting which is referred to as unaided awareness.  When they were prompted with brand examples, aided awareness, mobile was twice as effective as TV and four times as effective as on-line.  Mobile also outperforms any other individual medium in head to head competition in regard to brand favorability and it is five times more effective than on-line in promoting purchases.    Moreover, mobile advertising is more effective even against a coordinated multi-media campaign approach.  Insight Express found that purchase intent via mobile was 17% better vs. a combo of print and TV, 54% better than a package of TV, print and online and almost three times as effective as TV and online media buy.  And in the important category of unaided awareness, mobile performed 20% better than a media mix of TV+Print+Online and was twice as effective as a TV and on-line campaign.  While this qualitative difference needs further study in a wider universe, the indications that mobile advertising represents a better more effective and cost efficient medium in terms of consumer engagement, purchasing and customer satisfaction suggests that it won’t be too long before Madison Avenue shifts significant dollars away from other media to the mobile market.

Mobile Advertising:  Brands are starting to notice

In that regard, Mary Meeker of Kleiner Perkins had an interesting slide in her recent internet presentation showing that over the past two years, mobile advertising has burst on the scene and many companies are actively experimenting with the medium.  At the beginning of the third quarter, she states about 25% of the top global 1000 companies are currently running mobile advertising and global mobile ad impressions have grown from a few billion per quarter two years ago to nearly 25 billion impressions per quarter as of September, 2011.  Experimentation is taking many forms including opt-in programs, QR and snap tag tools, location based prompting, purchase ads inside free mobile apps and various short video streams.  Grocers and other retailers seem to be particularly active, pushing personalization and the connection between search, intent and purchase.  Some supermarkets are allowing mobile customers to use their smart phones to compare prices, access special discounts, receive digital coupons and generally improve and personalize the shopping experience.  In some Giant and Stop & Shop supermarkets, mobile smartphone customers are able to scan bar codes, bag items and pay for their purchases all with their own personal devices.  Early data suggests that this type of experimentation reduces labor costs by 12%-15% which is significant in grocery stores which are typically 5% margin businesses.  Partial to efficiency innovations, smart phones will be encouraged by more grocers, increasing overall time and data usage, providing more fertile ground for brands and advertisers to reach their customers.  One UK online grocer, Ocado Group , developed an interesting program by placing vinyl posters listing various product bar codes in empty storefronts in high traffic areas which can be scanned with smart phones enabling people to order groceries from their phones to be delivered later on in the day when they return home from work.  According to an article in Mobile Marketing, 15% of the Ocado Group’s $800 million annual revenue is generated through IPhones and Android Phone purchases suggesting mobile is highly effective especially as a local ad medium.

Mobile Advertising:  Its local

According to Google, about 50% of mobile search is locally oriented, focused on obtaining specific information, directions, restaurants, movies, weather and bargains.  Within the key 25-34 demographic, 50% own smart phones and 80% of these people use mobile phones in stores while 50% check their mobile phones first thing each morning before getting out of bed.  Talk about getting personal.

Mobile Advertising:  Will surpass radio and newspapers

Mobile advertising would be a compelling story solely based on future projections of market expansion and average daily time on the device.  But when you include the power of internet browsing combined with always on GPS functionality and an ability to deliver targeted information and applications at the point of purchase, mobile advertising is destined to outperform even the most aggressive projections.  An aggressive case goes something like this:   Assume that smartphone ownership doubles over the next ten years to about 160 million users and daily usage jumps to 90 minutes per day or 20% of total media time as folks find more things to do with their phones including watching video.  Also assume a modest annual compounded growth rate in total ad dollars increasing from $64 billion to $70 billion in that same 10 year time frame with people finding more things to do via their mobile phones which makes them more personal, efficient and indispensable.   Even if we discount usage of 90 minutes daily by half, mobile advertising at 10% of a $70 billion media market ad pie would equate to $7 billion annually by the beginning of the next decade.   If so, mobile advertising would likely surpass spending for radio and newspapers establishing smartphones as the most disruptive and significant piece of technology since the personal computer.


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The Smart Phone: Raising Expectations for Customer Service

The Smart Phone:  Raising Expectations for Customer Service

The smart phone, along with tablet computing is transforming the way we search and digest information and shop.    But the smart phone, in particular, as a piece of personal technology, will have a more significant and lasting impact on customer service, consumer engagement and the relationship we have with brands and businesses.

The Smart Phone:  The Growing Population

Although 20% of Americans move every year, very few of us change our cell phone numbers.  More to the point, the cell phone is now an indispensible personal item, along with our wallet and keys,  that are with us whenever we leave home.  In some instances, the phone is the first thing we grab in the morning and in most cases we sleep with it next to our bed at night. Cell phone usage is pervasive and the devices are a constant companion regardless of location or environment.   People use their cell phones to text, chat, browse or take pictures during sporting events and concerts, watching television, at restaurants, school and work.   70 million Americans love their cell phone so much they have given up having a land line phone.   235 million Americans over the age of 13 have a cell phone and 35% of those, or 82 million of us own a smart phone like an IPhone, Android of Blackberry.  That population is exploding.  Over the last three months, it grew by 10% and by 2015 it is expected that half of the US population will own a smart phone.

The Smart Phone:  Personalized functionality

Smart phones contain high powered browsers and intelligence that enable us to handle our emails, social networking, photos, information search, banking, shopping and video entertainment all through one handy, relatively small device.   And via the GPS function, the smart phone is able to create and maintain a detailed digital index of data which may contain your current location, where you’ve been in the last few days, your carrier, your age and gender and even what you might have recently purchased or consumed, which is a marketers dream.   This type of personal connection and always-on status is profoundly altering the concept of consumer engagement because it is redefining how, when and where we interact with businesses, brands and products. Just think about that statement for one moment.  The web gave us 24 hour access to information, entertainment and shopping without leaving the comfort of our homes.  But the GPS functionality of a smart phone enables advertisers, marketers and brands to target us precisely at the moment when we are ready to shop, walk into a movie theatre or look for information about a restaurant.  We can be found and marketed to as we cruise the local mall, airport or city street.   Think about shopping in Costco and receiving an SMS message from Wal-Mart offering a 5% discount for all your purchases.  Or walking past a Starbuck’s and receiving a coupon for a tall latte through your phone. The GPS functionality of a smart phone has taken control of the real estate away from businesses that believe they control the real estate.  And that disintermediation is a game changer.

The Smart Phone:  Game changer for many brands and services

Location based targeting and all of the associated data gathering capabilities through smart phone technology may be very troubling to privacy advocates.   And to be sure, safeguards need to be established to avoid the threat of abusive practices.  But the functionality is already affecting commerce and engagement in ways that force brands to adapt and raise the quality of their customer service.  Businesses now must pay attention to the role that mobile phones, especially smart phones, play in their customer’s lives.  For example, Meredith Publishing, owner of Better Homes and Gardens, Fitness and Family Circle, bases a good deal of its digital marketing strategy around the belief that the women who are its customers, run the world from their smart phones every day.   Women use their personal device to connect with friends, search for information (restaurants, movie times, products, services), data handling (uploading photos, applications) and transactions.   Pandora, a leading social media company offering personalized radio stations, cannot disregard the power of mobile phones and what it means to its business because two thirds of its unique visitors each month (28 million) access the offerings through their mobile phones.  Engagement is paramount and providing a robust custom tailored experience through smart phones is essential to establishing and maintaining relevancy with Pandora’s technically sophisticated customer.   Michael’s Stores, the largest retailer of custom arts and crafts, is transforming its conventional brick and mortar business by utilizing mobile devices as a way to a) reach a younger customer base, b) drive in-store sales, c) decrease dependency on print media advertising and d) track media spend to in-store purchases.  Michael’s allows its customers to find and redeem coupons, learn about weekly deals, product availability, scan barcodes in-store to receive information and special savings and sign up for loyalty programs, all through smart phones.   And companies as diverse as Home Depot, Best Buy, Taco Bell and Macy’s use mobile couponing , QR codes (those black white two dimensional maze like squares), snap tags (turns brand logos into interactive marketing tools) and mobile check-ins to drive store traffic, offer product information, provide personalized service, grant-a-wish and deliver preferential pricing to loyal customers.


The Smart Phone:  The NewMarketing Paradigm


Thanks to the smart phone, consumer’s perception regarding the time to acquire information, make reservations or purchase products has irrevocably changed and  there is little tolerance for delays or technological barriers.  Smart phones are fostering a very dramatic shift in traditional notions about brand loyalty and relevancy. In the world of personalized smart phone technology, relevancy not only depends on the quality of one’s product or service but now consumers flock to brands depending  largely on the ability to receive superior customer service through ease of use of applications,  seamless fulfillment or information and experiencing convenience across the entire shopping and purchasing funnel.  Relevancy leads to engagement which in turn leads to increased brand loyalty.  Smart phones are becoming a powerful tool to better understand consumer needs at a specific time and place and having the ability to anticipate and satisfy those needs instantaneously, on a one-to-one basis.    Companies that fail to embrace smart phones technological capabilities, longer range cultural influences and consumer’s expectations about personalized attention, risk losing their customers over time to more adaptive and savvy competitors.


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