In 2011, nearly half a billion smartphones were shipped worldwide. Add to that 70 million tablets, and you have an unprecedented opportunity for mobile connections, communication, media, and commerce. While the opportunity is there, there are also some major challenges that stand in the way of realizing the full potential of mobile as an advertising and marketing channel. Understanding the challenges -- and their impact -- is the first step in addressing them and moving ahead.
Why are we seeing so many issues with monetizing this burgeoning mobile market? The New York Times recently reported that mobile display advertising revenue was $1.6 billion in 2011. That's a big number, but it's a paltry 5 percent of 2011's total digital advertising revenue of $31 billion. The two most important data points for understanding the economic realities of mobile advertising are the Facebook and Millennial IPOs. They provide a sobering view of the struggles we face as an industry. A quick look at their stock prices tells the tale: During the month of July 2012, both declined by more than 20 percent.
What are the issues behind the issues?
Gluttonous supply of mobile ad impressions
Mobile display is faced with an incredible glut of supply. On the InMobi mobile ad network alone, there were 287 billion impressions available in Q1 2012. There are billions of devices all producing more potential ad inventory than the industry can possibly sell -- through social media, gaming, apps, the mobile web, you name it. This means the value of that inventory, even if it could be easily tracked and targeted, will face downward pressure. Adding to the supply issue is fragmentation. Today in mobile, small pockets of highly valuable inventory are perpetually sold out, while huge swaths of the remaining inventory go unsold. Mobile -- unlike desktop where one can buy data-driven behavioral audiences at scale anywhere -- is limited to buying mainly based on the device characteristics and limited, publisher-specific data. In this case, iOS iPads will always be sold out while the same valuable audience, which is also on Android, remains undersold and underpriced because we lack tracking and data.
Mobile's gone global
Mobile, for the first time in media history, operates in a truly global environment. Games developed in Japan and Sweden are among the largest mobile properties in the U.S. and Africa. Even more so than the traditional web, mobile has cut across every barrier imaginable. Impressions from familiar apps and publishers are available in every corner of the globe. Sales teams and agencies able to make the most of these impressions, however, are not so available. They remain concentrated in certain cities around the world, focused on individual geographies, and focused on the legacy business of desktop.
Tracking is broken
This challenge is the most concerning. There is no consistent and universal way to identify, recognize, track, and target mobile devices while respecting consumer choice. Almost half of marketers surveyed during a recent webinar on "Improving the Economics in Mobile Marketing" said that their greatest concern with mobile advertising is tracking and measurement. Despite the enormous potential of the mobile advertising market, the types of tools marketers have come to expect and rely on in the desktop world just aren't available.
No matter how you look at it, privacy is a requirement that can't be ignored. Whether this is the existential crisis some make it out to be or just a tempest in the digital teapot, it is high on the list for regulators and the public alike, and this means it needs to be on the minds of marketers as well. Failure to come up with a credible and effective means to protect consumers' online privacy -- whether on mobile devices, traditional computer platforms, or on emerging or yet unimagined devices -- will result in the failure of mobile advertising to reach its full potential.
Fraud is endemic in the mobile marketplace. This issue is linked to globalization, but there is a much greater issue with fraud than major industry players are willing to admit. Most executives know it's a 20 percent to 40 percent problem, and that's a big issue -- even if they don't talk about it. Why? Advertisers pay for it.
With all the issues it faces, the industry is spending an inordinate amount of its time and technical resources to find new and better ways to drive app downloads. This is because apps have been the only real bright spot in the industry. Unfortunately this fixation is failing the broader advertiser community. It is motivating many players to act against consumers' best interests with high frequency (i.e., spam) campaigns that are completely untargeted and use invasive tracking techniques such as swishing or permanent identifiers hidden from consumers.
Mobile is its own persona
After struggling for 15 years to finagle through the digital desktop, the natural tendency is to treat mobile as an extension of desktop. But there are huge differences between the channels that require very different strategies, tactics, technologies, media plans, and measurement. For sure you can find common ground, but more frequently it's uncommon ground, and if we simply treat mobile as an extension of desktop, mobile advertising ROI will ultimately suffer.
These are serious challenges, but they're not insuperable. As an industry we need to take a long and critical look at these roadblocks and find ways to collectively move beyond them. It won't be a simple task, but progress is being made. If we work together to solve them, we'll be another step closer to improving the economics of mobile marketing.
James Lamberti is vice president and general manager of AdTruth.
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