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1 Frost & Sullivan Publisher Sample Phone: (US) or or (Int'l) Hours: Monday - Thursday: 5:30am - 6:30pm EST Fridays: 5:30am - 5:30pm EST customerservice@marketresearch.com MarketResearch.com

2 June 2014 Brands Are Spending More on Mobile Advertising, Report but is Title Working? size and Prove position It with text box Big to Data center Report Title in the blue bar Stratecast Analysis by Jeff Cotrupe Big Data & Analytics (BDA) Volume 2, Number 7

3 Brands Are Spending More on Mobile Advertising, but is it Working? Prove it with Big Data Table of Contents Executive Summary... 3 Introduction... 4 Why Brands Are Turning to Mobile Advertising... 6 Mobile Is the Fastest-Growing Type of Advertising... 7 Mobile Advertising: Form and Function... 8 Mobile Advertising is Growing but Are Mobile Ads Driving Sales Growth?. 10 Mapping Path-to-Purchase is Crucial, but Elusive Cookies Crumble on Mobile Devices Social Analytics Quantifies Likes and Shares, not Sales Does Mobile Advertising Work? Answering that Question with Big Data AdHaven Bullseye Platform Targets Mobile Ads to More than 152 Million Mobile Devices. 12 AdHaven Bullseye HyperLocal Adds Geo-fencing for Near-Store Analytic Granularity The Proof is in the Delta Screen Attribution with AdHaven Bullseye Multiscreen Using Big Data to Deliver Big Results for Brands Privacy is Paramount in Mobile Advertising Does Mobile Advertising Work? Big Data Answers the Question The Last Word List of Figures Figure 1: Major Providers (Revenue Leaders) in the Mobile Advertising Market... 7 Figure 2: Facebook s Stock Price Reaches Its Highest Point Yet (23 May 2014)... 8 Figure 3: Mobile Advertising: Form and Function... 9 Figure 4: The Four Screens Brands Must Reach (and Measure) with Ad Campaigns BDA 2-07, June 2014 Stratecast Frost & Sullivan, 2014 Page 2

4 Brands Are Spending More on Mobile Advertising, but is it Working? Prove it with Big Data Executive Summary Does mobile advertising work? The fate of an industry that currently generates billions of dollars in revenue depends on the answer to that question. This report provides some answers, and continues Stratecast s analysis of an expanding area of the Big Data and analytics market: mobile, retail, and location analytics. 1 The report s main conclusions and key takeaways are as follows: 1. Brands are finding it difficult to sell to, or even to effectively communicate with, consumers who are more mobile and less loyal than ever before. Consumers, to make things even more challenging, are accessing Big Data on their smartphones, tablets, and computers to make informed decisions; execute split-second transactions; and tell the world all about it on social networks. 2. One of the things brands are trying, in order to resolve this, is mobile advertising. The global mobile advertising market, now heavily concentrated in the U.S., generates billions of dollars in revenue annually and mobile is now the fastest-growing form of advertising. Brands are spending about $ per smartphone user per year to advertise to U.S. mobile users. 3. Reaching buyers on the go is a common thread across verticals, but different verticals are turning to mobile advertising for varying reasons: bricks-and-mortar retailers need to engage shoppers long before they enter a store, and mobile advertising helps them do so. Banks have allowed a tightened regulatory environment, and their lingering come into our bricksand-mortar branches and we ll be happy to help you mindset, to distance them from their customers. Mobile advertising represents an opportunity for banks to reconnect with customers. Local shopkeepers may be outgunned by the Big Data prowess (and budgets) of national and global brands, but mobile advertising offers a way to turn the tables on the behemoths by looking every bit as slick and professional on the screen of a smartphone. 4. The main enablers and beneficiaries of the growth of the mobile advertising market are content publishers such as Facebook and Google, ad network providers such as Millennial Media, handset manufacturers such as Apple, and communications service providers such as Vodafone and AT&T. Underscoring the importance that brands and financial markets place on mobile advertising: the underwhelming stock price performance of Facebook until it proved it was able to monetize mobile users through mobile advertising. 5. There is no such thing as one type of mobile advertisement, à la, I d like one mobile ad, please. Stratecast has identified forms of mobile advertising, several of which are broken 1 Other titles providing insight and analysis in this sector include: Safe Haven from the Retail Analytics Privacy Fire: Retailer- Branded, Shopper-Approved Smartphone Apps (SPIE , 7 February 2014); Local Businesses (and National Brands) Need Big Data in a Big Way - Is doxo the Answer? (SPIE , 20 December 2013); The Human Bounce Rate: Can (and Should) Retail/Wi-Fi Analytics Help Retailers Survive in the Age of Amazon? (BDA 1-05, 22 Nov 2013); and Mobilizing Big Data for Bankable Results: Capturing and Leveraging Customer Data in Financial Services (ACEM 3-02, 26 Mar 2013). For more information on obtaining these reports or subscribing to Stratecast s Big Data & Analytics (BDA) Growth Partnership Program, contact your account executive or inquiries@stratecast.com. BDA 2-07, June 2014 Stratecast Frost & Sullivan, 2014 Page 3

5 out into sub-types; and all are hard at work reaching mobile users in different ways and venues, and at varying time periods. 6. The most important question in mobile advertising is: does it work? Are mobile ads driving consumers to the cash register? Big Data is now providing answers to the revenue performance of advertising, not only on smartphones but also on computers and tablets. Identifying path-to-purchase, and which channels are driving sales, is vital to this determination; and Big Data is now making that possible. This report is designed to speak to the needs of these roles and teams: Enterprises Big Data, IT and Data Science teams Product and Sales & Marketing teams, including the CMO Brands and their digital marketing agencies C-Suite All other line of business (LOB) stakeholders Communications service providers (CSPs) Product and Sales & Marketing teams Customer Experience Management (CEM) Revenue and Relationships Introduction 2 A crucial issue for many brands today is how to effectively communicate with and sell to prospects and customers who are increasingly conducting business and personal matters on their mobile devices. Frost & Sullivan expects the total number of smartphones in use in the U.S. alone to exceed million, and the number of tablets in use to approach million, by In addition to being highly active on their mobile devices, consumers are also less brand-loyal, and can access current, relevant Big Data on their smartphones to help them make better-informed purchasing decisions. Consumers also, in the span of a few seconds, can use a smartphone as weapon of sorts, sharing information and opinions about brands, products, and services and the varying levels of service and support they receive across the social Web. When Stratecast delivered what, to our knowledge, was the earliest analysis of this space, back in 2011, mobile advertising was far more prevalent in APAC, MEA, and Europe than in the U.S. We determined that the main causal factors at that time were industrialization and regulation. In the more industrialized world regions, such as the U.S. and Europe, consumers who are already 2 In preparing this report, Stratecast conducted interviews with these representatives of the following companies: Tim Jenkins, Chief Executive Officer, 4INFO A Wall Street-based representative of UBS who requested no name attribution by Stratecast Please note that the insights and opinions expressed in this assessment are those of Stratecast and have been developed through the Stratecast research and analysis process. These expressed insights and opinions do not necessarily reflect the views of those interviewed. 3 Frost & Sullivan, Mobile Advertising Insight, 7 October 2012 BDA 2-07, June 2014 Stratecast Frost & Sullivan, 2014 Page 4

6 bombarded with a glut of advertising messages from all marketing and communications channels were less receptive to advertising messages on their phones; and regulators responded accordingly. By contrast, a mobile user on a lonely African plain tended to look forward to receiving ads on his or her phone, in much the same way as U.S. and European consumers might eagerly anticipate a favorite television program. In just a few short years, however, a combination of factors has shifted the balance of revenue power in the mobile advertising market to the U.S. This is partly due to smarter, more privacy-conscious tactics by brands and ad networks, but also because Web and social media giants such as Google and Facebook, based in the U.S., have gotten their acts together with regard to monetizing mobile, and are now earning billions of dollars in mobile ads. One industry that is definitely and perhaps more visibly impacted by these factors than other industries is retail. Mobile shopping is expected to generate $ billion in Yet, the need to reach mobile consumers whether they are making buying decisions in their personal lives, or making purchasing decisions for companies spans every vertical, and touches both the private and public sectors. One way to address that need is through mobile advertising; and brands are using mobile advertising more than ever before. Mobile advertising is growing, both in terms of sheer revenues, which are now in the billions of dollars, and as a share of total advertising expenditures. Brands are spending on average more than $ per smartphone user per year to reach U.S. mobile users. 5 While the growth of mobile advertising at the expense of traditional advertising seems logical, the question is whether the results of mobile advertising are provable. A key question on the subject of mobile advertising is this: are brands getting a good return on their investment? In one way, the answer may seem self-evident: brands would not be engaging in mobile advertising unless they were seeing sufficient ROI. However, the history of advertising, and even some current examples of where companies are spending their advertising dollars, might suggest otherwise. As consumers engage more with their mobile devices and conduct much of their business on the social Web, digital and mobile advertising continue to take share of market away from traditional advertising vehicles such as print, broadcast, outdoor, and direct mail. Nevertheless, a great many companies continue to pour money into those traditional advertising methods long after their effectiveness has been disproven. For example, searching the Web for most household needs is ubiquitous today yet, the author and probably most readers, at least in the U.S., continue to receive thick, printed Yellow Pages and Yellow Pages-style telephone directories chock-full of listings paid for by advertisers. No form of advertising is, or should be, immune to questions about its effectiveness. So, while the growth of mobile advertising at the expense of traditional advertising seems logical, the question is whether the results of mobile advertising are provable. Many consumers who eschew traditional forms of advertising also consider ads on their mobile devices an intrusion on their personal space. This Stratecast report discusses the mobile advertising market, the key drivers for its growth and the use of Big Data to answer the question of whether mobile advertising is working. 4 emarketer, Google Takes Home Half of Worldwide Mobile Internet Ad Revenues, 13 June Frost & Sullivan, Mobile Advertising Insight, 7 October 2012 BDA 2-07, June 2014 Stratecast Frost & Sullivan, 2014 Page 5