August 19, Top 5 Mobile Advertising Trends to Watch. By Erica Swallow

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1 August 19, 2010 Top 5 Mobile Advertising Trends to Watch By Erica Swallow Mobile advertising is increasingly important, as cell phone adoption rates, especially smartphone adoption rates, soar. With a range of mobile advertising options, including SMS, WAP, mobile app display ads, search ads, rich media, video and push notifications, the landscape can be a bit complicated. After a tough 2009, advertisers are expected to increase mobile and digital marketing budgets over the next year. With this in mind, it s essential that advertisers keep up-todate on their options in the mobile space. Here, we ve laid out five mobile advertising trends to watch over the coming year. Let us know which trends you re keeping your eyes on in the comments below. 1. Continued Importance of SMS With approximately 90% of the U.S. population owning cell phones, according to CTIA s semi-annual wireless industry survey, and 98% of those phones being SMS-enabled out of the box, SMS is one of the most popular communication methods in the world. The rise of text messaging can be attributed to its low cost and ease of use. If you have a cell phone, you have the capability to text no downloads or installations needed. And with the advent of unlimited messaging plans, texting has become the mobile communication option of choice for cell phone-toting teens, beating out , and phone conversations. If that isn t enough data to show that SMS is an essential communication line, there s more. In May, 65.2% of U.S. mobile subscribers used text messaging on their mobile devices, up 1.4 percentage points versus the prior three-month period, according to comscore, making texting the top cellular device feature for all U.S. consumers, aside from calling. The texting audience is large and still growing. emarketer projects that the growth of the global market for ad support of mobile messaging will reach nearly $12 billion in 2011, up from about $1.5 billion in 2006.

2 SMS doesn t get a lot of hype that the flashy apps do, but it works because it provides what all marketers seek a one-on-one dialogue with a customer, noted Jack Philbin, co-founder and president of Vibes Media, a mobile marketing company based in Chicago. Philbin explained that click-through rates (CTRs) and conversion rates for text messaging are much higher than rates for and Internet display, two channels that win larger percentages of marketing budgets than mobile. The average CTR for text messaging is 14.06%, while the average conversion rate is 8.22%. brings in an average CTR of 6.64% and an average conversion rate of about 1.73%, and Internet display doesn t even hit the radar with an average CTR of 0.76% and average conversion rate of 4.43%, according to the Direct Marketing Association s 2010 Response Rate Trend Report. The response rates that marketers experience via texting campaigns are definitely attractive. These high action rates are probably due to the fact that texting is an opt-in marketing channel, in which consumers actively seek out information and sign-up for updates. Philbin says that he looks at SMS as a funnel, in which marketers start with text interaction, optimizing their messages to drive traffic by including a link to rich media, video, or other marketing materials, where users then take the desired action. What s perhaps one of the most interesting reasons to advertise via SMS is that about 90% of all text messages are read within three minutes of their delivery, and over 99% of all text messages are read by the recipient, according to a whitepaper on conversational advertising [PDF] by SinglePoint. The immediacy of SMS is currently unparalleled by any other marketing channel. 2. Experimentation with Rich Media With Google s acquisition of AdMob and Apple s acquisition of Quattro Wireless, which led to their introduction of iad, we re bound to see a pretty heated tech battle in the coming year, as both networks will be going head-to-head, focusing on rich media advertising. Eric Litman, CEO of Medialets, a rich media advertising and analytics platform for mobile, discussed why experimentation with rich media is bound to happen. First, Litman pointed out that rich media ads offer more in-app interactivity via video, sound, gaming, and so on. He believes that the aesthetic value is an obvious advantage that will attract advertisers and ad creators. Furthermore, with the growing adoption of smartphones as the device of choice, Litman believes that rich media is the natural progression towards more engaging ads. The engagement rates back up his predictions. Litman explained that engagement rates in mobile blow away the best of online rich media, and engagement times in mobile rival those of television [advertising]. He continued to explain that he has seen engagement rates as high as 33% on rich media ads, with rates consistently hitting above 20%. At the

3 low end of the spectrum, simple, expandable ads reach 6-7% engagement rates, which is still high when compared to other advertising options in mobile and online. These rates are unheard of in the online world, Litman commented. Srini Dharmaji, CEO of GoldSpot Media, a rich media and video advertising platform for mobile, also illustrated the pros of rich media, including higher CPMs (cost-per-thousand impressions), but he pointed out a few downsides as well. He said that one of the biggest barriers to adoption of rich media is the need for the time and skills to create the ads. He pointed out that the lead time for creating one iad campaign is currently about 8-10 weeks, due to Apple s tight control of the process. Media planners do not have the time to sit down and create a lot of these ads, he said frankly. A big company like Apple can do that, because they have the budget and clout. But smaller businesses do not have the time and money for it. Even with the lengthy creation process, publishers and advertisers are taking an interest in and experimenting with rich media ads. For example, Dictionary.com is a publisher of iad ads on their iphone and ipad apps, which have eight million and 500,000 downloads, respectively. Pictured above is an ad that is currently running within the Dictionary.com iphone app to promote The Switch, a movie being released this week. Within the ad, users can watch videos, take a quiz or build a baby. Ads like this one have already proven successful for Dictionary.com. Since enabling iad ads, Dictionary.com has seen its overall iphone mobile app ecpm (effective cost-perthousand impressions) increase by 177%, and with the iad network they are experiencing a 246% higher ecpm when compared with other ad networks, according to a representative of Dictionary.com. 3. Mobile Sites vs. Mobile Apps One of the biggest decisions for mobile marketers this year is whether they should build a mobile site or app or both. And for advertisers, the question is whether to advertise on mobile sites, apps, or both. But there is a bigger question here on where mobile is going. With Google betting on mobile web and search as the future, and Apple taking the app route, it is still not clear which platform consumers will prefer in coming years. Because of this fragmented mobile browsing experience, developing either can seem like a huge commitment to marketers, especially since mobile spending currently makes up less than 5% of marketing budgets in many organizations. Furthermore, with the number of different device types, operating systems, and screen sizes available, the decision can be even more daunting. Even for advertisers, mobile ad creation can be a pain, as ad unit sizes vary across platforms. Because of the intricacies with mobile, less than a third of U.S. marketers think optimizing the mobile marketing experience is important to their customers, according to an April 2010 survey by eroi. Furthermore, just 23% of marketers responding to the survey reported having a mobileoptimized website.

4 It is estimated that by 2014 half of Americans web browsing will be done on mobile devices. Aaron Maxwell, founder of Mobile Web Up, a company that specializes in helping small and mid-sized businesses mobilize their websites, spoke about the importance of that not-so-distant prediction, and what it means for mobile advertisers and marketers: What does this mean for companies and organizations? If they depend on their web presence in any way, it s important to start thinking about mobile now checking how their website looks and works, or doesn t, on mobile devices. Mobile internet use is growing faster than nearly anyone realizes. To them, I d say: Don t wait until 25% of your website visitors are using handhelds that s like waiting until a quarter of your backyard is on fire before grabbing a water hose! Start thinking NOW about how to make your website work hard for you on mobile devices. In the coming year, expect to see a larger debate on where mobile is going. With the onslaught of app stores, including Blackberry App World, Android Market, Windows Marketplace for Mobile, the App Store for Symbian, the Palm app store, and, of course, Apple s iphone app store, it doesn t look like the app is going anywhere anytime soon. But it should be an interesting debate at the very least. Dharmaji commented on the evolution of mobile web and apps, saying, Apple is all about mobile apps, and Google is all about mobile web. How the system will evolve, whether apps or web will be the chosen mobile solution, I have no idea, but I think that both of the platforms will co-exist. For advertisers, the most crucial part is presenting the ad. How the consumer accesses the ad, will not matter. 4. Interest in Geo-Location With location being the talk of the year, we re looking forward to the evolution of locationcentric mobile apps, and in terms of advertising, we re excited to see how advertisers will utilize them. We ve already seen a healthy usage of the popular location-based checkin app Foursquare by many brands, especially newspapers, magazines and other publishers, including Bravo TV, the History Channel, The Huffington Post, The New York Times, and even Mashable. To a lesser extent, marketers have even tested the waters beyond Foursquare with other location-based apps, including Gowalla, Whrrl, Brightkite, Loopt, and SCVNGR. However, a recent study indicates that this year may not be the time for location-based marketing, as only 4% of the adult Internet-using population has utilized any kind of location-based service, and just 1% of all adults check-in to a location at least once a week. Regardless of the stats, marketers are still taking an interest in the new technology. For advertisers, marketing within apps is as easy as creating an ad-campaign targeted to a specific audience. For example, the Brightkite app can target consumers by precise geography, by behavior, and within a given time frame.

5 Dan Gellert, CEO of GateGuru, an iphone guide for airports, explained that all the ads for their platform are location-based offers from airport retailers to drive people into stores. Gellert explained a recent campaign with XpresSpa, an airport spa: We launched this campaign across 13 airports, which collectively represent about 20 stores for XpresSpa. Since June 1st, we have delivered 20,000 impressions to them on the Amenity List View [pictured left], and over 500 impressions on the Amenity Offer [pictured right]. The CTR (between the Amenity List View to get to the full page offer) has continually increased, and in our latest report hovered at about 6%. Of those 500 impressions, we delivered into the store, which is a number we are very excited about. A conversion rate of at least 15-20% is quite amazing, and it goes to show that locationbased ads can provide value for consumers when they are optimally placed and timed. 5. The Growth of Mobile Video Lastly, with the explosion of Internet video consumption, it is assumed that mobile video will also be largely adopted in the coming years. While video isn t a huge focus for advertisers right now and many cite broadband and technology inadequacies as barriers, many predictive stats tell the story of video s increasing importance. The number of mobile video viewers in the U.S. will grow nearly 30% in 2010 to reach 23.9 million, according to emarketer s forecasts, representing a reach of about 7.7% of the total U.S. population and just under 10% of mobile phone users. Those numbers are set to double by 2013 and increase still further in By 2013, some even believe that video will be so widely adopted that it will be a significant driver of mobile data usage occupying an estimated 66% of mobile traffic, Cisco forecasts. With video taking an increasingly important role in the mobile market, advertisers should keep their eyes open for opportunities to try out new advertising options. We re keeping tabs of these five mobile advertising trends. Which trends are you watching? Let us know in the comments.