Realizing Potential: Overcoming Barriers to the U.S. Mobile Advertising Market. September 2008

Transcription

1 Realizing Potential: Overcoming Barriers to the U.S. Mobile Advertising Market September 2008

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3 For either amusement or dismay (depending on your point of view), take a look at mobile advertising market forecasts from years past sometime. Suffice it to say that as an industry, we ve been rather bullish about the growth of mobile advertising. Just in the last year, reputable firms forecasted upwards of $5 billion in mobile advertising revenue globally; others projected 100 percent year-over-year growth between 2007 and 2008 and, at Nielsen, we too put a stake in the ground to say that 2008 would be the year of mobile advertising. Once you remove the rose-tinted glasses, though, you find that the mobile advertising market has overall not kept pace with the rapid growth of mobile media consumption. An audience is snowballing, but a mobile advertising economy lags by comparison. We believe there are clear reasons for this stagnation: lack of awareness of the audience size, complexity of the mobile marketing ecosystem and a lack of trust among advertisers in the mobile advertising investment. The good news, though, is that each of these is a surmountable challenge, with efforts well underway to scale them. Once resolved, the mobile advertising market will come to fruition quickly and formidably. In this paper we draw on data from Nielsen s portfolio of mobile measurement to provide insight on the state of the mobile advertising market. Here we examine the factors that to date have restricted the market s growth, and we offer a prescription for increased investment in the platform. Key findings include: As of Q2 2008, there were million wireless lines in the U.S. Of these, some 69 percent (178.6 million) used their phone for at least one data service million U.S. mobile subscribers recall seeing some form of mobile advertising while using their mobile phone. That s up 81 percent year-over-year. Despite this growth, the majority of these mobile ad viewers, 63 percent, see mobile advertisements just once a month or less frequently. Mobile advertising is present on less than two-thirds of website homepage page views across leading mobile websites, and roughly half of that is unpaid house advertising. We believe there are three governing factors restraining the growth of the mobile advertising market: unawareness of audience size, complexity of the ecosystem and a lack of trust in the medium. The market can still see great growth through the demonstration of the audience s critical mass, a greater focus for advertisers and improved targeting and tracking tools available. 3

4 Critical Mass in Mobile Media As of Q2 2008, there were million wireless lines in the U.S. Of these, some 69 percent (178.6 million) used their phone for at least one data service be that text messaging, games, , mobile Internet, video, ringtones or another non-voice data feature on their phone. From our perspective, this is the potential universe for mobile advertising today. Growth in mobile media has been steady. Between Q and Q alone, the proportion of mobile subscribers subscribing to advanced data services increased 8.6 points, or 23 percent. Across data services, multimedia messaging (MMS) and mobile Internet subscriptions have seen the most growth in the past year, expanding penetration by 39 and 32 percent, respectively. Additionally, subscriptions to mobile video and SMS text messaging have also expanded, by 25 and 20 percent, respectively. While mobile data service subscriptions have expanded, so too has actual usage of these services. Of the data services available to subscribers, SMS text message is the most popular. In the U.S. today; half of all wireless subscribers use text messaging on a regular basis (53 percent, or million). Meanwhile, audience size for MMS, ringtones, mobile Internet, text alerts, instant messaging, mobile applications, location-based services and even mobile video has surpassed the 10 million mark. Figure 1 shows the proportion of mobile subscribers using various mobile data types and the projected audience size for these services as of Q In the past several years, mobile media services have developed audiences that present scalable advertising opportunities. Today, millions of U.S. mobile consumers turn to their phone for content. Why, then, has mobile advertising not kept pace? Figure 1 Number of U.S. Subscribers Using Mobile Data Services Q Mobile Data Type % Subscribers (000) Total* 258,900 SMS 53% 137,759 MMS 26% 67,783 Pre-installed games 21% 54,256 Ringtone downloads 19% 48,768 Mobile Internet 17% 43, % 38,951 Text alerts 13% 33,082 Picture downloads 12% 32,077 Instant messaging 12% 31,938 Wallpaper/Screensaver downloads 11% 28,930 Software/Application downloads 11% 28,219 Game downloads 9% 24,128 Uploads 8% 21,339 Video messaging 7% 18,064 Location-based services/gps 7% 17,153 Full-track music downloads 5% 14,202 Video/Mobile TV 4% 11,468 Streaming online music/radio 4% 11,064 Online game playing 4% 10,454 VoIP programs 2% 4,053 Source: Nielsen Mobile, Mobile Insights * Total and projections based on CTIA estimate of U.S. wireless lines, Q

5 Realizing Potential: Overcoming Barriers to the U.S. Mobile Advertising Market Mobile Advertising Today In fact, mobile advertising has become a slightly larger part of the mobile experience. Today, 76.8 million mobile consumers recall seeing some form of mobile advertising while using their mobile phone. That s up 81 percent year-over-year and, on the surface, seems like a substantial proportion of the million mobile data users mentioned before. As a percentage of mobile data users, mobile advertising exposure has risen too. In Q2 2007, 23 percent of mobile data users recalled seeing some form of advertisement, and the percentage rose to 30 percent by Q Despite this growth, though, the majority of these mobile ad viewers, 63 percent, see mobile advertisements just once a month or less frequently. Mobile AdRelevance, a new service launching from Nielsen Mobile this month, will reveal to clients the extent to which mobile advertising is becoming a part of the mobile Internet experience as well as which brands are investing in the space. Today, mobile advertising is present on less than two-thirds of website homepage page views across leading mobile websites, and roughly half of that is unpaid house advertising. AdRelevance reveals how some categories of websites are more successful in attracting paid advertising than others, yet overall mobile advertising is still just emerging across the mobile experience. Although mobile advertising hasn t been ingrained in the consumer experience as many had expected, there are signs of an expanding mobile advertising market. The percentage of teen mobile data users who recall seeing a mobile advertisement, for instance, reached 58 percent in Q2 2008, up from 46 percent just two quarters prior. 5

6 Figure 3 Internet SMS Instant Messaging Ringtone DLs Mobile Video/TV Game DLs Online Gaming Wallpaper/Screen DLs Full-Track Music DLs Uploads, Social Network, Blogs Picture DLs Streaming Music/Radio Application DLs Nav Menus Location-Based Services/GPS Source: Nielsen Mobile, Mobile Advertising Report Percent of Ad Viewers Who Saw Ads While Using Particular Content Q % 17% 21% 21% 21% 18% 29% 28% 27% 26% 36% 34% 42% 38% 57% 54% Looking across the different mobile media channels, among those who recall ad exposure, mobile Internet users were most likely to see mobile advertising: 57 percent of mobile ad viewers recall seeing mobile ads while browsing the mobile Internet, up slightly from Q (53 percent). Advertising via SMS also generates relatively high recall with 54 percent of ad viewers recalling text ads. And the extent to which exposure occurs via mobile video use is increasing: 34 percent of ad viewers saw an ad during Q2 2008, compared to just 29 percent two quarters prior. Figure 3 shows the percent of mobile advertising viewers who recall seeing ads, by the content type they were using at the time. Overall response rates to mobile advertising appear flat. In Q2 2008, 13 percent of mobile data users (45 percent of those who saw an ad) say they responded to a mobile advertisement in some way. That compares to 12 percent of all data users (52 percent of those who saw an ad) who responded in Q At first look, the lack of growth in the mobile advertising market is confusing. We ve experienced 23 percent year-overyear growth in mobile data services in the U.S.; phones have become more capable and robust (the proportion of 3G and smartphone handsets in the marketplace has doubled in the past year, to 28 percent and 10 percent, respectively) and media companies have made substantial developments in the sheer quantity and promotion of mobile content. What s more, the uniquely personal, portable and actionable qualities of mobile as a marketing platform appear today to be widely espoused and accepted in the advertising community. And yet, stagnation. 6

7 The Hold Up We believe there are three governing factors restraining the growth of the mobile advertising market. 1) Unawareness of audience size. Advertisers and agencies aren t yet fully aware of the sizes of mobile content audiences, particularly at the channel level. They hear that there are 138 million text messagers in the U.S. or more than 40 million mobile Internet users (as we reported in our recent study, Critical Mass: The Worldwide State of the Mobile Web), but they may not yet understand that this translates to 7-digit reach potential on individual mobile advertising avails. The top mobile website, Yahoo! Mail, attracts a unique monthly audience of more than 15 million mobile users; Barack Obama s campaign was recently able to reach 2.9 million people via text messaging to announce his pick for vice president. Mobile can today be a mass medium, but advertisers and agencies are not yet fully cognizant of this. 2) Complexity of the ecosystem. For those marketers who do recognize the reach potential of mobile, many are reluctant to enter into the space because they see it as a complex marketing environment with a steep learning curve and technical hurdles that reduce the efficiency of the ad buy. While mobile is a complex advertising ecosystem and new media do involve a learning curve, advertisers and agencies need further education on the simplicity around certain focused mobile media activations. As a composite of media vehicles, a marketer looks at mobile and sees dozens of choices to be made, partners to consider and formats to construct. In these instances, focus serves the advertising market well. Approached acutely, there are fewer barriers to the activation of any one mobile media than many marketers believe. are warming to mobile advertising largely because they see a value proposition forming and they imagine higher degrees of relevancy in the ads due to proper targeting. That targeting is itself another component of advertiser distrust in mobile advertising. Today, advertisers are unaware of the resources available to target a campaign to efficiently reach their consumers. They expect that in its nascent days, mobile does not yet afford them the audience profiling tools needed for proper advertising targeting. But these tools are available. Lastly, we believe advertisers don t inherently trust mobile advertising because they aren t fully cognizant of the means by which they can track their mobile media investment, and that of their competitors. They aren t fully aware of direct and third-party audience measurement and advertising intelligence that allow them to track the investment and performance of their mobile media buys and their competitors. All of this distrust is related to a great risk advertisers perceive in mobile advertising. For all their talk of innovation, agency media planners control budgets that actually do little to encourage media planning risk. The saying rightly goes, nobody was fired for buying television advertising. With standardized processes and built-in impressions guarantees, television is a medium that can be efficient and its results, measurable. For marketers to put their trust in mobile, then, there needs to be an expanded awareness of consumer receptivity and an education on the tools that exist to target mobile advertising and track its results, thus driving and reporting on their ROI. 3) Lack of trust in the medium. We believe advertisers are fundamentally reluctant to enter into mobile due to a lack of trust in the mobile advertising medium. They don t trust consumer receptivity, they don t trust ROI and they don t trust their ability to track performance. With regard to consumer receptivity, advertisers are distracted by survey data that suggest consumers are reluctant to accept mobile advertising. Many research firms ask about current receptivity to mobile advertising and the numbers, taken out of context, are discouraging. Our most recent Mobile Advertising Report says that just nine percent of mobile data users agree that mobile advertising is acceptable, but that number alone doesn t take into account the improvements to receptivity that are afforded by better targeting and improving content quality. Consumers self-reported disinterest in advertising at large should be set aside. Consumers, we believe, 7

8 How to Grow the Mobile Advertising Market Misperceptions of audience size, market complexity and a lack of trust in mobile advertising these are the reasons we feel the mobile advertising market lags today. The good news is that there is clear progress and a new clarity on how the market can catch up to the pace with which mobile media is so rapidly taking off in the U.S. and elsewhere. For the mobile advertising market to meet its full potential, stakeholders will need to demonstrate critical mass, provide focus in a complex ecosystem and build trust by allowing for targeted advertising and traceable results. To visualize this evolution, let s put these industry action items into the context of a case study: Nielsen Monitor-Plus estimates that the sports footwear category spent $198 million on traditional advertising in 2007 (excluding mobile advertising). How will the mobile advertising market attract some of these sports footwear advertising dollars to the mobile medium? 1) We will demonstrate critical mass to advertisers. Using audience research and rankings available from Nielsen Mobile, media companies can now call out substantial audiences in the sports category across the platform. For instance, they could show the sports shoe marketer that the sports category attracts 10.1 million unique mobile Internet visitors per month. Some brands, like ESPN, Fox Sports, Yahoo! Sports and CBS Sports, for example, each have unique audiences of over a million active mobile Internet users monthly. These sites provide the mass of impressions the shoe marketer needs, but they aren t her only option. Outside of mobile Internet, the marketer could see how sports content attracts mobile video users. In Q2 2008, ESPN was the second highest reaching mobile video channel, watched by 26 percent of subscriber-viewers. From a mobile games perspective, they could show the unique and engaging opportunity presented by the more than 150,000 unique mobile downloaders of EA Sports Madden NFL 08, each quarter. The onus here is on the content providers and research companies to routinely demonstrate this addressable universe. 2) We will provide focus to advertisers. While the sports category may have a dozen mobile advertising channels of suitable mass and content, one of the impediments to mobile advertising s growth has been the complexity and choices that exist in the ecosystem. Within the large tent of mobile media, though, there are simple opportunities for focused mobile marketing efforts of scale. Today, Internet and shortcode messaging provide the most straightforward opportunities in mobile advertising. From our perspective, there are two elements that make these appropriate channels on which to focus an advertiser's initial efforts: critical mass of audience and simplicity of activation. From an audience size perspective, mobile Internet and SMS channels have the potential to touch 43 million and 138 million unique users, respectively. The embedded base for these media types allows advertisers the opportunity for quick wins in terms of mobile reach. From a simplicity perspective, mobile Internet and shortcode messaging are uniquely positioned for ease of activation. That is, to include either texting or mobile Internet advertisements in a campaign is, at this point, a turnkey exercise. Enabling companies are in place to simplify this process. In addition to reach and simplicity, mobile Internet benefits from familiarity with both consumers and advertisers. Mobile Internet users are 60 percent more likely to find mobile advertising acceptable, largely because they are familiar with advertising through the Web medium. Advertisers are also accustomed to the format and are familiar with the banner and text advertising approaches that are being replicated for the third screen. So what is our shoe marketer to do? The quickest and most logical mobile marketing wins for her would be to launch a shortcode marketing campaign that allows her to have a text-message relationship with prospective consumers and a targeted mobile Internet campaign. These methods bring scale and simplicity that allow the shoe marketer, or any marketer, to add the unique engagement of mobile to a campaign without undo inefficiency. 3) We will work together to instill greater advertiser trust in mobile media, by improving targeting and tracking. Across media, we know that the more relevant an advertisement to a consumer's interests, the more engaging and effective that ad will be. The same is true of mobile, only it s further pronounced due to the uniquely personal nature of the medium and the relatively pristine, uncluttered media environment that it provides. Mobile data users are 44 percent more likely to find mobile advertising acceptable when it s relevant to their interests, which means profiling will play a critical part in the expansion of the mobile advertising market. To improve targeting of mobile advertising, Nielsen introduced a series of mobile ad planning tools: Mobile PRIZM reporting and Mobile MRI help connect advertisers with their targets and help media companies promote the unique strengths of their audience. 8

9 a service launched this year in partnership with Nielsen Online, profiles the audiences of 200 leading mobile websites across characteristics such as travel behavior, food and beverage consumption, leisure activities and more. This level of advanced profiling allows our sports shoe marketer to identify which websites allow for the most efficient reach of her targets. Using our most recent report, for example, the marketer would see that mobile visitors to the website The Street are more than four times as likely as the average mobile Internet user to jog for physical fitness. Additionally, mobile visitors to Forbes, YouTube and Epicurious all are more than three times as likely (see Figure 4). allows a marketer to see where her customers are, and aren t, on the mobile Web. In another advance for customer targeting over mobile media, Nielsen Mobile recently partnered with sister company Nielsen Claritas to launch Mobile PRIZM, providing PRIZM-based reporting of Nielsen Mobile s insights. PRIZM segments, used by marketers to segment customers based on socioeconomic and lifestyle attributes, allow our sports shoe marketer to use the PRIZM segment as a linking variable into mobile media. Say, for example, that our marketer has identified PRIZM segment 48, Young and Rustic as a target for her marketing campaign. The Young and Rustic segment tends to be single, with modest incomes, but because of their fast paced lifestyles centered on sports, cars and dating, they may represent a target our marketer is trying to reach to promote her sports shoes. Analyzing mobile media consumption by this PRIZM segment would show our sports shoe marketer that her target is more likely to use text-message, MMS, ringtones or games than the average subscriber, but only as likely to use mobile Internet (see Figure 5). This helps her to see broadly where she can most efficiently reach her target consumer. Taken further, she could use Mobile PRIZM segmentation to identify the best mobile websites, video channels and applications by which to reach her target segment(s). Figure 4 Index of Audience Profile Point: Runs for Physical Fitness Selected Mobile Internet Sites Q The Street Forbes YouTube Epicurious WeatherBug Marriott Earthlink Moviefone.com Premiere Source: Nielsen Mobile, * Dotted line represents average mobile Internet users 9

10 Lastly, to further allow mobile media audience profiling and targeting, Nielsen recently announced a partnership with Mediamark Research and Intelligence (MRI) to launch Mobile MRI. Mobile MRI will provide an integrated database to show how mobile behavior relates to advanced demographics, psychographics and product usage. The integration will provide more options for marketers to examine the behavior and preferences of the mobile media audience. The bottom line is that a targeted ad is an efficient and effective one and will help mobile to deliver the ROI that advertisers demand of their media. Beyond targeting, though, will be the need to track mobile advertising investments and here is the last key to instilling greater trust in mobile advertising and the final prescription for growth in the mobile advertising market. Advertising is about planning and then tracking, and so for our sports shoe marketer to invest in mobile media she needs confidence in her ability to track investments in mobile media. In addition to mobile media audience research tools that tell our marketer the size and demographics of the audiences reached over certain mobile Internet, video, game, application or other content channels, our Mobile AdRelevance service will allow her to monitor the ad occurrences of her competitors through mobile Internet advertising and allow her to see where mobile advertising inventory is and isn t being utilized. In effect, Mobile AdRelevance allows our shoe marketer to see which other sports apparel companies are advertising on the mobile Web and on what sites their ads appear. It is the advertising intelligence she and others will need to put their trust in the platform. Figure 5 Mobile Data Use by PRIZM Segment: Young and Rustic Q Text messaging/sms Picture Messaging/MMS Ringtone downloads Pre-installed games Text alerts Mobile Internet Wallpaper/Screensavers downloads Software/Application downloads Picture downloads Game downloads All Subscribers 18+ PRIZM Young & Rustic Source: Nielsen Mobile and Nielsen Claritas, Mobile PRIZM 10

11 We re still bullish As we monitor the recall of advertising among data users, track mobile Internet advertising through Mobile AdRelevance and shortcode advertising through our bill panel, we see quantitative proof that the mobile advertising market has been slow to take off. Advertiser investment in the medium has failed to keep pace with the rapid growth of mobile media, but the lag in the mobile advertising market exists for reasons that are clear and correctable. Today, audience levels are sufficient but need to be promoted; the mobile ad market is complex but offers easy wins when approached with focus; advertisers are not trusting of the mobile advertising opportunity but should gain confidence through the new targeting and tracking tools that are in place. Indeed, the barriers to growth of the mobile advertising market are diminishing quickly, and the opportunity for a multibillion dollar mobile advertising economy remains. Today the ball is in the advertiser and agency's court. To be cutting edge and innovate in their engagement with consumers, to fully capitalize on mobile s uniquely personal, portable and actionable value proposition, they need further education, focused wins and tools that build trust in the mobile advertising investment. Only then will they see opportunity, not risk, in mobile advertising. Only then will this market truly take off. 11

12 About Nielsen Mobile Nielsen Mobile, a service of The Nielsen Company, is the world s largest independent provider of syndicated consumer research to the telecom and mobile media markets. Nielsen Mobile focuses exclusively on tracking the behavior, attitudes and experiences of mobile consumers; their reports also provide up to seven years of data on Internet, video, gaming, audio and advertising trends for mobile phone users. Nielsen s technology-driven research provides unique and holistic insight into how mobile customers use their devices and what they think about brands, devices and services. About The Nielsen Company The Nielsen Company is a leading global information and media company providing essential integrated marketing and media measurement information and analytics and industry expertise to clients across the world. Nielsen maintains leading market positions in marketing and consumer information; television, online, mobile and other media intelligence; and trade shows and business publications (Billboard, The Hollywood Reporter, Adweek). Nielsen is a privately held company and is active in more than 100 countries, with headquarters in New York, USA. For more information, please visit, Contact Us For information about this analysis or Nielsen s portfolio of mobile research, contact: Nic Covey Director of Insights, Nielsen Mobile The Nielsen Company nicholas.covey@nielsen.com 12