The Slow Evolution of Mobile Advertising

NEW YORK — Working in the mobile marketing industry has got to be a little like being a baseball fan in Brooklyn in the 1950s. Prospects to win abound, but somehow, come October, the faithful are always left with the consolation, “Wait ’til next year.”

Well, just when 1955 (the Dodgers, triumphant at last!) will come for the mobile market is not clear, and the drags on the industry are significant enough that many working in mobile advertising realize a quick fix won’t happen.

The once-heralded boom in mobile marketing might turn out to be more of a gradual evolution. Screens are too small to replicate the multimedia activities common to the PC, and outside of iPhone owners, few people use their mobile devices to access the Web.

Then, too, carriers are only slowly loosening their grip on their services so that marketers might one day set up interoperable third-party ad networks similar to those dominating the Web.

A panel of industry executives at the iBreakfast series on Web 2.0 marketing described how companies are learning to make money from mobile devices. Almost in chorus, they emphasized the importance of learning the particulars of the medium. People use mobile devices in different ways than they do with computers, so what works on the Web does not necessarily work on the handset.

Building from the premise that good content is the foundation of ad revenue, Farhan Memon, AOL’s senior product manager for mobile search, said advertisers must understand what types of content people typically search for on their mobile devices, because it differs from what they access on the Web.

Conventional wisdom argues that since people have their mobile phones with them all the time, the mobile Web should see proportionally more queries for local businesses, the kind a person might make when traveling to a new town.

Not so, according to Memon.

“In search, what we’re finding is that while the industry has said mobile is about local, and advertisers have been gearing themselves that way, in fact there’s a disconnect,” he said. “Mobile is not about local. Mobile is about other things.”

On AOL’s desktop search engine, the top query is Google; on its mobile search engine it’s MySpace. According to AOL’s research, people tend to search on their mobile devices for content that might indicate a younger audience, such as celebrity gossip, music and dating, as well as an alarming volume of pornography.

Memon would not say what portion of AOL’s mobile search queries are for adult content, only that it is “significant.”

For companies such as AOL — a unit of Time Warner (NYSE: TWX) — that aim for a compelling mobile Web experience, a one-size-fits-all advertising solution is elusive. “No single form of advertising is enough to cover the expense of serving all this content up,” Memon said.

Mobile ad initiatives

To cover the field, AOL has formed a partnership with a company called JumpTap to serve sponsored search results on its mobile browser sold on a cost-per-click, or CPC ,
basis, while its own Third Screen Media serves display ads, are sold by cost per thousand, or CPM , impressions.

AOL also sells what it calls “advertorial” placements on its mobile browser, where a company called Thumbplay pays for content such as downloadable ringtones or wallpapers to appear at the top of search results. Then it contracts with Ingenio to handle pay-per-call advertising.

As a content provider, AOL is principally focused on the advertising possibilities for the mobile Web. But given the relatively few people who spring for data plans, the more immediate advertising possibilities involve the elemental uses of the mobile phone: talk and text.

As the most developed of the mobile marketing channels, texting messages to short codes gives advertisers the opportunity to initiate a broad variety of interactions. Perhaps most famous for the voting system on American Idol, short-code texting can also trigger a company to send a coupon, a link to its site or place a phone call in a situation where a customer might need personal assistance, such as technical support.

Short codes also fit neatly into a multichannel marketing bundle, as advertisers routinely mention their texting outlet in TV commercials, print ads and on their Web sites. The panelists suggested that mobile marketing is not a strategy unto itself, but that the most successful advertisers treat it as part of an integrated media mix.

Randy Haldeman, chief marketing officer and vice president of sales for a mobile ad company called Apptera, described how ads can be worked into phone calls — the closest thing to a “killer app” that will be found on a mobile phone.

If a person is calling an automated business number such as an airline, Apptera might insert an audio ad for a rental car company, with the call to action of pressing a button to receive a promotional text message. Calling a movie theater for showtimes might result in an ad for a nearby restaurant, along the lines of, “Hungry for a bite before or after your show?”

Apptera’s in-call ad-serving technology filters between calls received from landlines and mobile phones, so landline callers are not given offers to receive coupons or other messages via SMS codes. Ads served to landline callers are sold on a CPM basis; the messages that wireless callers hear, since they are being asked to take a direct action, are sold on a CPC basis.

In-call advertising for automated services such as directory listings or movie tickets solves the geolocation problem without complex cell-tower triangulation or tapping into the in-phone GPS device. In those cases, Haldeman said, the customer is revealing his location by entering the address of the business he is looking for.

For companies such as Apptera, the technological route to geolocation will require a level of cooperation from the carriers that they are not ready to commit to yet.

Next page: Aiming for open access

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Aiming for open access

Of course, the wireless providers’ reluctance to grant access to the “walled gardens” of their networks is commonly cited as the principal drag on the mobile economy. The carriers have been making some motions toward openness on their own, but many of the companies betting big on the mobile Web remain skeptical. The issue of open access was at the center of Google’s participation in the recent government auction of wireless spectrum.

“Currently, the carriers pretty much control access to the application or the Web page,” Memon said. “You can make deals with the carriers, as AOL has, but that doesn’t allow us the level of control that we want to see in terms of getting people to our products,” he said, noting that he was looking forward to a new class of wireless devices built on principals of open access and interoperability, such as those expected from Google’s Android initiative.

Robert Walczak, CEO of the mobile ad network Ringleader, said that the carriers’ unwillingness to open their platforms has led to the creation of siloed content on the mobile Web, leaving the streamlined ad networks that have become veritable cash machines on the PC Internet a dream deferred.

Then there has been the matter of convincing advertising professionals that mobile really is worth their time and money. But many agencies are now beginning to move beyond their initial skepticism about the validity of the medium, Walczak said. Now, agencies accept that mobile is too important to ignore, but they are looking for ways to predict and quantify the return on their investment in the space.

“We’re in the second evolution of mobile now. We’re a little beyond the education point and getting into the proof point,” Walczak said. “They want to see it work.”

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