News Column

Thumbs Up for Smartphone Ad Click Space

Dec. 25, 2012

Ameet Sachdev

Smartpone

Ads on smartphones are so small that an irritating problem has emerged: "fat finger" syndrome. The ailment is caused by accidentally clicking on a banner ad as your finger scrolls through a mobile website or app.

Google, a big seller of mobile ads, has come up with a makeshift cure: If your finger merely slides on the outer border of an ad, the search giant will prompt you to verify whether you meant to click on it.

The blip says a lot about the state of mobile advertising. Advertisers are spending more money on mobile marketing, but the tracking and measurement tools are still immature. Smaller screens also are challenging marketers to come up with creative and innovative ways to reach consumers without annoying them with tiny banner ads.

So far, the powerful promise of mobile, offering the opportunity to pop relevant deals onscreen at the moment consumers are in the time and place to spend, has gone largely unrealized. Technology companies like Google Inc., marketers and advertising firms have tested advances such as geolocation, but adoption has been limited.

"Mobile advertising is in a really weird place right now," said Melissa Parrish, a senior analyst at Forrester Research, the technology research firm. "Is it online paid advertising made little? That's the way it's largely been approached. But in 2013, I hope (advertisers) start to move beyond that thinking. Mobile is special."

The highest concentration of smartphone users is the 25 to 34 age group, one of the most coveted demographics for advertisers. Overall, 45 percent of American adults have a smartphone, according to the Pew Research Center.

The rapid penetration of smartphones -- Apple introduced the iPhone just five years ago -- has created a new medium that marketers have scrambled to learn. One research firm estimates that in 2012 mobile ad spending will nearly triple what was spent last year, topping $4 billion. Despite the explosive growth, businesses are devoting a relatively small piece of their total advertising dollars to mobile ads -- 2.4 percent this year, according to eMarketer, which tracks display, search and messaged-based ads.

But eMarketer predicts mobile will grow 77 percent next year and reach an 11 percent share of total U.S. ad spending by 2016, overtaking radio and newspapers and making up more than one-third of all digital advertising.

"Mobile has seemingly always been in test mode," said Kurt Unkel, president of the VivaKi Nerve Center, a research and development arm within the Publicis Groupe, a French advertising firm. "But there does seem to be momentum based on volume and key companies focused on mobile."

Those companies include the tech giants familiar to everyone: Google and Facebook. A lot of the growth this year in mobile advertising has been fueled by Facebook, which reported $152 million in mobile ad revenues in the third quarter after starting from scratch this year. It generated 14 percent of its total advertising revenue from mobile.

Facebook is just beginning to tap the potential in mobile. The social network says 60 percent of its active users log in on phones.

Google, parent of Motorola Mobility, is the largest player in mobile ads because of its dominance in the $2 billion mobile search market. The company says it's on track to generate $8 billion a year from mobile ads and apps and media sold through its Google Play store.

A big challenge for publishers and other ad sellers is that advertisers pay less for ads on mobile devices than for online ads on desktops. There are several reasons. There is more supply of mobile ad space than there are buyers. And it is harder to track whether people make a purchase after they see a mobile ad.

But smartphones offer marketers something that desktops don't: the ability to target users on the go. Advertisers are trying to figure out what consumers want when they are on the train, walking down the street or sitting in a coffee shop -- and squeeze it into a small screen.

Deerfield-based Walgreen Co. has used mobile ads to encourage consumers to download its smartphone application for refilling prescriptions and editing and ordering photos. The drugstore chain also is targeting special offers to its mobile customers. On Black Friday, for example, Walgreen plugged in a digital "scratch off" game into its mobile app that provided discounts for Starbucks coffee products.

The goals of the app are to increase customer engagement and drive consumers into stores, said Tim McCauley, senior director of mobile commerce at Walgreen.

The app, while it brings a lot of utility to Walgreen customers, also serves as an ad for the retailer, said Unkel of VivaKi.

"Apps are becoming the brand experience for consumers," Unkel said. "To me, that's the most compelling thing in mobile as it relates to advertising."

Also gaining traction in mobile advertising are targeting consumers by location to take advantage of GPS features on mobile devices. Foursquare, a mobile check-in app, has begun selling ads to merchants to provide loyal customers with coupons or updates about new products. The next big thing in location-based ads is matching place with consumer behavior so people receive relevant coupons or daily deals.

"Mobile is presenting new marketing opportunities that never existed before," said Greg Stuart, chief executive of the Mobile Marketing Association. "Consumers have changed, and marketers have to catch up."

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Source: (c) 2012 the Chicago Tribune