CES: Mobile Advertising Lags Usage

Rising usage of mobile devices has not yet translated into big ad revenues

While 2011 has been repeatedly proclaimed the year of the tablet and the smart phone, advertising models to take advantage of those two platforms remain in their infancy, executives noted at a number of sessions at this year's Consumer Electronics Show.

A number of issues have hampered the development of mobile advertising, including low penetration of devices, limited number of avails and the cost and time it takes to develop ad campaigns for different platforms, a number of advertising executives said.  

Estimates of mobile advertising vary widely. Some peg 2010 mobile ad revenue at about $700 million while Magna Global has estimated that mobile advertising will hit $2.7 billion in 2011 and grow rapidly to $6.6 billion within five years.

"Consumption of media on mobile is growing rapidly and is about 19%, but budgets aren't there," said Jay L. Sampson, vice president, emerging media sales and agency relations for the U.S. at Microsoft Corporation. "Based on consumption, if TV advertising is at about $65 billion then mobile should be $12 billion."

Sampson stressed that he doesn't think budgets should reflect consumption at this point given some of the difficulties in developing mobile ad campaigns, but he believes that they should be higher.

Currently, mobile ad budgets comprise 3% to 6% of total budgets, Sampson noted. But those figures vary by industry and these estimates could be inflated by the fact that Microsoft always bundles mobile with online, which tends to drive money into the medium.

The rising penetration of smart devices and the launch of the iPad last year had prompted many people to expect the mobile ad play to take off much faster than it has. "Mobile advertising has been a little bit of a failure [last year] at least in terms of the expectations I had last year," admitted Josh Rose, executive VP, digital creative director, Deutsch Los Angeles, who added that some patience is in order. "I remember working in a world ten years ago when Internet budgets were only 1%, and now they are 20% or more."

One major problem has been the lack of standards, which forces agencies to develop campaigns for a slew of different devices and operating systems.   

"Maybe you can justify developing for iPhone, Android and Windows 7, but you can't go much more than three to five platforms," said Tim Hanlon, CEO and managing director, Velociter, Mediabrands. "Some type of consolation of distribution will be essential for the medium's growth. Iteration for more than four or five is a non-starter."

Still executives noted that the medium continues to grow rapidly as penetration increases. "The Internet really started taking off when you had broadband penetration reach 30%," said Shravan Goli, president, Dictionary.com, which has about 50 million mobile users. "This year we are expected to reach 30% smart phone penetration and I think that is when we will see things take off."

Goli also stressed that tablets provide a potentially ad-friendly platform because of their larger screen size. "We are seeing much more demand for tablet advertising," he added.

The sector could get another boost in the next few years as mobile phones begin to be used to pay for goods. "We just saw that mobile phones played a much more important role in [researching items for] purchase during the holiday season and as payment systems roll out they will be even more important for purchasing," said Yahav Isak, senior vice president of operations at MRM Worldwide. "Advertising always follows the eyeballs and money. As there are more eyeballs on the platform, the money will go there and advertisers will start thinking about mobile in a smarter way."

Isak also expressed hope that some of the problems with developing and deploying mobile campaigns across different platforms might be reduced with the introduction of HTML 5.

"If you are building different apps for different platforms it can have a big impact on budgets, but if you are just building a wrapper [for different platforms] around a browser in HTML 5 the development is much easier. I hope things will move more into browsers and that will helps standardize the market and make our life easier."