Behind the Surge in Mobile Advertising

With so much consumer attention shifting to mobile phones and tablets, the business of advertising in mobile media is on a steep upward trajectory. A surging number of apps are supported by ads, and users can expect to see more ads when they view mobile video or use smart phones to conduct searches. In the United States, mobile ads are expected to bring in $1 billion next year (chart). Globally, mobile advertising is already a $3.5 billion business.

When companies buy mobile ads, they typically arrange placement through a network that submits bids for open ad space and runs the campaign across many different devices, apps, and sites. The top network by market share is run by Google, which acquired AdMob last year. The number-two player, Apple, entered the market at the beginning of the year when it bought Quattro Wireless.

The number three-network, Jumptap, is a privately held company based in Cambridge, Massachusetts. Technology Review sat down with Jumptap’s founder, Jorey Ramer, to find out about the challenges of serving ads to on-the-go people who would rather avoid them.

TR: What accounts for such strong growth in mobile advertising?

Ramer: The mobile advertising sector sits at the intersection of two converging trends. On one side, out of a $450 billion global industry of advertising, you see digital advertising eclipsing traditional forms of media.

You also see, over the course of the next three to five years, financial analysts like Morgan Stanley, industry analysts like Gartner and Pew, all predicting that more people will be accessing the Internet through their mobile device than they will through the PC.

As the consumer behavior starts to shift, advertisers will shift their spending as well.

Let’s talk about the basic challenge from the mobile user’s point of view. People with mobile phones are busy—they’re trying to get things done, they’re racing to the next place. Isn’t there some resistance to having advertising getting in the way of what they want to do?

Two things. One is providing a very engaging experience for the user. If you look at some of these campaigns that are coming out now, with all of the advanced things that can be done with the mobile device, where you can touch the screen—it’s aware of its surroundings, it’s aware of its movement—there are very interesting ways of engaging the user.

At the same time, though, when you look at the metrics, if you look at the way that advertisers measure the effectiveness of advertising—brand recall, message association, purchase intent—mobile in studies has been shown to outperform PC advertising [by] two to six times. So it can be a more effective way of delivering your brand message to the consumer.

Can you name some brands whose mobile advertising has been very engaging and useful for the user?

One of my favorite campaigns recently was one that was run by Dunkin’ Donuts, where they were releasing a new iced latte product to the market. When the user went to the screen, the screen frosted over, very much like the frost on the side of a glass for your iced latte, and then with your finger you wiped the frost off the screen.

This was art that was reproducing the experience that people have in the real world, and it brings a real joy to people.

If you can combine the engaging nature of the medium together with that joy, together with the message that ties directly with this product you’re offering, that’s very powerful for the advertiser.

How are advertisers buying campaigns? On TV it’s cost per thousand users (CPM) and other kinds of metrics. What’s the basic unit of measurement for a mobile advertising campaign?

Advertisers right now are buying primarily through CPM; they’re also buying through performance-based marketplaces [that negotiate prices on behalf of the marketer]. We do both. So advertisers can come to our website—they sign on through the self-service interface, and then they’re bidding in auction to compete with other advertisers to deliver their message in front of another advertiser. In that way, it’s on a cost-per-click basis. They’re paying only when the consumer clicks on the ad.

Jumptap has large competitors, but you have your own network, essentially. How does it work?

Today our network includes mobile operators like AT&T and Sprint, publishers, and large media companies like Fox and Comcast, as well as some of the most popular iPhone and Android applications.

What we do is we provide a platform-agnostic approach. What I mean by that is we deliver advertising across iPhone, iPad, Android, Microsoft, RIM. That’s very important for advertisers, because what they are looking for is reach.

They care more about targeting a particular audience, delivering the right message to the right audience, than they do about the device. By providing this type of approach, we make it as easy and simple for the advertiser to get engaged in mobile advertising as possible.

Where is it all going in terms of privacy? What are customers expecting, what’s the trade-off in terms of the publisher or the advertiser really targeting you? This has come up with Facebook and some of the other networks.

Privacy is more critical in mobile than perhaps any other medium, because it’s a more personalized environment. Mobile has the opportunity, has the capability, of delivering a more targeted message than any other platform. Because there’s location that’s available, there’s less cluttered content, which means it’s more contextually relevant for the user.

We’re allowing the user to take a level of control over what information is made available, letting them manage, edit, delete, opt in, opt out.

We believe that as long as you’re providing this level of controls and transparency to the user—that’s what’s important to them, and that’s the direction the industry is taking. And we believe that is the direction legislation will also be taking.