Wireless Federation

Mobile advertising seems to be an industry that’s about ready to explode, chasing the billions already being spent on Internet advertising. But mobility, although it has unmatched attractions for advertisers, also is a business very much in a state of flux.

Some of those in the burgeoning mobile advertising industry, which has been making money mostly through text-driven ads, expect advances in networks and advertising capabilities to reach an inflexion point in time for the Christmas shopping season. If so, mobile advertising could become a tiger escaping from its cage next year.

What has everyone so excited about mobile advertising is what has happened on the Internet. Ad spending on the Web is growing at a compound annual rate of 18.3% and will reach $73 billion in 2011, according to PriceWaterhouseCoopers. The consultancy says Internet advertising will comprise 14% of the entire global advertising market by that year.

Another research company, eMarketer, expects Internet ad spending in the United States to total $19.5 billion this year Nielsen NetRatings says the top 10 Internet advertisers in the United States spent $278.4 million in June alone, led by InterActive Corporation’s $47.2 million. Those numbers exclude search advertising, which is the fastest-growing segment of Internet advertising.

If mobile advertising follows that spending curve, it’s no wonder the industry sees big things ahead. Strategy Analytics is forecasting advertisers will spend $1.4 billion on mobile media this year, with that rising to $14.4 billion in 2011. eMarketer says mobile ad spending reached $1.5 billion last year and will grow to $14 by 2011.

“The outlook for mobile advertising spend has significantly advanced in the past 12 months,” says Phil Taylor, director of Strategy Analytic’s global wireless practice. “The supply of advertising inventory is rapidly increasing as mobile publishers look to develop advertising as a revenue stream.”

Taylor notes that Sprint Nextel, Verizon Wireless and Vodafone have all accelerated their plans to sell advertising through their networks. “Advertisers appear to be responding positively,” he says.

And then there’s the interest that Google, which lives on its Internet ad revenue, has shown in mobile advertising. Google CEO Eric Schmidt said at the All Things Digital conference in May that the company wants its share of mobile ad revenue because “they are twice as profitable or more than the non-mobile phone ads because they’re more personal.” Carriers have expressed some concern about Google’s entry, fearing they could lose ad revenue.

Despite these rosy expectations, there still is some caution evident because mobile advertising in a unique and unknown medium is bringing together carriers, ad agencies, publishers, mobile ad technology companies and brands. Everyone is treading on unfamiliar ground.

The No. 1 issue facing mobile advertising, says Kanishka Agarwal, vice president of mobile media for Telephia, is that the mobile industry is not a single advertising medium. Brands and advertisers are familiar with working with print, TV, radio and the Internet as separate entities. But mobile networks can bring together the Internet, video, text, gaming, music and more.

“Mobile is a group of quite separate media with different characteristics,” Agarwal says. “They differ in form and in the audiences they draw. People are still trying to figure out a way to handle this.”

One of those figuring it out is John Hadl, CEO of Brand in Hand and strategic adviser to Proctor & Gamble on its mobile strategy. Hadl created more than 50 mobile advertising campaigns in 2006, including Cover Girl and Old Spice.

Hadl says the top priority for advertisers is that they want to buy audiences and not technology. “Brands are about reaching consumers and audiences,” he says, adding that technology is not interesting to advertisers.

“The problem is that mobile companies are mostly selling tools now,” he says. “We’re all being sold platforms and technology. You have to give us an audience.”

Hadl also thinks mobile advertising will become more interesting to major brands when richer content on wireless devices becomes more widespread, especially video and TV. The richer the media, the richer the consumer experience, which drives sales and brand recognition.

As long as everyone in the mobile advertising business remembers that the “consumer is boss,” Hadl says, he is optimistic about the future. Everyone involved is trying different things to see how they work, getting their feedback from consumer reactions.

Another agency working in the mobile arena is Nurun/ant farm interactive. Michael Koziol, executive vice president, says mobile advertising is much more complex than online advertising was in the 1990s. Part of that is because wireless operators are taking a stronger position on collecting a share than did the wired telcos.

“It’s not unreasonable that they are more involved,” he says of the carriers. “It doesn’t make it as profitable for content properties where the ISP didn’t ask for a share. AOL did, but where are they now?”

There also is a great deal of uncertainty because no one in the value chain knows exactly what will work or how to price it. “Everybody is doing different things and no one is moving in the same direction,” he says. “In the 1990s, most things were moving in the same direction at least.”

Nurun has done some mobile advertising, some of which has worked well and some that hasn’t. Koziol believes the future of mobile will be less in advertising and more in building brand affinity by connecting with individuals with information in context.

“Phones are personal space, which makes them appealing for marketers but is dangerous ground for push advertising,” he says, adding that delivering ads to phones should be on-demand or at the point of need.

Some major brands have started moving into mobile advertising. Among them are Proctor & Gamble, CBS and Coca-Cola. CBS recently inked a deal with four mobile advertising companies, AdMob, Millennial Media, Rhythm NewMedia and Third Screen Media. Third Screen also has a deal with Fox TV.

Cyriac Roeding, executive vice president of CBS Mobile, says each of the four will provide different technologies and services for CBS content, including banner and text ads on WAP sites, phones and video commercials attached to video content.

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