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Inside Mobile Advertising Top 5 trends and insights Foreword by Maurice Saatchi
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Introduction
Now brands have come to embrace mobile as an essential component of the marketing mix, old questions such as Should I invest in mobile? have been replaced with How do I engage with mobile? and How do I cost effectively acquire new customers via mobile? Accompanying this increased desire to engage with the mobile medium comes the relentless march of innovation that will always have an impact on how advertisers best utilise mobile. A multitude of ad formats, APIs, exchanges, demand-side-platforms and emerging technologies, as well as concerns over tracking, can prove intimidating to many and act as a barrier to those who wish to maximize their engagement with this fast growing medium. This is not another document which seeks to convince brands of the value of mobile as a marketing medium this is a well-established market which has been conveyed by many others. Nor is this document a Mobile advertising masterclass 101 seeking to educate brands on the basics of mobile advertising. Instead, this document aims to provide strategic insight for brands and agencies on the key trends and changes which will affect advertisers in the mobile market during 2013, as well as some possible solutions to help overcome these challenges.
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Berg Insight estimated that mobile ads and marketing comprised a 3.8 billion (U.S. $5 billion) market in 2011, dominated by Googles AdMob and Apples iAd platforms. But Berg is predicting that numbers will grow by a factor of 5 into a 19.7 billion market in 2017. In the UK, the Internet Advertising Bureau UK (IAB) said the sector grew by 132% to 181.5 million in the first half of 2012 to account for 7% of digital ad spend.
This trend is reflected in the activities of the markets more forward-looking agencies. For example, M&C Saatchis mobile division contributed 15 to 20% of the agencys total UK profits last year. Progress is being made fast. But there is a long way to go. To put the above figures into context, digital was 16% of all expenditure in 2012, making mobile outlay equal to just over 1% of the entire UK spend on advertising. Yet mobile is grabbing an ever-larger share of consumer attention, as demonstrated by the diagram below, where time spent on mobile is at 23%.
43%
40%
11%
9% 1%
Inside Mobile Advertising Top 5 trends and insights 1. The current state of the mobile advertising market
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According to a US study by Flurry, people now spend more time on mobile apps (127 minutes per day) than they do on the desktop web (70 minutes). Mobile is not far off TV, which commands 168 minutes of viewing a day from consumers. What is holding mobile back is a belief that the audience is too fragmented to be reached effectively and that good, useful data on users is still elusive. This is not the case, anymore. New services and technologies, demand side platforms and real time bidding are making it far easier for brands and agencies to run targeted mobile campaigns and achieve impactful results and excellent ROI. Meanwhile, new forms of rich media advertising are making the executions more appealing to end-users.
people now spend more time on mobile apps than they do on the desktop web.
Takeaway
Mobile advertising continues to experience rapid growth Consumer time spent in mobile apps is exceeding desktops and will soon overtake TV Overall mobile expenditure in digital still remains relatively small Marketing manager concerns over lack of data/insight and tracking on mobile should be dispelled as this is no longer the case
Inside Mobile Advertising Top 5 trends and insights 1. The current state of the mobile advertising market
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Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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DSPs are enabling advertisers/agencies to buy ads in real time. They are more effective than working with multiple ad networks because the buyer can identify what kind of consumer they want to target and the system will locate them, place a bid and serve an ad based on that value. It can do this in milliseconds when combined with a real time bidding solution (see below). Many advertisers will be familiar with the DSP concept, which took hold in the digital space in the last decade. Its proliferation will be far faster in mobile. However, mobile DSPs do differ from those of digital in one critical way; they lack the cookies which make tracking a users previous activity possible. This essential difference has forced DSP providers to come up with alternative methods for delivering this critical data. If an advertiser chooses to increase downloads of a particular app, the DSP system can learn the pattern of traffic that most likely leads to a download. It will then create a profile of that traffic type and automatically adjust the buying strategy to maximise downloads. Even better, because this information is being refined in real time, bids are made on a per impression basis, rather than a purchase of bulk traffic. In 2013 and further ahead, more and more agencies will have their own DSPs. Advertisers should be aware that only knowledgeable specialist agencies can handle this transition successfully.
Demand Side Platforms really come into their own when combined with a Real Time Bidding Platform.
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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For example: A consumer is interested in golf and spends many hours on golf apps or sites. A site that serves ads through RTB would be able to match the profile to this consumer to a selection of golf club manufacturer advertisers and serve an ad for the one prepared to pay the most in that instant. This improves the quality of the impressions purchased, makes mobile ads more efficient and captures data that can make future campaigns more effective by applying demographic and behavioural data to every converted impression. It is also transparent. Buyers know where their budget is being spent, allowing for a more strategic approach. This method is also fairer; if everyone can see how much inventory is worth and how valuable impressions are, then the prices set should settle down according to their true market value. A report by IDC concluded that RTB can improve ad effectiveness by between 20 and 150%. This is why the technology has swept across the digital ad market to the extent that market IDC predicts it will grow 59% a year to be worth $13.9 billion by 2016. It believes mobile RTB is about three years behind, partly because of the issues around the speed of connectivity on 3G networks. However, 4G will change this scenario. In addition, the fact that most mobile inventory is still sold by specialist intermediaries rather than directly from publishers should make the transfer to RTB speedier.
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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Like most analysts, we expect to see these rates continue to grow, whilst the surge in emerging markets will be even more marked. TrendForce, a Taipei-based market watcher, projects 876 million smartphones to be shipped this year, for an annual growth of 24.3%. A continuing trend will be the picking off of individual territories by Android. Google says it is activating 1.3 million devices a day, propelled by the huge support it receives from handset makers in all markets. These include the hungry new Asian OEMs such as ZTE and Huawei and also fascinating new entrants such as Congolese VMK, which describes itself as Africas first smartphone maker. By the end of 2013, Google should pass a big milestone as cumulative shipments of Android devices pass 1 billion. Some experts believe Android may account for up to 70% of devices shipped. However, Apple appears to have made the tablet market a little more challenging for Android with the introduction of the 7 inch iPad Mini. The launch was questioned by those who recalled Steve Jobs ridicule of the smaller form factor, yet it appears to have been a triumph, with sales expected to reach 12 million in the last quarter of 2012. The good news for Apple and the rest of the mobile ecosystem was that most of these sales were to consumers that did not already have a tablet. According to analyst Cowen and Co, 52% of Mini intenders were new to the market. With the major competition from iPad coming from seven-inch devices (Nexus, Kindle Fire, Galaxy Tab 2), it seems that the mainstream future of the tablet is the smaller form factor. What is intriguing is how this will affect user behaviour. It is likely that the 7 inch tablet will become a more genuinely mobile device than its larger cousin (which most consumers use in the home). With the advent of services such as voice calls on LinkedIn, we may start to see the 7 inch tablet eat in to traditional telco functions too. All of this is uncensored by perhaps the most significant change from 2012, which was the slowing down of global PC shipments. This is a direct result of the rise of tablets and we expect tablet shipments to rapidly eclipse those of the PC. New numbers from analysts at Canalys note that in Q4 of 2012, 1 in every 3 PCs shipped was actually a tablet (defined as any computing device with screen of 7 inches or more) and that Apples iPad accounted for about half of them, or 1 in every 6 PCs shipped.
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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At the time of writing, BlackBerry launched its new BB10 OS with two launch models. Likewise, Nokia and Microsoft continue to fight over consumers hearts and minds. Whilst there can be little doubt that Google and Apple fight over 1st and 2nd place, the position of 3rd place (predominantly in Europe and the US) is a battle between BlackBerry and Microsoft. The diagram below depicts Global internet device sales.
1,500,000,000 1,000,000,000
WE ARE HERE
Planners will continue to buy across all formats as long as the correct audience can be reached, irrespective of the operating system. This is the exception, however, when one is promoting apps as not all developers will create apps for 4 operating systems and will likely choose to focus on Google and iOS.
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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OTHER
80% 70%
APPLE
SYMBIAN
APPLE
BLACKBERRY ANDROID
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Gartner, IDC, Strategy Analytics, BI Intelligence estimates and company filings
Source: Gartner
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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4G will accelerate the rich media mobile ad space. However, not that fast
It has been nearly a decade since the first 3G networks launched. There was a great deal of hype followed by some disappointment when the promise of superfast connectivity did not materialise. Now, we are seeing that excitement again with LTE or 4G. This time around, it looks like the technical promises will mostly be fulfilled. If there is any frustration it will most likely be around pricing and coverage. Everything Everywhere launched 4G in the UK in 2012 and tests showed the network to be five times faster than 3G. By May 2013, Vodafone, O2 and 3UK will be able to launch their own 4G services too. However, the pricing is high and most expect this to be an early adopter market, with the vast majority of subscribers unwilling to break long contracts to get 4G. The question for brands is how 4G might affect advertising on mobile and the most obvious conclusion is that it will enable more rich media campaigns especially on tablets and bigger smartphones. According to recent Internet Advertising Bureau (IAB) stats, display banners and text ads contributed 23% of all mobile ad revenue in 2012 (the rest was nearly all search). Rich media ads constituted 20% of this spend. Therefore, rich media revenue represents around 4% of the UK mobile ad market. At present we can assume most of this is via Wi-Fi, but 4G has the power to accelerate the consumption of rich media. Not just because 4G is fast, but also because it is more portable than a fixed Wi-Fi hotspot. Against that, there is a risk that consumers on lower monthly bundles will react badly when ads suck up their data allowance. Assuming these wrinkles can be overcome, what kind of rich media executions will we see? Pre-roll video advertising is the obvious start point. It is a proven success in other media and it has obvious potential on mobile where consumers are demonstrably interested in viewing video. Perhaps more exciting are the complex ad products which combine video, audio and interactive elements. When developed using HTML5, these ads can run on a browser, yet deliver extraordinarily rich experiences. The results can blur the boundaries between what is advertising and what is content. A good example is a campaign for Auto trader's Ignition iPad interactive magazine. The advert lets users browse, read and purchase the product entirely 'inside' an advert without leaving the site or app in which it is displayed. In future, rich media ads should go a stage further and start to engage with the native features of the phone such as the alarm clock and contacts book.
display banners and text ads contributed 23 per cent of all mobile ad revenue in 2012.
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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This is sensitive stuff; however, with the right execution and for the right advertisers (i.e. those cherished by consumers), it could deepen the connection between brands and fans. It may take a while, but we believe rich media mobile advertising will become the norm just as it did in digital when broadband replaced dial-up. Ultimately, brands need richer media because direct response cannot really communicate messages.
Takeaway
The old inefficiency of blind buying mobile media with little targeting is being replaced with exchanges, mobile DSPs and real-time bidding. This is still in its infancy and there should be an expectation that campaigns will contain a mix of RTB and pre-planned media Google is dominating the OS wars on mobile and will continue to fight it out with Apple for first and second place. The newly launched BlackBerry OS10 and handsets means that they will likely fight it out with Microsoft/Nokia for third place The introduction of smaller form factor, affordable 7 inch tablets at mass market prices (circa 100/$151.62) will likely revolutionise tablet ownership that to date has been the preserve of those who could afford an iPad. This will invariably widen the demographic for tablet access and open up new opportunities for advertisers. 2013 will be the year of the 7 inch tablet The increasing availability of Wi-Fi in private homes and public places will add to the mobility of the small tablets Responsive web design is a must for advertisers. They should give consideration to how a sight renders across all devices and screen sizes, and optimise it to increase the effectiveness of campaigns, including PPC and SEO Ubiquitous Wi-Fi and 4G adoption will increase the opportunities for serving new rich media ad formats to consumers on tablets and handsets New ad formats will blur the line between advertising and content to engage consumers in new ways, as demonstrated by Auto traders new Ignition iPad interactive magazine Advertisers will need to experiment with a wide range of creative and formats to find the right mix
Inside Mobile Advertising Top 5 trends and insights 2. Key Developments in mobile and advertising technology
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Purchases via a smartphoneinternet users aged 16+ who personally own a smartphone
25% 20% 15% 10% 5%
WNMUSI LO C AD S TRA TIC VEL KE FEA TS TU RE SF MY PH OR ON E CLO TH ES CIN TIC EMA KE TS EAW A FO Y OD CD /DV Ds S TRI GOCAL OD S ER IES
20% 16% 15% 13% 12% 12% 12% 11% 10% 10% 10% 9% 9% 9%
8% 5%
Source: GMI/Mintel
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertising
OK S HO US AP EHO PLI AN LD HO CE LID S AC CO AY/T MM RA OD VEL ATI ON TIC KE AL TS IVE EVETO NT DO WN VIDEO LO AD S INS UR AN CE
0%
OK
ELE C
OC
DO
GR
TAK
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BO
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The combination of location awareness with real-time bidding opens up a new era of granularity when targeting consumers. This must be tempered by the fact that the volume of local inventory will be small for the foreseeable future, but it will also result in more valuable customers. The importance of search on mobile in relation to locality should not be under-estimated. At the time of writing, around 47% of consumers use their smartphone to search for local information, such as a store they want to visit. 46% look up a stores mobile site and 42% check inventory prior to visiting a store. The increasing rise of customers searching on their devices when they are on the move will increase the need for brands to ensure that they have mobile optimised websites. Still, too many brands are investing heavily in both PPC and SEO with not enough thought given to the fact that customers will may well be sent to a non-mobile optimised page. It is unfortunately still too common to see consumers taken to the desktop version of a retailers website. Brands must continue to invest in their mobile strategy and consider carefully where customers are coming from so that they do not lose them after they have clicked through via a search. Conversely, brands should also consider widening their PPC and SEO spend to mobile and to drive consumers to mobile optimised sites once they have been developed.
At the time of writing around 47% of consumers use their smartphone to search for local information.
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertisingi
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Add to this the fact that, on average, a user spends more time on a mobile session than on a fixed web session, Flurry data indicates the average app session is 4.2 minutes, compared to the average web session length on a website of just under 1 minute. Whats more, sellers are devising imaginative new ad slots to boost the available inventory even more. We have seen examples such as advertising when a video stream is buffering, or ads in the notification bar on iOS and Android. All of which may explain why, as stated earlier, Berg Insight estimated the mobile advertising market to be worth 19.7 billion in 2017. That is 15.5% of the total online advertising market or 4.4% of the total global ad spend for all media. Interestingly, the escalation of the market is bringing with it new power players on the publishing side. Whilst Google and Facebook still command large sections of the audience, more recently firms such as Pandora and Weather.com have also made their presence felt. Some of these giants have begun to employ their own mobile sales people, which is a significant indication of the maturity of the market. Yet, on the more traditional mobile-only side, the market continues to thrive. In the early days of mobile advertising, gaming played a powerful role. It still does, with publishers such as Gree and King.com constantly rolling out new and popular titles, each with multiple advertising opportunities.
Its estimated that the mobile advertising market is worth 19.7 billion in 2017 15.5% of the total online advertising market.
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertising
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Facebooks earnings in Q4 2012, (announced in late January 2013), painted an increasingly robust picture of mobile in its overall earnings. Facebook reported $680 million mobile Monthly Active Users (MAUs), and more mobile Daily Active Users (DAUs) than web DAUs in December. Mobile also accounted for around 23% of Facebooks $1.33 billion of advertising revenues in Q4, which represents $305 million of mobile ads sold in the quarter. Instagram was used to share more than 600 million photos to Facebook on New Years Day alone, and cited recent comScore stats suggest that Facebook accounts for 23% of all time spent on mobile apps in the US, with Instagram accounting for another 3%. CEO Cheryl Sandberg also noted that Facebooks mobile App-Install ads for mobile app developers are now being used by more than 20% of the 100 Top Grossing iOS apps to attract new users.
The big gambit for 2013 will be the roll-out of Facebooks own mobile ad network. This will give networks the ability to serve ads placed with Facebook (and based on the social giants user data) on third party sites and apps. When a Facebook user visits an app or site where the ad exchange has an agreement with Facebook, the exchange will check if there is a bid set to target them. If there is, an ad will be displayed and Facebook will receive a cut. In theory this is an extremely exciting move, given the wealth of data Facebook can accumulate based on its users' behaviour. But, it is the true value of this data that is in question. At present, for example, sponsored stories are first distributed to users who have chosen to be fans of an advertisers Facebook page. Fine. Thereafter, the ad is displayed to that fans network of friends, whether they liked the advertisers page or not. Observers have questioned the value of this, pointing out that people dont necessarily shop for the same items as their friends. Overall, positive results have been seen through advertising via Facebooks app, and this is wholly expected to improve as they invest more into the targeting capabilities that are derived from a wealth of customer insight.
The big gambit for 2013 will be the roll-out of Facebooks own mobile ad network.
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertising
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Since Twitter is so much about of the moment trends, advertisers need to carefully match their campaigns with current issues.
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertising
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Takeaway
The availability of mobile inventory continues apace with much greater smartphone adoption Campaigns based around locality will come more and more to the fore, especially for retailers Advertisers should know their brands mobile touch points then research, prioritize & start testing. They should also ensure that they are mobile optimized Brands need to include mobile search and local in their mobile strategy Social networks will invest in deeper insight in order to offer sophisticated targeting capabilities. This is predominantly via Twitter and Facebook, but sites such as Google+ and Pinterest will also be monitored for new opportunities Native campaigns will blur the boundary between editorial and content. Such types of advertising are a potential minefield as they need to ideally complement the context they appear in and complement the editorial they sit with
Inside Mobile Advertising Top 5 trends and insights 3. The changing face of mobile advertising
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Apple replaced the UDID it in 2012 with the IFA (Identifier for Advertisers). This cannot identify an individual. Instead, it records patterns of activity to deliver more targeted ads. However, it can be switched off by users.
Inside Mobile Advertising Top 5 trends and insights 4. Campaign Tracking and measurement
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It is incumbent on the mobile advertising industry to reassure consumers about privacy and persuade them that targeted advertising is safe, and can enhance their browsing and app experience.
Google recently introduced efforts to mitigate erroneous clicks so that when people clicked on in-app ads, they would be promoted to click again on a button labelled visit site. This safeguard reduced overall clicks but it was also found that users who clicked through were of a higher value as they were genuinely interested in the advert. Google stated that Implementing confirmed clicks is an important step that we think will benefit users, advertisers, publishers, and the mobile ecosystem overall.
Inside Mobile Advertising Top 5 trends and insights 4. Campaign Tracking and measurement
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Meanwhile, the move away from CPMs to new commercial models based on performance or lifetime value is also limiting the damage done. If an advertiser only pays on the basis of clicks that lead to a download or subscription for example, then the single unintentional click becomes irrelevant.
Privacy concerns
Like the UDID, IFA is unique to a device and enable advertisers to track mobile media conversion even cross-app data for better targeting techniques. IFA does not contain Personally Identifiable Information (PII) as users can opt out: it is able to limit advertising tracking at any time, which helps to address privacy concerns. For users who do opt out, IFA allocates a different value to the device to prevent tracking. Should they opt-in to targeted advertising, the device will only start tracking once the iOS user gives their permission. Another significant improvement over UDID is that when a phone is reset or sold to a new user, the IFA resets all information to provide a clean slate. As a further nod to addressing consumer privacy concerns, the latest version of Apples mobile operating system (iOS 6.1) which was released on January 27th 2013, now contains a reset button in the device settings which enables the user to clear the IFA value, much the same way that users can clear their cookies from their desktop browser.
Takeaway
Mobile response can be a great way of marrying together formats from bus shelters to television and magazines but it needs to have effective measurement. That means tracking one user across multiple platforms, which is technically complex. One possible solution for the future is a single sign-in by the user, via Facebook or other social networks Concerns of click-fraud are being countered with double opt-ins as well as exchanges only counting unique clicks over a fixed time period. Efforts to overcome wastage and click fraud will only increase in the coming months Issues over privacy and ad tracking are also being overcome with PII (personally identifiable information) not being tracked
Concerns of click-fraud are being countered with double opt-ins as well as exchanges only counting unique clicks.
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Inside Mobile Advertising Top 5 trends and insights 4. Campaign Tracking and measurement
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You cannot use an agency in the UK to service the US and Africa. The markets are just too different.
Inside Mobile Advertising Top 5 trends and insights 5. The importance of being local
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Takeaway
It no longer suffices to plan global campaigns from a single geographical location Brands need to engage planning agencies with significant local presence in all the major markets to deliver truly local advertising for maximum ROI Local nuances are becoming very apparent from the dominance of BlackBerry in Africa to the dominance of the Opera browser in India coupled with the continued loyalty to Nokia
Inside Mobile Advertising Top 5 trends and insights 5. The importance of being local
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Conclusion
For many brands, mobile advertising complicates matters. After the disruption wrought by digital on a tried and tested industry, here is yet another platform to figure-out. As outlined in this piece, the deeper you dive into the medium, the more there is to consider: DSPs, real time bidding, rich media formats, tracking systems and much more. However, the opportunity should now be obvious through the frenzied adoption of smartphones and tablets. Google alone is activating 1.3 million Android devices per day and is turning mobile phones from devices that simply make voice calls to machines that convey entertainment, information and user insight. This revolution will make mobile the next great advertising medium. Berg Insight estimates a market worth $23.6 billion by 2016 and it is not alone in its audacious view.
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CONTACT
To find out more about how mobile innovation can boost your business and to discover more about M&C Saatchi Mobile, please do not hesitate to get in touch with our team at any of our offices around the world.
M&C Saatchi Mobile London
36 Golden Square, London, W1F 9EE UK T: +44 207 543 4600 E: london@mcsaatchimobile.com
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