While it would be wrong to say that advertisers aren’t spending on mobile — they are, to the tune of $7.1 billion in 2013, a 110% year-over-year increase, according to the Interactive Advertising Bureau — it wouldn’t be wrong to say that they are spending at a rate not commensurate with mobile consumption. Mary Meeker and all that.
But it is fair to note that the majority of that money isn’t coming from the AT&Ts and Coca-Colas of the world; it’s coming from app-install ads courtesy of smaller performance-based advertisers, with games at the top of the list. Based on numbers from eMarketer, app-install ads could account for up to $4.3 billion of mobile ad spend in 2014.
A lot of that activity happens through Facebook, which sees 62% of its revenue from mobile advertising. But during Facebook’s Q2 2014 earnings call CMO Sheryl Sandberg attempted to deflect attention off the importance of app-install ads, commenting that Facebook sees “our opportunities in mobile as much broader than just installing apps.”
Courting brands is a logical next step for Facebook and others. App-install ads dominate today, but brand advertisers are the next frontier — they just have different KPIs from app developers, things like brand loyalty, brand lift, awareness, preference and the connection between mobile and in-store engagement.
“It makes sense that app-install ads were the first thing to take off because they’re so transparent in terms of where you’re getting your return,” said Justin Choi, founder of native tech provider Nativo and Cie Games, which recently sold to Glu Mobile. “In the game industry, you know that if you spend $2 on a certain type of user that you can make more than $2 back on average. That’s why it’s easy for a company like Supercell, which makes billions on its games, to spend a huge portion of that acquiring users, and Facebook, of course, was a big recipient of that.”
But there’s no reason advertisers shouldn’t spend some money on app-install ads rather than pure branding if it makes sense for what they’re trying to achieve. Take a quick-serve restaurant like Domino’s Pizza, which wants users to download its app as a transaction channel.
What holds back brands, Choi said, is that constant bugbear: measurement beyond in-app. “Brands need a little more massaging to understand what the return is,” he said.
Brands essentially feel mobile is unproven and untested, said Harry Kargman, founder of mobile brand ad platform Kargo. “Brands know that if they spend a certain amount of money against TV with a good creative agency that they’ll sell this or that amount of product in-store,” he said. “With mobile, there’s no direct sense of what a brand is going to get out of it.”
Gayle Fuguitt, CEO and president of the Advertising Research Foundation, who for 30 years served as VP of consumer insights at General Mills, echoed this sentiment at a July thought leadership breakfast.
“Advertisers are going to be last to the mobile game – and I know because I used to be one,” she said. “Brands need measurement if they’re going to spend on mobile.”
Not surprisingly, Nielsen was one of the hosts of that breakfast. The company is trying to solve measurement issues with the recent inclusion of mobile metrics in its Online Campaign Ratings tool, but it’s still a nascent effort.
Once the metrics are better, Kargman predicts a serious uptick in brands spending on mobile. He said he’s already seeing it happen.
But when the wave hits, what exactly should brands put money against in the mobile space? If a brand’s looking to tell a story or move beyond direct-response, a mobile banner ad isn’t going to cut it.
Catherine Salazar, managing partner and digital practice lead on the AT&T account at media agency MEC, points to video as an ideal mobile vehicle – especially in light of what Facebook’s been up to recently with its acquisition of LiveRail and experimentation with auto-play video ads, evidence of its growing focus on paid video.
“It’s a step in the right direction to move away from gaming advertisers to brands that are looking for rich storytelling experiences,” Salazar said. “That might be what a Ford of a Kraft is looking for: the ability to relay their story.”
“As bad as display is, the structure is pretty mature, and mobile data just isn’t quite there yet,” said Choi. “But I’d say Facebook is very well-positioned to solve that. They have the best data out there and once they start making the connection, that will start driving brand dollars, especially to video, which is a low-hanging fruit.”
In fact, Facebook launched a new cross-device reporting tool in August to enable advertisers to see which device a person used to view an ad contrasted with where they actually converted. Other major players are also making moves, as evidenced by Google’s purchase of Adometry and AOL’s acquisition of Convertro.
Yet today, only about 10% of ad budgets flow towards mobile. MEC’s Salazar said she could see that number doubling in the next couple of year. So, where’s the cash going to come from?
Salazar and AppLovin CEO Adam Foroughi agree that ad dollars are most likely going to shift over from mobile from channels like print and magazines, which account for about 19% of ad revenue, but only roughly 5% of time spent, according to numbers from IAB and eMarketer.
Though it’s arguable that some mobile ad dollars will come from TV spend, Nativo’s Choi sees TV and video merging into a single budget category: the “video bucket.”
“In the minds of advertisers, I see the TV bucket evolving into the video bucket, which will be any screen,” Choi said. “As TV becomes part of the video bucket, that will unlock more brand dollars. It’s inevitable that will happen at some point.”
Mondelēz International confirmed that mentality when it struck its deal with TubeMogul.
“Video traditionally is TV,” B. Bonin Bough, the company’s VP of global media and consumer engagement, told AdExchanger in June. “That’s where the opportunity is going to exist. On average, 70-80% of most budgets are spent on television. When that begins to unlock, it’s all video that’s unlocking.”
But with mobile advertising specifically, some education needs to happen before brands fully embrace spending more, said Richard Cacciato, general manager for the US arm of S4M, a France-based mobile ad server – although some brands are already upping their mobile spend. French automaker Renault has increased its mobile ad budget “tenfold” since starting on as an S4M client. Renault’s mobile media budget is now equal to its digital spend.
Brands’ attitudes towards mobile recalls their previous reaction to digital. When it first started to hit, brands felt it was an unproven advertising medium, despite being a “tidal wave” that would sweep them away if they didn’t get on top of it, Cacciato said.
“CEOs and CMOs would attend high-level strategic conferences where the focus was on digital,” he said. “They would return to their companies and call for meetings with their brand managers and marketing teams in which they would tell them that they must engage in digital – or perish. Then, in the next breath, they would lean forward and tell them that if they messed up, they’d be fired. The result? Nobody took any risks, all the marketing dollars stayed in traditional media and digital stayed at 5% of the budget or less. Fortunately, digital has finally taken its place at the table and everyone recognizes the importance of digital in a brand’s marketing mix – but it sure took a long time.”
That’s where brands are with mobile today: on the spending cusp.
“They’ve been saying ‘This is the year of mobile’ for a number of years now,” Cacciato said. “I think that’s finally starting to come true.”