Thursday, January 28, 2010

Giving Mobile Ads a Makeover

Google, Apple and Others Seek to Push Beyond Banners, Text Messages Google, Apple and several start-ups are trying to break the mold in mobile advertising, hoping to persuade marketers to spend more on a format that the technology industry has been hyping for years, with little to show for it. Until now, mobile advertising mainly consisted of small banner ads tucked into the corner of a mobile Web page or text-message ads that often resembled spam. As a result, the mobile-advertising market remained relatively small, even as mobile phones proliferated. Google, Apple and others are putting money into changing that. In November, Google announced a $750 million agreement to acquire AdMob Inc., a company that sells a variety of mobile ads, including some that show the location of a retailer's closest store on a map or allow mobile-device users to download music or watch a commercial between levels in a game. This week, Google is also expected to launch a new type of mobile-search ad for high-end phones like Apple's iPhone, says a person familiar with the matter. People who search for pizza, for example, might see a search ad with a phone number that they can click to call a nearby pizzeria. Apple, meanwhile, bought mobile-ad company Quattro Wireless in January. On Monday, Apple Chief Financial Officer Peter Oppenheimer said the company acquired Quattro to offer "a seamless way for our developers to make more money on their apps, especially those that are providing free apps." An Apple spokeswoman declined to elaborate. Amid much fanfare Wednesday, Apple introduced a multimedia tablet-style computer called the iPad. priced at as much as $829 for high-end models with 3G wireless capacity. Marketers are carefully watching the iPad, which can run software applications similar to iPhone apps, along with other new products, as they look to broaden their strategies beyond first-generation mobile ads, such as text-messages ads. Volkswagen started testing text-message ads in 2008 and hired digital ad shop AKQA to develop a mobile-advertising strategy for the brand last year. The company built a mobile-specific Web site and even launched its new GTI hatchback via a mobile game. Now, the auto maker is building applications on its mobile Web site that allow VW owners to schedule service appointments or pay their bills and for prospective buyers to track incentives, said Charlie Taylor, Volkswagen's general manager of digital marketing, in an interview. Best Buy's chief marketing officer, Barry Judge, wants to use mobile to make standard ads more interactive. A print ad or billboard, for instance, might give consumers an address they could text-message for more information. Best Buy also is thinking about how to use mobile marketing to enhance customers' shopping experiences, such as by building new applications or including special codes on its products to provide more information about them. "This is going to be a big area. It may dwarf what the PC Internet does," Mr. Judge says. While the Google-Apple race heats up, start-ups like FourSquare and Loopt, are trying to sell marketers on new ways to target customers on their mobile phones. Mobile social-networking service Loopt is developing a service that can target offers to the cellphones of people who walk into a specific store a certain number of times, says Loopt Chief Executive Sam Altman. "Advertisers want to reach people near their doorway, and when they are at that critical moment about making a decision," he said. FourSquare, a software application that allows users to tell their friends when they have "checked in" at various locations like a restaurant, is looking at ways to charge for a similar service that sends special offers to people who regularly check in at an establishment or are nearby. Today, more than 600 venues are using a free version of the service, FourSquare says. Tristan Walker, FourSquare's head of business development, says the company may develop a paid offering, and is looking at ways to give marketers more data about the types of people who visit their stores, like which store they visited just prior. "You could potentially turn it into a Google-like ad model where people bid on the latitude and longitude of where they want their ads to appear at certain times of day," he says. All the activity comes as mobile ads have yet to live up to what the tech industry says is their huge potential. Spending on mobile ads in the U.S. remains small–just $416 million in 2009, up from $320 million in 2008—according to market-research firm eMarketer. That's a fraction of the $22.4 billion U.S. online advertising market. Growth has been slower than expected as many mobile Web sites have yet to generate significant traffic and marketers have had a tough time creating campaigns. EMarketer predicted last February that mobile-ad spending would be $760 million in 2009, growing to $2.4 billion in 2012. The research firm now estimates that mobile-ad spending will reach just $1.1 billion by 2012. "The growth has been disappointing," says Mark Read, CEO of WPP Digital, the group within WPP working to develop the ad company's digital offerings. "The only large numbers on the table are the prices of the acquisitions—not the amount of revenue they're generating." In an interview last week, Google CEO Eric Schmidt said serious growth in mobile advertising will take time. "It's probably the case that the real impact on mobile [advertising] will come from products that aren't yet built," he said. In particular, he cited potential advertising opportunities around new software applications, like augmented reality software, which gives people information about what their phone is pointing at, acting as another pair of eyes. Apple could be another wild card."The relationship that Apple has with developers [of apps for the iPhone] is a really tight one," said AdMob CEO Omar Hamoui, in a recent interview. "I don't really have a clear view of what that's going to mean, but I do think it will be very different." AdMob and Google are continuing to operate as independent companies as they await word from the Federal Trade Commission, which is reviewing the deal on antitrust grounds. Google has said it remains confident "the FTC will conclude that the rapidly growing mobile-advertising space will remain highly competitive after this deal closes."

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