We’ve all heard for several years that the effectiveness of advertising — print, television, radio and even digital — is suffering from the law of diminishing returns. While there is some truth to that phenomenon, advertising in all forms is far from dead. In fact, since 1926 (with the exception of a dip during World War II), ad spending has moved along at a regular clip, steadily accounting for a little over 1% of the U.S.’s (growing) GDP. What has changed is the mix of where advertising dollars are spent. Why the history lesson? Sometimes the best way to predict the future is by looking at the past. In this case, there are a lot of conflicting opinions on mobile advertising, but it’s likely that mobile advertising, in some form, will account for a greater piece of the pie in the future. In this post, we will evaluate the different types of mobile advertising currently available and what the benefits of each are. Mobile Web Today, one of the most prevalent mobile ad formats is via the mobile web. These ads come in the form of take overs (ads that cover most of your screen until you click through or close the ad with the “x” in the corner), banners at the bottom or top of the screen or embedded in the content itself. These are obviously the easiest to serve up, but over time, likely to be the most ineffective. Similar to banner/takeover ads on the digital web, these ads are disruptive and often not very targeted. Like the digital advertising we see on our desktops and laptops, these ads will deliver impressions and some level of click throughs based on sheer volume of traffic but like their counterparts, will be ignored or worse, loathed by a majority of users. In-App One of the advantages of in-app advertising is that advertisers have more control over where these ads show up in the experience and who the ads target. One of themes you’ll notice in this light analysis is that the more targeted and timely mobile ads can be, the more effective they are. The key to making these ads successful is collecting enough information up front — either via social authentication using Facebook, Google or Twitter — or via a sign up form. Obviously app makers must be careful because asking for too much information can create a barrier to entry but getting access to things like location (more on that later), age, sex, and ideally other interests can dramatically increase the uptake of these types of ads. Over time, these ads are likely to be one of the most successful. Voice Over If you use the non-premium version of apps like Pandora, Spotify or Rdio, you have probably heard a local ad similar to what you might hear while listening to the radio. These are ads that embed into the medium itself and are impossible to avoid. Similar ads appear via fitness apps like MapMyRun either at the beginning, end or after a certain milestone (one or two miles in). Because many of these ads are targeted by location, they are more relevant than the run-of-the-mill mobile web app but likely less targeted than an in-app ad. While these ads can be viewed as intrusive, they will continue to be effective if for no other reason than the fact that they are not easily avoided. Mobile Video As I mentioned in my post back in June, mobile video is big and getting bigger. As a result, video advertising is also an effective vehicle. The advantage that video advertising has over other formats is that it is more engaging and better geared toward story telling. The key, however, is brevity so advertisers that look to platforms like Vine (6.5 second limit) or Instagram (15 second limit) for inspiration will be assured of greater success than those that insist on more traditional 30 and 60 second spots. Text/SMS It’s ironic that five years ago while leading a panel on mobile/location-based marketing, I stated that even thinking about using good old fashioned text/SMS as a vehicle for marketing made me nauseous. But five years later and 20+ years into the technology’s life-cycle, this channel is still one of the most powerful when it comes to reaching customers. The one major caveat here is that advertising to customers (or prospective customers) using this very personal channel is that with great power (or in this case, access) comes great responsibility. That means that while marketers have unfettered access to their audience, the expected value from the end user is several times higher than it would be in places like in-app or via the mobile web. Often, the best value for this form of advertising is to drive engagement via other channels like mobile social, app or web. Worth noting is the fact that text/SMS is one of the few mobile advertising types that is available to all mobile phone users (feature and smart) versus most of the others listed here which are heavily skewed toward smart phones and/or tablets. Social Networks Similar to video, use of social networks via mobile devices has gone through the roof. As a result, there is a sheer volume play for any advertiser that wants to reach their targets via Facebook, Twitter, Instagram and Google+. Similar to in-app advertising, leveraging paid social can also be more effective based on the amount of information available (interests, location, social graph, age, sex, etc.) It also allows for discrete targeting, especially on Facebook where marketers can literally reach audiences that are sliced and diced based on thousands of data points. The double edged sword in advertising via social is that there is an even higher burden on the ad creative to be relevant (particularly on Twitter and Instagram) because if not, all of the other text/image updates will simply drown out the paid activity. Location-based Search engines like Google and Bing have been strong location-based advertising players for several years now but increasingly, discovery-based applications like foursquare and Yelp are making their own claims to this space. Understanding where people are down to a five-yard radius can be an incredibly powerful asset when helping to steer customers toward a particular venue or service. Similar to text/SMS, however, marketers must be careful not to overstep boundaries given the sensitive data they now have access to. Realistically, location-based advertising will continue to be a part of all of the mobile advertising formats above but for now, it still provides unique advantages over some of these other formats. Conclusion Like other new channels before it (print, radio, television, digital), mobile is starting to see its day in the sun. As mobile devices and usage continue to proliferate, the mobile advertising space will follow suit. While offering unique benefits like discrete targeting, an understanding of where and when someone is along with an ability for two way communication, marketers must be mindful that they are not only honoring customers privacy as well as delivering a better, more targeted experiences. This is particularly true with formats like SMS, social networks and location-based mobile advertising. What marketers should be leery of is falling into the trap of treating mobile advertising like more traditional digital advertising. The fact that mobile devices are considered more personal with less real estate and battery life considerations raises the stakes for which disruptions they are willing to accept. But ultimately, mobile should give marketers opportunities to reach audiences in a meaningful way unlike ever before. So looping back to the original question the title of this post asks — does mobile advertising work — the answer is it that depends. Done right, the answer should ultimately be a resounding yes. But then again, marketers aren’t always good at doing things right. The QR code being one of the greatest examples of this phenomena.
There’s no clear answer, despite the sums spent on mobile ads—$8.4 billion in 2012, a number expected to quadruple by 2016. Some experts argue that mobile ads are a waste of marketing dollars (see “For Mobile Devices, Think Apps, Not Ads,” by Sunil Gupta, HBR March 2013). But new research shows that mobile display ads can work for certain types of products: those that are both utilitarian and “high involvement.” Minivans and washing machines, for instance, serve a practical purpose, and consumers buy them only after much deliberation, in large part because they’re pricey. Mobile display ads for “hedonic” products (things, such as sports cars and movie tickets, that people buy for pleasure) are unlikely to have any influence, as are ones for “low involvement” products (a tube of toothpaste, a candy bar).
We studied data from a market research firm that surveyed 39,946 U.S. consumers about products featured in 54 mobile display ads from 2007 to 2010. The products spanned 13 industries, including consumer goods, financial services, and automobiles. About half the participants saw an ad for a product on their mobile devices; the others saw no ad. At the start and close of the experiment, all rated their attitude toward and intention of buying the product.
When to Go Mobile
We classified the products as utilitarian or hedonic and as high or low involvement. We found that ads for utilitarian products and high-involvement products boosted attitude and purchase intention, and that the effect was greatest for products with both attributes; in those cases, ads increased positive attitude by 4.5%, on average, and purchase intention by 6.7%. For hedonic and low-involvement products, most ads had no effect.
What accounts for these results? We believe that mobile display ads, even though they convey little information, can cue consumers to revisit facts they already possess. That’s why these ads are more effective for high-involvement goods: If a product is relevant to them, people are more likely to have retained—and be motivated to recall—information about it. And psychological research has shown that the higher people’s involvement, the more likely they are to process information cognitively (rather than emotionally), a method better suited to the decision to buy utilitarian products.
The obvious implication for marketers is that mobile display ads should be reserved for utilitarian, high-involvement products. (Marketers may be able to position a hedonic product as more utilitarian: A mobile banner ad for a sports car, for instance, might show an exceptional warranty.) Marketers should also use the ads in conjunction with higher-bandwidth ones, such as TV commercials, and launch them after those more detailed messages have run so that consumers will have some stored information to retrieve. In addition, mobile display ads are more effective when viewers are close to a purchase decision and so naturally have high involvement.
As marketers shift more of their budgets to mobile channels and display ads in particular, it’s crucial that they understand when these ads can work and when they are just noise.