Written by Jessica Piccola
Edited by Sam Eisen
Every time a new smartphone is released, consumers flock to purchase it, with half of the U.S. adult population owning one. So then why do smartphones only attract 1 percent of advertising expenditures in the U.S.? Many advertising executives simply do not know how to approach this medium, and ineffectively treat smartphones like traditional computers.
Another discrepancy between smartphone and computer advertising is the accessibility to consumer information and the lack of availability to monitor their activity. As a result, optimizing marketing decisions is challenging, if not impossible. In addition to having trouble attaining the preliminary information, advertising professionals often cannot measure the effectiveness of their campaigns. Jay Henderson, strategy program director for IBM’s Enterprise Marketing Management group, says, “they’re not as certain about the return on investment,” so companies have difficulty justifying their mobile advertising budgets.
Smartphones are mainly used for functional and pinpointed tasks that take only short periods of time. Users tend to be very focused on what they are doing, and are therefore less receptive to advertising messages. Marketers, then, tend to concede and limit the advertisement’s size, “as not to irritate people,” says Mark Himmelbach, director of digital strategy at BBDO North America. Since a large goal of mobile advertising is to be unobtrusive, mobile ads are often “invisible or ignored by consumers,” he adds. Pandora, a company that has been very successful with smartphone advertising, has weaved around “banner blindness.” They interject commercials in their music stream and display large visual ads while the consumer is listening to the music.
On the other hand, one of the most successful forms of mobile advertising is geofencing, which is location-based advertising. It is fairly unique to smartphones and is impossible to accomplish on a desktop PC. Doug Ray, president of Carat North America, a media planning and buying firm, says that knowing a consumer’s geographic location to deliver “a contextually relevant offer has been effective in driving conversions and sales.” The only obstacle is that location-tracking apps must obtain the user’s permission to access their global positioning. Users are still leery of sharing their every move for a company to track. Geofencing, though, has been a profitable strategy for many retailers like The Gap in increasing revenue. It effectively targets and reaches local consumers, drawing them to a company’s brick-and-mortar site with coupons, discounts, and knowledge of ongoing promotions.
Social media sites in particular have been flourishing with smartphone advertising. Twitter incorporates sponsored advertisements naturally by including them in a user’s stream. Similarly, Coca-Cola has used its Facebook page to contain marketing communications in its news feed. Earlier this year, Facebook officially introduced mobile-sponsored news feed posts, which will better enable smartphone advertising. Many companies have been utilizing Foursquare Labs, which allows users to check in at locations to notify friends about their whereabouts. American Express gives consumers coupons that are redeemable at locations they have previously checked in at using the app. Within the next few months, Foursquare will launch advertising products to begin officially earning revenue off its 20 million subscribers.
It’s important for marketers to take advantage of advertising on smartphones, given that they account for about 10 percent of total media consumption in the U.S. Advertising executives can easily benefit from Web companies who specialize in social media and seek to profit from advertising. Engaging customers through text messaging is another a possibility when it comes to mobile marketing. For example, Coke has bottle cap promotions that prompt consumers to send text messages to win prizes.
Smartphones currently are responsible for fueling 5.1 percent of retail store sales in the U.S. According to Deloitte, that will equal to $159 billion in sales this year and will be up to $689 billion by 2016. Mobile advertising is proving to be effective when it is utilized in the right way and it is also continually evolving to be more consumer-friendly.
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