Mobile Advertising Reaches a Historic Point, Faces New Challenges

mobile advertising
It’s hard to believe, but smartphones and tablets have been around for less than a decade.

Understanding this, it’s even more amazing that they’ve been able to draw as much advertising as they have. During this year, mobile advertising will outpace newspaper and radio advertising. According to eMarketer estimates, spend on mobile advertising, including both smartphones and tablets, will increase by 83% up to nearly $18 billion. Newspapers will come in at just $17 billion, while radio is expected to bring in $15.5 billion.

Mobile spending makes sense. When you consider that advertisers and media buyers want to be where people are spending their time, it makes sense that they’d be spending so much money on mobile advertising. American adults spend nearly 25% of their media time on mobile devices. This year’s estimated spending on mobile advertising will increase their share of the ad market to just 9.8% – which is expected to increase in time.

Radio and newspaper have seen erosion in media spending for the past several years. American adults spend just 2% of their media time reading newspapers, and ad spending is just under 10% of the market share. Radio dropped to 8.6% of the market share from 10% in 2008. Television draws 40% of American adult media time and holds onto the same proportion of the ad spending market.

But still a low percentage of ad dollars. With mobile’s popularity, it’s hard to believe that mobile advertising still has such a low overall percentage of ad dollars. Analysts say that unhappiness with mobile advertising formats may be to blame – but new products for mobile may change their tune. The tiny little banner ads that were perceived as a nuisance by users are now being replaced with more natural “native ads.” For example, an ad from a retailer could appear in the Facebook timeline stream as part of the regular view.

Despite the new technology, there are still questions about the effectiveness of mobile advertising. eMarketer’s poll of a dozen marketers and digital ad markets revealed that they gave mobile display ads a “B-.” Location-targeted ads received an “A-” from the group.

Location capabilities for mobile devices are a big draw for advertisers, and are driving the growth of mobile spending. It’s also an asset that retailers want to use. There’s something appealing for them about being able to advertise to mobile users who are within a certain radius of their store at the moment.

Where will the mobile increase come from? Radio and newspaper may not grow as industries, but they will maintain for a while so mobile won’t be able to increase their share of spending entirely. Older platforms still have a use to advertisers, and they’ve historically performed well, which is comforting to media buyers.

A recent study from Nielsen Catalina Solutions showed that for each dollar spent on radio advertising, there was a sales return of $6 from listeners within four weeks of airtime. It’s effective at driving sales, and that’s something that advertisers want to keep benefitting from.

Measuring the mobile audience. Mobile also faces challenges in measuring its audience. There are no effective tools for measuring who is seeing the ads and how effective they are. Both Nielsen and comScore are attempting to create tools for advertisers to do just that.

Even with these tools in place, the mobile space has made advertising choices more difficult. It’s complicated for media buyers to determine how to split up an ad spend budget across online, TV, radio, newspapers and mobile. An effective split requires a deeper understanding of the audience and where it is spending time.

With better tools and more detailed analytics, the advertising industry may continue to trend toward mobile spending – it just requires the right infrastructure to support the spending.

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