Tuesday, February 02, 2010

Mobile Advertising needs Rich Media and Better Targeting

Mobile advertising is a $2.2 billion business. Advertisers put up mobile ads for two reasons: (1) Building brand awareness and (2) generating leads, whether to download their iPhone Apps or sign up for their service.

Two possible improvements:

Two possible improvements:

Rich Media

All ads you see today on your phone are static text or images. Brand advertising works by playing to emotions, and to do that, you need animations and sound. I know you dislike those Flash ads on websites, but they're how the content gets paid for.

Those ads are static for a reason: iPhone doesn't support Flash, and the ads need to be small in size due to limited bandwidth. I'm sure one of the players in this space is already working on building technology to show great-looking, animated, interactive ads - whether with proprietary technology or some sort of browser plugin. Rich ads, rich CPMs. Even the bandwidth problem can be solved: There are plenty of ways to preload ads and cache them for later display.

Better Targeting

If you've tried putting up an AdMob ad, you know that the targeting options are pretty limited: You can narrow down by country, device (iPod Touch / iPhone), and connectivity (Wifi/3G).

There's one type of ads that could unleash dramatic growth in mobile advertising: Imagine you're on the way to lunch at Pete's Burgers, and your iPhone shows you a coupon for Joe's Burger Shack. You go to Joe's and show them the coupon you just clicked on. The ad just generated a verifiable lead, and the advertising network just made a bunch of money.

For this type of application to work, targeting needs to get better: We need street-block level targeting, time of day ("only run this ad at lunchtime"), and likely user activity ("user likely walking to lunch").

I imagine that local ads like that could be bigger than the $20 billion / year search advertising business (e.g. Google AdWords), which makes money by generating leads for people to buy stuff online. The number of real-world transactions and the amounts I spend on them are much higher than what I spend online. Done right, mobile advertising could be much bigger than that.

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