February 25, 2013 6:58 am

Advertising space: Marketers aim to tame mobile’s final frontier

picture of an app on a smartphone

Campaign trail: services such as those from Adfonic allow clients more accurately to track how successful their mobile advertising and promotions have been

Every year, mobile advertising is forecast to enjoy a bonanza, and every year advertiser confidence and expenditure lags far behind consumer adoption of mobile devices.

A study by research firm Berg Insight estimates that mobile ads account for about 1 per cent of worldwide advertising outlay, while consumers are spending around a quarter of their available “media consumption time” browsing the internet and using apps on smartphones and tablets.

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Mobile advertising, nonetheless, represents a step in the dark. There is a vast oversupply of available ad space and not enough demand for it. This imbalance makes it hard for advertisers to understand where their ads might be best placed.

There are problems presented by mobile devices themselves. For an effective campaign, developers need to take into account the large number of handsets available, with different screen sizes, capabilities and operating systems. This means the costs of developing engaging, interactive mobile ads can seem high, especially to an advertiser with no guarantee of a return on their investment.

There is the challenge of understanding the audiences reached by a particular mobile ad campaign. While online advertising on a conventional PC or laptop uses cookies – code downloaded by a website to a visitor’s browser – to track user behaviour and identify audiences, this is more problematic on mobile devices, as Andrew Frank, an analyst at research firm Gartner, explains.

Apple has set the Safari browser on its iOS-based products (iPhones and iPads) to reject third-party cookies by default. Mr Frank says unless users change their phone settings, which is pretty rare, cookies will work on that device. He adds that Apple devices reject apps that access a device’s UDID, an alphanumeric identification string unique to each iPhone and iPad.

With Android, there is more flexibility. Fragmentation of the market, however, with different devices running different versions of the operating system, makes it hard for developers to build a tracking mechanism to run across Android versions.

This makes mobile seem risky: a channel for which it is hard to build effective campaigns and harder still to measure their success. Advertisers and agencies representing them, find this off putting says Alex Rahaman, chief executive officer and founder of StrikeAd. His company provides a mobile demand-side platform, or DSP, which allows companies to buy advertising space in a more targeted way and track the success of campaigns.

DSP, established in online advertising, is a way of connecting advertisers looking for space with the large numbers of ad exchanges that, in turn, represent the many online publishers selling space. A mobile DSP, like the one offered by StrikeAd performs the same function but enables advertisers to pinpoint audiences by a number of characteristics: the type of devices they use, their operating systems, their mobile carriers, the time of day and, increasingly, their location.

Once the advertiser uploads their targeting criteria for a particular campaign, the DSP monitors a number of ad exchanges where mobile ad inventory is bought and sold and, when a suitable ad space becomes available, bids on it. Because of the time this process takes – often milliseconds – this kind of buying is known as real-time bidding.

“The DSP figures out what works best for a particular campaign, based on when and where the ad was delivered: which sites, which locations, which handsets, which target audiences,” Mr Rahaman says. “The DSP learns to answer the important questions for itself: Did the ad work? Did the audience engage with it? Did they purchase a product, watch a video or download an app? Then we stop buying space in all the places a campaign doesn’t work and hone in with laser-focus on the best places to buy ads for a particular advertiser.”

This approach has enabled two-year-old StrikeAd to attract $3.5m in venture capital funding and relocate from London to New York but it has lots of competition. Indeed, this is a rather crowded market, dominated by a crowd of start-ups, such as Tapad, EveryScreen Media and MediaMind.

Undeterred by the scramble, mobile ad network Adfonic launched its own DSP, Madison, last October. Wesley Biggs, its chief technology officer, says: “We had a crunch meeting with a large agency client that told us: ‘We want to do mobile, our clients are asking us to do more and spend more but we can’t unless we can see where the results come from.’ The question for us was: ‘Do we have the courage to embrace this disruption?’ ”

The mainstream advertising agencies that Adfonic works with in the UK – representing Warner Brothers, Peugeot, McDonald’s and other brands – have campaigns on Madison or trialling the mobile DSP during 2013’s first quarter, Mr Biggs says.

“One agency customer described getting hold of a mobile DSP as like having laser eye surgery. They could see the true performance of campaigns, tracked over time and that meant they had confidence in mobile as an ad channel for the first time,” he adds. “For advertisers to include mobile in their major campaign budget lines, the industry has to give them the visibility and transparency they expect.”

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