Mobile advertising is finally beginning to come of age as phones transform the relationship brands have with their customers in new, and sometimes unexpected, ways. The rate of growth is astounding, and the pace of change so rapid it is now difficult to believe that many companies greeted the predicted inexorable growth of mobile advertising with barely disguised scepticism a decade or so ago.
The UK market was worth £83m in 2010, according to the Internet Advertising Bureau (IAB), up from £37.6m the previous year, an 116% like-for-like increase. Online market research company comScore says that in 2010 there were 19.1 million monthly mobile internet users in this country, up by 4.6 million from the same month the previous year. US investment bank Morgan Stanley said this year that "online advertising may finally be entering a golden age".
The bank believes that the mobile advertising market in western countries is set to reach the recent growth rates seen in Japan, where mobile ad spend rose threefold from 2006 to 2009, to stand at $1bn (£610m). FirstPartner, a consultancy company, predicts that the UK market will be valued at £992m by 2015.
Much of that growth has been driven by the mobile internet and, latterly, by smartphones. Jon Mew, head of mobile at the IAB, points out that 41% of the population already have a smartphone. "By next year that should be half of the population," he says, "and it shows no sign of slowing."
Rik Haslam, chief creative officer at leading digital advertising agency RAPP, says: "Clients sometimes ask me whether mobile advertising is really something they should focus on. I tell them that right now more smartphones are being built than laptops and desktops combined, that mobile internet use is ramping up almost 300% faster than desktop internet access did, and that more than 50% of people use a mobile device while watching TV. So yes, it's something clients should focus on." He adds: "If the internet revolution disrupted business norms, then the smartphone revolution is devastating business norms."
Analysts at Morgan Stanley estimate that by 2020 there will be about 10bn mobile internet devices worldwide – 10 times the number of PCs currently in use.
But the story can't be told by statistics alone, as compelling as they are. The arrival of tablets, Apple's iPad in particular, and the popularity of location-based services, which use the GPS functionality of a smartphone to offer users services based on their location, have transformed the user experience – and the aesthetics – of mobile advertising. Put simply: it has become sexy.
"Traditional brands didn't do much on mobile, but it's changed dramatically in the last year," says Mew.
In recent years, around two thirds of online advertising spend has traditionally been on ringtones and downloads, but 12% of spend last year came from companies that sell fast-moving consumer goods.
The look, feel and size, of the iPad, one of the fastest-selling new computer devices in history (it took just one month to sell 1m iPads; the iPhone reached the same target in 74 days), has prompted fashion brands and car companies to create sumptuous online campaigns that were only seen in glossy magazines or expensive television adverts until recently.
Generating a response
Although they have been talked about for some time, location-based services have only really started to take off over the past 12 months, aided by the launch of Google and Facebook products, such as Facebook Places. Those services are powerful, allowing carefully targeted advertising campaigns that generate far better responses among consumers. Research published by location data firm Navteq in August 2010 found that 41% of consumers who saw a specific mobile advert went into one of that retailer's stores – and 53% said it was the advert that prompted them to visit.
Text messaging and advertising campaigns have become more targeted and more sophisticated. More people are using their phones rather than PCs to search the internet (10% of all UK traffic now comes through mobiles) and new mobile technology is enabling big corporations to experiment with reward schemes designed to attract and retain customers, which may, ultimately, make loyalty cards obsolete. M-commerce also continues to grow: mobile-generated sales at online giant eBay tripled to nearly $2bn in 2010, with the UK the fastest adopter.
Challenges remain for advertisers, however. The lure of the iPad and the iPhone, with their hugely popular apps, can make companies who want to establish a mobile advertising presence lazy. According to mobile marketing company 2ergo: "A lot of companies launch a mobile app and think they've ticked the mobile box – but an iPhone is only 11% of the total [mobile] market. You're missing out on the bulk of your target audience."
If a company wants to reach all of its target audience, it has to create content that can be used on all of the popular operating systems, which combined make up the vast majority of the market. Google's operating system for mobiles, Android, is growing market share, and Android-powered phones recently overtook iPhone sales. BlackBerry-maker RIM has won a new audience of young enthusiasts who use its instant- messaging service.
All of those platforms are likely to enlarge, but there are lingering concerns among consumers about privacy and there is still some resistance about using services such as mobile internet at all. According to a recent IAB survey, 21% of respondents said they only used their mobile phone for texting or calling. That seems set to change, however, as mobile phones become the next link in the internet's evolutionary chain. There have been several false dawns, most notably when WAP-enabled phones, which allowed users mobile access to the internet for the first time, became available at the end of the last century and failed to live up to the hype that surrounded their launch. This time around, the hyperbole seems justified.
