Building a Case for Mobile Advertising

There's no denying cell-phone users are seeing more ads. A Mar. 4 study by Nielsen found that 58 million U.S. wireless subscribers had viewed an ad on their cell phones in the past month. The problem is that advertisers don't know what users are doing, if anything, when they see the ads. Until advertisers find out, they may hold off on committing more precious marketing dollars to the mobile medium. "Advertisers that are used to full accountability are left in the dark," says Farhad Divecha, director at London-based ad agency AccuraCast.

The hesitance is understandable. In the online world, determining how well a campaign is performing is easy. Web sites embed tracking software known as "cookies" on your personal computer. Those cookies monitor your browsing activity and pass the information to advertisers and the ad-placement networks that distribute their ads across the Web.

A Consistent Yardstick

The wireless industry has refused to facilitate this tried-and-true approach. Most wireless service providers block cookies before they can ever get to cell phones, arguing that to allow them would open a hole in their networks for computer viruses. They also say they worry that a flood of new data traffic -- cookies are programmed to report back to their masters -- could degrade service quality by clogging wireless networks.

Complicating matters, what little data the wireless service providers do pass back to advertisers varies widely in terms of what they measure. Mobile-advertising networks, in turn, crunch the disparate data in different ways to gauge the audience response to ads.

One ad network might report the number of phones that received an ad, while another might report how many users actually viewed the ad. The distinction is subtle, but important for advertisers. Without a consistent yardstick, it's hard to compare the results of a campaign that ran through Yahoo's (Nasdaq: YHOO) ad-placement business with one placed by a rival network such as AdMob.

Wait and See

In the end, ad agencies find themselves creating complex spreadsheets in a bid to reconcile the data from various campaigns. "They are doing more manual processing of data than strategic planning for their clients," says Scott Ferris, a senior vice president at Microsoft (Nasdaq: MSFT) , which has been testing software to help agencies compare mobile ad data from different sources.

Even Google (Nasdaq: GOOG) , which is determined to extend its dominance in Web advertising to cell phones, has no reliable analytical tools customers can use to gauge the success of mobile marketing campaigns. "The mobile ad space is nascent, and we are currently working to figure out the best ad formats for our advertisers and users," Google spokesperson Daniel Rubin wrote in an e-mail.

As a result of these obstacles, there are doubts whether the mobile advertising market will fulfill robust predictions, such as a Gartner (NYSE: IT) forecast for US$11 billion in global ad revenue by 2011, up from less than $1 billion last year.

After all, ad metrics are crucial to creating cost-efficient campaigns. "We can then optimize campaigns on the fly," says Benjamin Ezrick, a senior strategist at OgilvyInteractive. "If one [ad] network performs better than another, we can shift the budget," he says. Likewise, if users don't seem interested in a particular ad, it can be redesigned.

So for now, many advertisers are in wait-and-see mode. "At the moment, the level of transparency is not enough to drive significant budgets into this medium," acknowledges Henry Stevens, director of media and entertainment at the GSM Association, a trade group that represents wireless service providers.

Measures of Success

In a bid to rectify the situation, the association announced in February that five of its most prominent members -- Vodafone (NYSE: VOD) , Telefonica O2 Europe, T-Mobile International, FT/Orange Group and 3 -- have formed a working group to define common metrics for mobile advertising. By year-end, these companies hope to develop a set of standard measures and then launch a trial in Britain. Using input from ad agencies and wireless carriers worldwide, the group will attempt to define everything from what constitutes a click to how to measure different kinds of user behavior. "The experimentation stage is almost over and, in order to scale, operators need to work together (to fix this problem)," Stevens says.

A separate effort launched by Nokia (NYSE: NOK) focuses on making it easier for ad agencies to compare the results of different ad campaigns. In February, the world's largest cell phone maker rolled out Nokia Media Network worldwide. The network, which lets companies place ads on mobile media sites from Nokia and about 80 other content providers, allows advertisers to contrast the performance of their ads on the various sites. Advertisers can also see which types of ads, be they banners or text messages, are working best. "Our focus is very much on this analytics element," says Mike Baker, vice president at Nokia Interactive.

Not surprisingly, mobile ad agencies see the urgency in delivering more reliable data to their clients. "We want to enable advertisers to understand value of ads more deeply," says Jason Spero, vice president of marketing at AdMob. "We want to let them see where a user goes, which phones they use. Otherwise, you can't engage with an audience."