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April 2009

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Contact Ken Custer at 303-277-9840.


You Are Here: Mobile Advertising's Big Advantage

By Bret Morstad

If you ever been in the office of Ken Custer, publisher of Denver's Advertising and Marketing Review magazine, you've seen the old sign on his wall espousing the mother of all mantra's for marketers: “Do you know what happens when you don't advertise? Nothing.”

Even in today's difficult economy, these words ring true. If you happen to be responsible for spending the very precious advertising budget of your business unit, your client or your own enterprise, you are facing a difficult choice: the same complex media buying decisions as usual with the added pressure of blowing vital cash.

But there are some diamonds in these dismal conditions. One sector is seeing real growth with most experts projecting considerable growth in this area over the next three to five years. Better still, this option has a secret weapon no other advertising channel can match.

Mobile Gets Better and Better

Mobile advertising is no longer an experiment. The proof is in the growth and the growth is due to the advancing technology.

According to a recent article from Adweek, the shift in mobile ad spending in the US is attributable primarily to growth in mobile web usage. Mobile web browsing used to be a basic, irregular experience due to less sophisticated handsets, slower networks and prohibitive consumer pricing. The age of smartphones and unlimited data plans has changed that.

Over the last few years, mobile carriers have invested a great deal in enhancing network reach and capacity to accommodate the demands required for today's advanced mobile web apps. A Kelsey Group study, “Going Mobile: The Mobile Local Media Opportunity”, states that about 20% of US cell phone subscribers are on the mobile web right now.

In addition, the hardware continues to improve. Smartphone handsets continue to get better in both design and functionality. One only need look at the speed with which Apple's iPhone was consumed to understand how quickly the shift to increased mobile usage has occurred. Apples App Store has seen the download of over 25,000 applications that do everything from translate currency exchange rates to help you find a restaurant to make fart noises.

And soon, the non-Mac loyalists that use Blackberry devices will have their own app store as well. Creating a new wave of application development that will further prove enhanced mobile device usage looks to continue its blistering growth.

Bullish on Mobile Advertising

“Mobile advertising could be one of the few bright spots in the media and entertainment landscape this year. With near saturation of cell phone usage in many countries, mobile advertising represents an attractive and largely untapped market.” So states Deloitte's annual media and entertainment sector predictions.

Your mobile phone is a very personal device, much like your watch, your sunglasses or any other possession you pick up before leaving the house. It's one of those few items you almost always have with you. It is an advertisers dream to be able to communicate with consumers on such a personal, useful device. It's direct and it can deliver a better relationship building experience.

Currently, SMS still has the lead in mobile advertising formats, with 49% of US mobile users actively using SMS on a regular basis in any given month. Look around you on the freeway, the airport or at the food court. Everyone is busy with their phone, texting friends or sending notes back to the office.

But this and other forms of advertising, like mobile web banners and in-application advertising are pushing brands around the world to invest more than double what they spent in 2008 on mobile advertising in 2009, from $1.0 billion to $2.4 billion according to a report by Strategy Analytics. A clear indication that ad firms and the companies they represent have realized the potential of this medium.

Respected research arm of the Mobile Marketing Association, M:Metrics, recently put it like this, “The mobile advertising market has matured considerably over the past year and is no longer a novel addition to media planners, but rather a key component to an interactive campaign.”

Location, Location, Location: The Mobile Advantage

If endorsements like this, better web browsing and the personal nature of the mobile device were not enough to convince an advertiser that this is the place to be, understand this: the phone knows where it is. That is to say, it knows where you are.

Because a phone's location can be (at worst) triangulated using its unique cell-id, or (at best) located precisely with GPS technology, you can be located and localized at anytime.

From a user perspective, being able to locate yourself on a map, for example, simply by typing in your address (or the nearest intersection) is an extremely useful function. You save a great deal of time not getting lost. The next logical step is to find out where you're going: local search in real time right in your hand.

Enter Location Based Advertising. LBA is a form of marketing communication that uses location-tracking technology in mobile networks to target consumers with location-specific advertising on their mobile devices. No two concepts were ever a better match.

Advertising over this channel is more relevant, personal and targeted, allowing the consumer some sense of control and the notion that they are driving the experience rather than simply being served. This in turn increases the likelihood of conversion and the spending of actual money, which is the obvious end game of all advertising.

The Kelsey Group study predicts that by 2013, 35% of all mobile searches will have local intent driving local advertising revenues to over $1.0 billion.

One Denver based company taking advantage of this trend is a Liberty Media subsidiary called Useful Networks (Disclaimer: I also happen to work here). Useful Networks is a full service Location Based Service (LBS) provider providing location aggregation services to other application developers as well as developing its own applications and games. One of their hottest location services is advertising.

Useful Networks has created an ad driven service it calls “Store Finder” and has worked with some of the world's largest brands to enhance their mobile web advertising by localizing them. Store Finder works like this: A web browsing customer reading the sports scores see's a web banner for a fast food joint. By clicking on the banner, Useful Networks serves up a map showing all the locations of that restaurant within a certain radius of where you are. Next stop, cheeseburger.

The success of this application is drawing the attention of other ad networks and big name brands in the both the US and Europe. “Our location-aware advertising products have shown brands the value of using location within mobile ad campaigns,” states Chris Glode, Sr. Director of Product Management, “there's no other medium that allows a brand to engage with a customer who is on the move, and direct them to the nearest point of sale to find what they want.”

One Small Issue Remains

As promising as it is, LBA has its roadblocks. Mobile consumers are extremely sensitive to marketing without consent, better known as spam. This sensitivity is heightened by the idea of being tracked. Many consumers are concerned for their privacy and risk of being monitored without being aware of it. The mobile industry at large is making consumer privacy and preference management policies a priority.

As a personal, direct marketing channel, LBA (and location services in general) must always be an opt-in option for the user. The Can Spam Act in 2005 made it illegal in the US to send any message to an end user without that users consent or opting in. Revealing location is no different, and carriers and other service providers are working hard to respect the rights and privacy of their customers and ensure these services are always permissions based.

In the end, mobile advertising is a quickly advancing new service, flourishing at a time when other advertising channels are shrinking. Mobile web browsing, network access and better smartphone handsets are making it increasingly easier for consumers to use their phones for applications way beyond the phone call. Location Based Advertising brings useful, relevant information to people in their everyday lives. Only in its infancy, LBA has a future as a serious option in the mix of advertising campaigns of all sizes.

Bret Morstad is Director of Finance at Useful Networks and the publisher of Advertising and Marketing Reviews online digital edition.


Another View
Ed Otte
Executive Director, Colorado Press Association

Lost amid the avalanche of bad economic reports involving print journalism are two factors:
1. The role newspapers play in people's lives.
2. The impact of Wall Street.
Consider the second statement first and, to borrow the (Bill) Clinton campaign slogan - it's the economy, stupid.

Newspaper profit margins began to change when recruitment and automotive classifieds slipped away to websites. Real estate ads followed when Realtor websites and other Internet offerings siphoned off that revenue stream.

Some newspapers were less affected because of their geographic advantage and deep roots in the community. Those that did lose classified revenue were adjusting to the changes when the nation's economy started to free-fall last fall.

Foreclosures, tight credit and job losses damaged consumer confidence. That hurt retailers and that led to a slump in display advertising.

Newspapers are always thin this time of year. First quarter ad revenue declines produce fewer pages and smaller news holes. But that early-year characteristic is more pronounced in 2009. Even financially healthy papers are now cautious because no one knows when the economy will rebound.

This states the obvious but the economy must be cited as the culprit in any discussion about newspapers.

No one criticizes the owner of a Main Street restaurant for curtailing hours in a recession. Fewer people are dining out, and the owner must manage expenses.

No one blames the owner of a well-established clothing store for closing its doors. People stop buying new clothes, and the owner can't pay the monthly bills.

The restaurant's menu was still appealing. The clothier's merchandize was still fashionable.

It's the economy.

Newspapers face the same challenge but some critics claim the medium is the problem. Newspapers, they say, are no longer relevant.

Really?

Tell that to people who live in Westcliffe who read in the Wet Mountain Tribune about the $152,000 to be distributed to local non-profit organizations.

Or Ouray residents who are kept informed about the Home Rule Charter Commission meetings by reading the Ouray County Plaindealer.

Or people who read the front-page market reports from area grain elevators in the (Springfield) Plainsman Herald. That information is valuable to farming communities in Baca County.

Or Leadville residents who read in the Herald Democrat about Lt. Gov. Barbara O'Brien's visit to explain how the state's budget-cutting plans will affect Lake County.

Or people who read in The Johnstown Breeze about the school district's decision to resume serving peanut butter in school cafeterias. Think that's not important? It is to parents of school-age children.

These examples illustrate the point that newspapers - in print and online - inform people about vital issues and help them form intelligent opinions.

Bottom line: Newspapers, regardless of the delivery system, are the reliable source of local news, information and advertising. That holds true for metro newspapers, such as the Rocky Mountain News, and for small, rural weeklies.

The relevant newspapers will survive.

To contact Ed Otte, call 303-571-5117 X11 or email eotte@colopress.net.


So what is the answer to save newspapers?
The easy answer is, pay for a newspaper subscription and buy ad space. Unfortunately, buying ad space doesn't make sense if it doesn't fit your businesses needs and, why pay for a subscription when you can go online and get it for free. Other answers are being considered.

The cover story on the February 16, 2009 edition of Time is titled “How to Save Your Newspapers.” One article is by former Managing Editor of Time and President of the Aspen Institute, Walter Isaacson, the other by Josh Quittner, former magazine editor is titled “The Race for A Bette Read.”

Isaacson charts the decline in circulation over the last year by The New York Time -3.6%, Los Angeles Times -5.2%, Daily News -7.2%, New York Post -6.3% and The Washington Post -1.9%. During this same period, the unique visitors online grew +15%, +34%, +6%, +53%, +99%, +60%, and +13% respectively. Thus, indicating that, though circulation is down, newspaper readership is up. Why? Because it's free, it's easy and you can read it when you want.

Quittner points out that everyone has been trained that any information on the Internet should be and is free. This was not a problem when the economy was robust and selling online banner ads was easy. Now those ads are going away, revenue is gone, and the content is still free. This does not support a staff of professional journalist.

The answer from both authors is to start charging the online reader. A lot easier said then done for several reasons. Apple linked the iPod to iTunes and got people to pay for the music instead of downloading it free from Napster. The Wall Street Journal subscriptions for their Website rose 7% in a gloomy 2008. These entities have worked out a successful online payment system. At this time, this is a major drawback for any small change charge. How do you collect 10 cents or 20 cents to read the Rocky Mountain News online? At this time, Adobe, Pixel Qi, Plastic Logic and many others are developing payment software and hand held screens for downloading and reading online information. Another question to be answered, should a newspaper be presented online in it's current format or is a new hybrid format needed? What ever the answer, the chances these developments will be in time to save the Rocky Mountain News and other newspapers seems to be slim.

There are many opportunities to gather information on the Internet. Personal blogs, opinions and stories abound. But, most are by amateurs, many with an axe to grind and without an unbiased opinion. The loss of professional journalism, presenting a well-researched story, leaves everyone believing only what they agree with and never getting both sides of an issue. The loss of newspapers is a loss of one of the basic freedoms that founded this country.


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