Will Mobile Ads Finally Get Their Due?

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by Kenneth Corbin

Stakeholders from all corners of the mobile industry converged on Washington, D.C., today for the first of two days of town hall meetings taking stock of the developing economy in applications beyond voice.

The meetings, hosted by the Federal Trade Commission, are intended to flesh out the various facets of the nascent mobile commerce and marketing sectors in search of any potential harm to consumers.

For many years, the mobile marketplace has been a dream deferred. Google (NASDAQ: GOOG), Yahoo (NASDAQ: YHOO) and scores of other tech companies large and small have been betting big on the explosion of ad-supported mobile activities, but the economy is still a microcosm of the greater Internet industry.

“It’s something that has been seen as coming down the pipeline for some time,” said Mary Engle, director of the FTC’s advertising division. “[But] it’s still a small fraction of most companies’ advertising budgets.”

At an afternoon panel focusing on different ad models, academic researchers and several people who develop mobile campaigns weighed in on what it will take for the handset to take its place alongside the television and computer as advertising’s third screen.

It’s a much different story in Asia, where mobile devices have become a much more widely adopted vehicle for advanced applications. Hairong Li, a professor at Michigan State University who studies mobile marketing, said that Japanese advertisers have moved beyond simple text-messaging campaign.

Many brands in that country are connecting with consumers on their phones through what is known as QR codes, two-dimensional bar codes placed on physical objects that can be read by a phone. A fast-food company, for example, might place a QR code on its menu that the mobile phone would read to display more information or offer a promotion.

Li believes that this type of mobile advertising, where the user initiates the interaction, will ultimately be the winning model in the United States, once more phones come with the ability to read the QR codes.

“Intrusive advertising has little room because consumers consider phones their personal medium,” he said.

In the meantime, mobile advertising in the United States remains a one-off economy. One of the chief criticisms is the charge that people simply do not want to be bothered with advertisements on their cell phones. But Michael Hanley, an advertising professor at Ball State University, said his research has shown that college students are highly receptive to mobile ads, provided they are relevant and offer something in return.

“Without incentives you’re going to have a hard time getting anything done,” he said, noting that ads offering discounts for restaurants and movie tickets were the best received among the college students he polled.

From the advertisers’ perspective, the mobile device has some unique limitations as a medium, such as its screen size and the still small proportion of people who use their devices for applications other than voice and text messaging.

New devices could change that. Mobile screens will always have size limitations, but a new wave of handsets, ushered in by Apple’s iPhone, could lead users to engage in more sophisticated activities on their mobile devices, said Ben Ezrick, who is in charge of developing new-media campaigns at the agency Ogilvy Interactive.

Citing a recent study by M:Metrics, Ezrick noted that 85 percent of iPhone users access the mobile Web, compared with 58 percent of smartphone users, and just 13 percent of consumers with regular WAP-enabled handsets.

Apple made the Web-browsing experience intuitive and enjoyable, Ezrick said. He also noted that iPhone subscriptions automatically include a data plan, which many users of other phones choose not to purchase.

As the first phones from Google’s Android initiative hit the market later this year, and other handset makers produce similar products, the mobile commerce and advertising markets will develop apace, Ezrick predicted.