Is the Mobile Advertising Opportunity “A Mirage”?
A recent blog post from an investor named Jean-Louis Gassée raised some provocative questions about the future of mobile advertising, and suggested that mobile ads are never going to work as well as print and online display ads, and will never be as lucrative for advertisers and publishers as these older forms of advertising.
Gassée puts forth the idea that mobile advertising should be a much bigger market than it is (his blog post is called the “$20 billion opportunity mirage”) because mobile device screens are so much smaller and the way people interact with their mobile devices is different from sitting at a computer (shorter attention spans, more distractions), if mobile ads were going to be as lucrative as everyone hopes, it should have happened by now.
Mr. Gassée raises some valid points in his article, but on the whole I believe he is missing some key distinctions between mobile advertising and Web advertising. It’s wrong to say that “mobile advertising doesn’t work” and will never work. Here are some reasons why:
- The industry is still young. Mobile advertising is a very new industry, with fast growth as thousands of companies start to look for new possibilities of connecting with customers via mobile devices. The iPhone was not introduced until 2007. We’re only 5 years into the mobile device revolution, and mobile devices and smartphones have only very recently overtaken PCs as the preferred method for people to access the Web. We are just barely scratching the surface of what is possible with smartphones and mobile advertising. People are still getting accustomed to the realities of smartphones and discovering all the things that smartphones can do for them. Just as Amazon needed a few years to introduce people to online shopping (Amazon didn’t turn a profit until 2001, seven years after it was founded), the mobile ad industry is inevitably going to have some growing pains as people get more comfortable with using mobile devices and responding to mobile ads.
- Mobile ads are different. Mr. Gassée makes a good point in his essay, saying that people might be mistaken in assuming that mobile advertising is going to have the same business model as online advertising, but in a smaller size. I agree. It’s true that mobile advertising is not just “Web advertising, shrunk to fit,” as Mr. Gassée writes. However, this doesn’t mean that mobile advertising cannot be just as profitable (or more so) than online advertising. Mobile ads have to be different from web ads because the medium is different – the screens are smaller and the way that people interact with mobile devices is different. Mobile ads offer bigger opportunities for different types of advertising like interstitial screens and video ads, as well as location-based mobile ads. As more consumers get access to smarter smartphones and faster 4G networks, we expect to see advances and more sophisticated smartphone advertising that blends more seamlessly into the user experience. It’s true that mobile ads aren’t going to be exactly the same as Web ads, but that’s not a bad thing. Of course mobile ads have to deal with smaller screens and smaller windows of opportunity to influence consumers, but this doesn’t have to be a bad thing if advertisers plan and design their ads and websites to be mobile friendly and take advantage of location-based information.
- Mobile commerce will take mobile advertising to the next level: Over the last decade, mobile devices have become increasingly integrated into almost every aspect of our lives. Our phones are already the center of our social lives. Now they are poised to become the center of our financial lives as well. From mobile banking to in-store mobile payments, consumers are becoming increasingly comfortable with using their phones to conduct financial transactions. These scenarios will help mobile advertising to expand well beyond the scope of what is possible through Web advertising. And as the mobile commerce ecosystem expands, mobile advertising will start to show its true potential.
- Sometimes commentators underestimate the possibilities of new technology: There was a famous article published in Newsweek back in 1995 where the author said that the Internet was never going to live up to the hype – it’s hilarious to read today. Here is an excerpt: “How about electronic publishing? Try reading a book on disc. At best, it’s an unpleasant chore: the myopic glow of a clunky computer replaces the friendly pages of a book. And you can’t tote that laptop to the beach. Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Internet. Uh, sure.” With any technology, including mobile advertising, it is easy to apply a linear perspective to predicting the future. When we do this, we incorrectly picture a future filled with products that are incrementally better than they are today. The truth is that mobile technology is growing exponentially, not linearly. While it is impossible to predict what mobile advertising will look like 5 years from now, one thing is for sure: mobile advertising will adapt and become stronger every year.
The point is, while a healthy amount of skepticism about new technologies is often appropriate, it’s all too easy to underestimate the transformative potential of new technologies while we are in the midst of seeing them grow. In another five years, the mobile advertising opportunity will likely be much larger than we ever anticipated – and nothing at all like a “mirage.”
What’s your take on this? Does Mr. Gassée have a point about the effectiveness of mobile advertising, or is he missing some key distinctions? Have you seen in your own experience whether or not mobile advertising “works” as well as you hoped?