December 29, 2010, 2:18 PM

Mobile Messages

Tiny ads displayed on mobile sites and apps provide a new way to reach smartphone users

Smartphone users love apps, and they expect web sites to be optimized for use on their mobile phones. But they have to know sites and apps exist before merchants can reap the benefits of going mobile.

In early fall 2010, apparel and accessories retailer Express LLC wanted to let its customers know they could shop Express via their smartphones. It had just launched an m-commerce site and mobile app and had its sights set on a robust new channel. So it took a gamble on a new marketing tool, mobile display ads, to get the word out about m-commerce.

Using the services of a few ad networks, it created small banner ads to appear atop the mobile sites of numerous news, entertainment and other non-commerce mobile sites. One ad, for instance, read: “EXPRESS, Shop On-The-Go This Holiday Season.” When a smartphone user touched the ad it took her to either the m-commerce site or to the page within the appropriate app store where the Express app could be downloaded.

“The call to action was tying into our overall strategy, Express 360 On-The-Go. Our main goal was engaging with customers wherever they are and whenever they want, and inserting ourselves into their lifestyle,” says Suzanne Guzzo, manager of interactive marketing. “Tying that into mobile through display ads really shaped the message of Express On-The-Go. So we launched with one $250 shopping spree winner per the three platforms we targeted: Android, iPhone and BlackBerry.”

Because the medium is so new, Express was not sure what to expect, and did not set specific return on investment metrics. Its goal was simple: Drive more traffic through its mobile site and app. While Guzzo declines to divulge specific figures, she says unequivocally that Express achieved its goal.

New and different

Express is a pioneer, but it’s not alone. Mobile display ads are a new and growing tool that some retail marketers have begun to explore. Analysts say spending on mobile display will increase, in part because a growing number of consumers are making the smartphone their primary Internet access device.

Retailers seeking to engage that kind of consumer with mobile ads will have to tackle some fundamental differences between mobile and desktop display, namely the size of the ads, the need for finely tuned calls to action and the nature of the consumer seeing the ads.

On average, retailers can expect to pay $6 to $10 per 1,000 ad impressions for a mobile display ad run through an ad network, a company that delivers ads to large groups of web sites, marketing and advertising experts say. A merchant paying on a cost-per-click basis, instead of on the basis of how often the ad is shown, may pay around $0.25 per click. But costs can vary depending on the level of targeting, which can be done by demographic, wireless carrier, type of smartphone and other characteristics.

Comparing that to online display ads is difficult because the price of advertising on the desktop web varies too widely to come up with a true average, online ad experts say. An ad targeted at very precise niches on premium sites can run as high as $65 per 1,000 impressions, while a basic run-of-network ad could cost as low as $1 CPM, or cost per thousand.

Only 14% of interactive marketers in numerous industries, including retail, are using or testing mobile display ads, according to Forrester Research Inc. 21% expect to test mobile display in the next 12 months, finds the October 2010 survey. And a significant 65% have no plans to move into mobile display. Forrester expects the total spend on mobile display ads to hit $437 million in 2010, a fraction of the $8.9 billion 2010 online display ad market. But mobile display ads will grow to $1.27 billion by 2015, Forrester Research says, with a compound annual growth rate of 29.3% from 2009 to 2015.

Mobile display ads also are receiving a tepid response from mobile Internet users. 24% of online consumers used their mobile phone to shop in November 2010; 4% of those consumers responded to a mobile advertisement from a retailer, according to the Internet Retailer Holiday Shopping Survey conducted by Lightspeed Research, a market research firm.

However, smartphone users at least seem somewhat receptive to mobile ads. Of 13- to 54-year-old smartphone owners who have apps on their phone, 32% say they are more inclined to purchase the brands that advertise or have marketing messages in an app, according to a study by Knowledge Networks and MediaPost Communications. Of all mobile phones in use, 31% are smartphones, according to The Nielsen Co.

“It’s pretty early,” says Michael Boland, senior analyst and program director at BIA/Kelsey, a media research and consulting firm. “Most of the mobile ad dollars are going into text messaging because 70% of mobile devices are dumb-phones, and the extent of the media capabilities of these phones are mostly text messaging.”

But by the end of this year, Nielsen says half of all mobile phones in use will be smartphones, and that means a lot more eyeballs on sites offering mobile ad spots.

Who’s there?

Before a retailer decides to run a mobile display ad campaign, it needs to know whom those eyeballs belong to.

“A retailer must use all the tools at its disposal to determine which of their consumers are using mobile in which ways,” says Melissa Parrish, interactive marketing analyst at Forrester Research. Such tools include web log traffic monitoring, web analytics and surveys. “Before you put dedicated money and resources against these strategies, really understanding how big a consumer pool you have is most important. And then it depends on the willingness to experiment. We’re expecting consumers’ use of mobile display to grow substantially over the next few years. So the question is what kind of scale is enough to encourage you to give this some of your budget? We can’t recommend this in a blanket way; it really does depend on the marketer.”

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