e marketer mobile_display_ad_types-move_over_banner_ads_youve_got_company

Copyright ©2013 eMarketer, Inc. All rights reserved.

The Expanding Menu of Mobile Display Ads 2

Popularity, Availability and Irresistibility 5

Factors Influencing Mobile Advertising Costs 8

Conclusions 11

eMarketer Interviews 12

Related eMarketer Reports 14

Related Links 14

February 2013

Executive Summary: If “mobile advertising sucks,” it has less to do with the limitations of mobile ad formats than it did when the late Apple co-founder Steve Jobs used those words in 2010. 151176

At that time, advertisers’ options were largely restricted to static banners that in Jobs’s words failed to “engage and deliver emotion.” While the static banner is still widely available and used, advertisers looking to engage mobile consumers on a more emotional level have a menu of formats to choose from, including an assortment of rich media ads and a growing number of video formats. Furthermore, Facebook and Twitter have reinterpreted the static ad concept in ways that weave brand messages organically into the mobile content experience.

The larger and more diversified supply of mobile ad formats means greater opportunities for advertisers to deliver engaging experiences. And bargains abound as publishers and app developers rely heavily on third-party services to sell mobile inventory. However, rich media and video ad formats are not going cheap, especially when targeted to specific audiences.

Key Questions

■ What mobile ad formats are available in 2013?

■ Which ad formats are in high demand?

■ What factors are influencing mobile advertising costs?

Most Common Display Ad Format Served to USMobile Phones, H1 2012

Source: Mobile Marketing Association (MMA), 2013151176 www.eMarketer.com

Feature phone Smartphone

168x 28

320x50

Cathy Boyle [email protected]

Contributors Tobi Elkin, Chris Keating, Martin Utreras

Mobile Display Ad Types: Move Over Banner Ads, You’ve Got Company

Mobile Display Ad Types: Move Over Banner Ads, You’ve Got Company Copyright ©2013 eMarketer, Inc. All rights reserved. 2

The Expanding Menu of Mobile Display Ads

eMarketer estimates US advertisers will spend $2.2 billion on mobile display advertising in 2013 and diversify investments across a wider range of ad formats. Unlike three years ago, when there was little more than the static banner to choose from, advertisers looking to engage mobile users now have an array of display ad options at their disposal.

While subsets such as “banners, rich media and video” play an important role in understanding the composition of the mobile display ad category, such names mask the individual ad formats available to brand advertisers. Just as a diner would be ill-equipped to choose a main course to satisfy his hunger and budget without understanding the options within the “meat, fish and pasta” categories, advertisers need similar transparency to achieve their campaign goals. To shed light on the types of mobile ads available, it’s best to work from the bottom up, starting with a set of common ad units served to mobile devices.

Common Ad Units

After analyzing 140 billion in-app and mobile web impressions from Q2 2011, the Mobile Marketing Association (MMA), in partnership with interactive media verification firm ImServices Group, found six ad units were most commonly used by advertisers deploying campaigns to smartphones and feature phones. After a period of public comment, the industry organization recommended these six units, along with a popular mobile audio ad unit, become the global standards for smartphone and feature phone display ads.

Mobile Ad Dimensions Used by Mobile Ad Networksand Publishers, 2012Display ad unitsDimensions120x20

168x28

216x36

300x250

300x50

320x50

Audio ad units (if supported)Length15 seconds

TypeFeature phone

Feature phone

Feature phone

Smartphone

Smartphone

Smartphone

TypeSmartphone

Source: Mobile Marketing Association, "Universal Mobile Ad Package(UMAP) V2.0," Aug 2012151178 www.eMarketer.com

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To gauge the adoption of these recommended units, the MMA and ImServices analyzed 93 billion mobile ad impressions

served in the first half of 2012 across a selection of mobile ad networks. The results showed that nearly 90% of ad impressions served to feature phones used the 168 x 28 pixel ad unit, and roughly 80% of ads served to smartphones used the 320 x 50 pixel ad unit.

Most Common Display Ad Format Served to USMobile Phones, H1 2012


Feature phone Smartphone

168x 28

320x50

151176

To benchmark the MMA’s findings, eMarketer conducted a series of interviews with an assortment of leading publishers, mobile ad networks, ad exchanges, brands and advertising agencies. Among the companies consulted, adoption of the MMA’s six standard ad units was high. As an example, mobile ad network Jumptap reported that 75% of the inventory it manages uses nine ad units. Five of those are the standard units issued by the MMA for smartphone and feature phone campaigns, and three of the four nonstandard units are sized for tablets.

Given that companies are quickly adjusting content and advertising to accommodate the growing use of tablet devices, the presence of larger, nonstandard units was common among those interviewed for this report. The MMA has not yet officially published tablet standards, but its analysis of the 2012 impression data revealed that the two units most commonly served to iPads were desktop mainstays, the medium rectangle (300 x 250 pixel) and the leaderboard (728 x 90 pixel). Together, these ad units were responsible for nearly all of the iPad impressions in the sample studied by the MMA and ImServices.


Most Common Display Ad Formats Served to USiPads, H1 2012


728x90

300x250

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The large share of desktop units among tablet impressions raises the question of to what degree are advertisers simply serving desktop ads to the smaller screens. Research could not be found to answer this question definitively, though interviews with agency experts suggest it is happening with some regularity.

“We’ve worked with clients that like to replicate standard online creative meant for the web because it’s seamless. They’ve already approved their standard ad and they don’t have to spend money on additional creative formats,” said Michael Baliber, senior vice president and director of media strategy for direct response agency ID Media.

Ravi Pahilajani, associate media director at digital agency Razorfish, described the situation similarly: “We’re seeing a significant amount of rich media and video coming through on the tablet side of the house, but don’t get me wrong, we still have static 728 x 90 pixel and 300 x 250 pixel banners because they can be easily repurposed.”

The ad unit, however, is merely the frame through which advertisers deliver their messages. The power to differentiate mobile advertising from desktop, and in turn increase brand engagement, lies in how advertisers tailor the growing set of mobile ad formats at their disposal to the mobile medium.

Common Ad Formats

The menu of mobile ad formats—or ad styles—is evolving in much the same way as desktop display. “You can find any type of static or animated banner, rich media, video and a lot of different types of social ads that have extensions across mobile,” said Wade Rifkin, vice president and media director at digital agency Digitas. Additionally, there is a growing selection of custom formats that deliver share of voice on par with desktop sponsorship formats.

What differentiates mobile ad formats from those on any other medium is their ability to leverage the unique capabilities of the

devices on which they are served. For example, sensors can provide insight into the location and context in which consumers are using their smartphone or tablet, enabling a brand to increase the relevancy of its message in response. And touchscreen, camera, text messaging and other phone features offer multiple ways for a brand to engage the consumer.

Nomenclature used for mobile ad formats varies widely from publisher to publisher and between mobile ad networks and ad exchanges, which can make it difficult for an advertiser to differentiate one seller’s options from another’s. The following list attempts to describe in basic terminology the variety of mobile display format options available.

Banners and Static Formats

Simplistic in design, the following formats typically serve as a quick link to a secondary destination (app store, website, map, etc.) or trigger actions such as a phone call, text message or app download.

■ Traditional Banners: These ad formats allow for a small amount of text, basic animation (typically animated GIFs) or static images.

■ Full-Screen Interstitial: This format is often served on the launch of an app before the content is rendered, or as a user navigates between sections of content or transitions from one level of a game to another. Like the traditional banner, animation capabilities are limited.

■ In-Stream Mobile Social Media: Currently offered primarily by Facebook and Twitter, these ads are designed to match the format and style of content in a user’s social newsfeed. Facebook’s ad formats include Mobile App-Install Ads as well as mobile versions of the Sponsored Stories, Promoted Posts and Facebook Offers found in Facebook’s desktop environment. Twitter’s mobile ad offerings include Promoted Tweets in the mobile timeline and search, as well as Promoted Accounts and Promoted Trends targeted to mobile devices.

Interactive Rich Media

■ Rich Media Banner: This banner can include animation and visual transitions that are technologically more advanced (using HTML5 or JavaScript, for example) than the animated GIF used for standard banners. For example, swipe-able images and click-to-play video can be embedded in the banner, along with multiple buttons that can enable social sharing, emailing, texting and so forth.

■ Mobile Audio: Mobile audio ad formats offered by companies such as Pandora play during transitions in audio content just as a radio advertisement plays between songs. The recommended length for the mobile audio ad is 15 seconds. Note: Mobile audio ads can be coupled with a traditional banner or rich media ad format served simultaneously to a device’s screen.



■ Expandable Rich Banner: Served in the collapsed form, these formats can resemble traditional or rich media banners. However, when tapped, the ad can expand to the full screen without leaving the app or mobile site. In expanded mode, the ad can take on the feeling of a microsite and can leverage multiple rich media capabilities offered by the publisher or ad server. These can include but are not limited to audio, video, game functionality, quizzes/polls, image galleries, 360° view, an embedded web browser, social sharing and actions that make use of device features such as the camera, gyroscope, accelerometer, GPS, etc.

■ Rich Interstitial: These ads are displayed upon launch of an app or website, or served between content pages or game levels. This format can occupy the full screen or be served into one of the common ad units mentioned above. Like the expandable banner, this format can be built to feel like a microsite and include a variety of rich media capabilities.

The following rich media ad formats are two of the five formats declared Mobile Rising Stars by the Interactive Advertising Bureau (IAB) in February 2012 as part of its larger Rising Stars initiative, which seeks to facilitate brand advertising on digital platforms. According to the IAB, these two ad formats were the most widely used of the Rising Star formats.

■ Adhesion Expandable Banner: This ad format is similar to the standard expandable banner except it “adheres” to the portion of the screen on which it is served. Therefore, it remains visible as the user swipes through content. When tapped, the format expands to offer the same capabilities as a standard expandable banner.

■ Full-Page Flex: The unique aspect of this ad format is that the width, height and orientation of the ad automatically adjust to the dimensions of the device on which it is served. This format can be an expandable unit or an interstitial, and it can leverage multiple rich media capabilities.

Video

Mobile video ads vary in length but are commonly less than 15 seconds. These formats can include interactive features to trigger actions such as downloading an app, social sharing, emailing, etc. Such calls to action can appear on the video itself using a transparent overlay, can sit beneath the video or appear on a dynamic end card as the video resolves.

■ Tap-to-Watch Video: This video format is typically initiated using a static display format that includes a “watch video” button. When tapped, the video player takes over the screen and, in its most effective form, does not remove the user from the app or mobile website.

■ In-Banner Video: In this case, the video format is served within the display ad unit and plays automatically. There is also an expandable version of this ad format that enables

the user to enlarge the video and collapse it back down to the original size upon completion.

■ Interstitial Video: As with other interstitial ads, this format is served upon launch of an app or mobile site or during content transitions. The video ad typically plays automatically upon launch.

■ In-Stream Video: Perhaps the most natural environment for mobile video ads, this format is paired with premium video content and can be served as a pre-roll, mid-roll or post-roll ad. Pre-roll and mid-roll video is the most common placement for mobile video ads.

Sponsorships

Defined by the IAB as “custom content and/or experiences created for an advertiser,” sponsorships are not classified as a unique subset of mobile display advertising, as they are in the desktop world. However, the lack of recognition doesn’t mean mobile advertising is devoid of such advertising. Indeed, the approach has ported to the smaller screen and eMarketer accounts for mobile sponsorships when projecting spending levels for the mobile display category.

The goal of mobile sponsorships is the same as on the desktop: to integrate a brand or product seamlessly so the brand message feels native to the content experience. In turn, advertisers and publishers may agree on a custom approach. For example, a game developer may allow a product to become an integral element of a game for a given period of time. Alternatively, an advertiser may weave together one or more of the ad formats mentioned above to command a single share of voice within an app or mobile site.

Auto manufacturer Chevrolet took the latter approach when it partnered with mobile media company Zumobi and Source Interlink Media to run The Chevrolet Six-Part Technology Series in the Motor Trend magazine’s iPhone and Android apps between July and October 2012. The six-part campaign served a rich media expandable ad to the Motor Trend apps every three to four weeks to announce the release of new “content” in the series. “When the user tapped on the ad unit, it took them into the special Motor Trend section that was all Chevy content. There were long-form articles to scroll through and videos to watch. And, if you wanted to read it later, you could save the [content] series to the home screen of your phone,” said John SanGiovanni, Zumobi’s co-founder and vice president of product design.

A point of confusion regarding sponsorships in the mobile channel is whether a content-rich branded app created by an advertiser to launch a product or to raise brand awareness should be considered advertising or a marketing tactic. Take the Chevrolet example: If the automaker had developed an app of its own to publish the Six-Part Technology Series instead of buying ad inventory from Motor Trend, the app would be considered a mobile marketing tactic, not advertising. The distinction is based on there being a media buy associated with advertising but not with marketing tactics.



Popularity, Availability and Irresistibility

The popularity of one mobile ad format over another has less to do with available inventory than with ease of use, scalability and the targeting capabilities associated with the format.

Facebook’s and Twitter’s mobile ad formats score high marks in all three areas and are growing increasingly popular with both performance and brand advertisers as a result. Big-box retailer Wal-Mart, for example, deployed 50 million mobile ads through Facebook over Thanksgiving weekend to prime the 2012 holiday shopping season. And to support the launch of the newly redesigned Civic, automaker Honda targeted mobile users with ads on both social networks.

“During the Los Angeles auto show in November 2012, we used mobile Promoted Tweets and a hashtag that drove traffic to photos and video content. And throughout the launch, we used promoted posts on Facebook and saw our web traffic grow increasingly mobile,” said John Watts, Honda’s senior manager of digital marketing.

In the spectrum of mobile ad formats, Facebook and Twitter ads stand out because their organic nature helps brands become a part of the content experience.

“Our ads are tweets first and ads second. The only difference between an organic tweet and a Promoted Tweet is the Promoted symbol underneath it,” said Will Stickney, Twitter’s communications manager.

It’s doubtful consumers put Promoted Tweets and tweets from friends on equal ground, but just like with user-generated tweets, “folks are retweeting and favoring Promoted Tweets. In fact, last year, the most retweeted tweet was a Promoted Tweet by Wendy’s,” Stickney said.

For advertisers already leveraging Facebook’s or Twitter’s desktop ad programs, extending campaigns to mobile is seamless. “Because the buying systems are natural extensions of the desktop ad systems, it’s easy to allocate money [to mobile] as part of the overall program,” said Rory O’Flaherty, group media director for digital agency R/GA. This is particularly attractive because it eliminates the need to navigate the mobile advertising ecosystem and invest in additional creative assets.

“On Facebook, the promoted post is a device-agnostic piece of content that is reformatted by Facebook to run cross-platform, whether it’s an Android tablet or smartphone, iOS tablet or smartphone, or desktop,” said Gokul Rajaram, Facebook’s product director for ads.

Ads designed to resemble content may be less interruptive than a full-screen interstitial ad that appears between levels of

a game or an instant-play video ad that runs before a popular YouTube video. However, as mobile spending increases and the flow of Facebook Sponsored Stories and Twitter Promoted Tweets targeted to mobile users goes up, there’s a risk that such ads will be as easy to ignore as an overzealous friend’s minute-by-minute status updates. With pressures on both companies to increase ad revenue, the challenge ahead will be to diversify the variety of ad formats to keep both brands and users engaged.

As newcomers, Facebook and Twitter are in the spotlight, and because of their substantial reach, they are garnering a large share of mobile ad dollars. From the advertiser’s perspective, however, their arrival has had little impact on demand for the other mobile display formats.

“Facebook, Twitter and the social media options are good to have, but they’re not overtaking the other kinds of mobile media. They go hand in hand with the display strategy for clients and are an add-on to the mobile component,” said Camilo Lizarralde, group planning director at digital agency neo@Ogilvy.

In general, advertisers have been clamoring for a selection of better formats. Now that the format list has grown beyond the banner, and as brand advertisers test the mobile waters in larger volumes, mobile video ad formats are in demand. “Everyone is asking for video. It’s the big, shiny object that everyone wants this year,” said Alice McKown, associate publisher of men’s lifestyle magazine GQ.

The demand for mobile video ads is not surprising given that 75% of tablet users surveyed by Keynote Competitive Research in the first half of 2012 said they watched videos on those devices. Likewise, eMarketer estimates 51% of US smartphone users in 2013 will watch videos on their phones at least once a month. Perhaps most encouraging for advertisers is mobile users’ preference for ad-supported streaming video content. Of the 1,500 internet users surveyed by Frank N. Magid Associates in November 2012 for video ad network YuMe, nearly 60% said they would rather see 15- to 30-second commercials streamed with free video content on tablets and smartphones than subscribe or pay a fee for commercial-free videos.


% of respondents

US Internet Users Who Want Access to StreamingContent that Is Ad-Supported vs. with a Subscription,by Device, Nov 2012

Tablet59% 22% 19%

Mobile device such as smartphone or iPod touch58% 22% 19%

Laptop or computer58% 24% 19%

Streaming on a TV screen connected to the internet54% 27% 18%

Free, with 15- to 30-second commercials integrated into the content

Monthly subscription fee, without commercials integrated into the content

Fee for each video, program or movie I watch, without commercials integrated into the content

Note: ages 12+; numbers may not add up to 100% due to roundingSource: YuMe, "Emerging Growth Opportunities for Connected TV andAdvertisers" in conjunction with Frank N. Magid Associates, Dec 18, 2012149195 www.eMarketer.com

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Advertisers looking specifically for in-stream video last year found inventory was limited. “The demand/supply balance is the most constrained for in-stream video, and last year there was a lot more demand than we were able to fill. The number of in-stream ad opportunities per month is in the half-a-billion range, while the other mobile video formats are available in much, much larger numbers,” said Ujjal Kohli, CEO of mobile video ad network Rhythm NewMedia.

Alex Linde, vice president for mobile and digital apps at The Weather Company (formerly The Weather Channel) agreed that more in-stream video inventory is needed, and noted that his company is responding. “Video is the thing that marketers are asking for, but we didn’t actually make video available until September 2012,” he said. “Our application redesign will feature video much more prominently, so we expect to offer a lot more video ads [going forward].”

An eMarketer report scheduled for publication in the second quarter of 2013 will offer more detailed information on mobile video ad usage and effectiveness.

Indeed, in-stream video may be the most sought-after method for serving video ads to tablets and smartphones, but as Digitas’ Rifkin pointed out, “Rich media enables the overwhelming majority of display media to be video-enabled, and clients are excited to take advantage of it from a purely creative standpoint.”

An expandable rich media banner ad that opens to what feels like an embedded website with a video player and interactive features is becoming an increasingly popular way for marketers to tell their story. While Apple led the way with the development of rich media expandables, and iAds were once the only option for delivering immersive

rich media experiences, mobile rich media formats are now widely available.

“We are doing more and more rich media ads, but we think it’s still an untapped market. There’s a huge opportunity [for growth] with rich media as screen sizes have gotten bigger and phones have gotten more robust,” said Brian Colbert, vice president of mobile advertising sales for Pandora. “The functionality is just so incredible now. Whether you’re leveraging GPS functionality in maps or calendar functionality, you can do so much with the phones from a rich media perspective.”

Brand advertisers are enthusiastic as well. When asked, “Which of the following mobile marketing elements are you using (or are you planning to use) to reach customers,” 75% of US client-side marketers who responded to an October 2012 survey conducted by the Association of National Advertisers (ANA) and MediaVest said they were interested in mobile rich media formats. Of that group, slightly more than half were already investing in rich media formats, and the other 20% planned to do so in the coming year.

Still Bewitched by Banners

Despite the increased availability and enthusiasm for more immersive and interactive ad formats, those consulted for this report agreed that static banners continue to dominate the mobile advertising landscape. Krishna Subramanian, chief marketing officer of mobile marketing firm Velti, estimated 60% of the market is comprised of direct-response campaigns using banners with static images or animated GIFs. AOL reported an even higher share: “The bulk of our business—80% and above—is still banners,” said Mandar Shinde, AOL’s senior director for mobile monetization.

The direct-response focus among mobile advertisers is one likely factor contributing to the continued popularity of static ad formats. An August 2012 survey commissioned by Velti and conducted by Forrester Research found marketers’ objectives for their mobile advertising and marketing campaigns skewed toward performance over branding, regardless of their experience level with the mobile channel. The research firm polled US-based B2C marketers and agencies representing the retail, automotive, consumer packaged goods, travel and financial services sectors and found 90% of the 139 respondents expected to acquire new customers through their mobile efforts. A sizable, albeit smaller, number (83%) aimed to raise brand awareness through mobile advertising.



% of respondents

Mobile Advertising/Marketing Objectives Pursuedby US Mobile Marketers, by Mobile Experience Level,Aug 2012

Lessexperienced

Acquire new customers 82%

Increase brand awareness 75%

Increase customer loyalty and retention 74%

Increase customer satisfaction 56%

Improve customer service 52%

Offer convenience to customers 61%Extend customer engagement throughanytime/anywhere access

51%

Generate leads 32%

Build mobile community through textcalls to action, sweepstakes, contests,coupons, etc.

Experienced*

90%

83%

83%

76%

71%

63%56%

37%

22% 29%

Note: n=139; *have had a mobile marketing strategy for at least 2 yearsSource: Velti, "Present & Future of Mobile Marketing" conducted byForrester Consulting, Nov 20, 2012147803 www.eMarketer.com

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For advertisers focused on immediate conversions, the static banner format provides an affordable and scalable means of linking mobile users to an app store or a web storefront, or to trigger a phone call or text message, all of which can generate leads or sales. “The biggest volume of impressions comes from direct response app downloads, so it’s not surprising that a banner is the most-used ad format,” said Jason Young, CEO of Crisp Media, a firm that specializes in rich media ad format development and serving.

Yet the popularity of the banner is not a reflection of available inventory, according to the industry experts consulted by eMarketer.

“There’s a misunderstanding in the marketplace that the bulk of [mobile] inventory is banners. That’s not true. What is true is that the standard banner is the prevalent marketing tool, and for performance advertisers who are trying to drive app downloads, it may be the best marketing tool,” said Marcus Startzel, general manager for North America at mobile ad network Millennial Media.

The Weather Company’s Linde agreed but sees other factors at play. “We, like many publishers, are responding to requests for banners, so 90% of what we sell are static banners. We offer [rich media formats], it’s just that agencies do not often have the time or the budget to buy [them]. Either that or they are stuck with a static banner that they’ve been given [by the client] and have to run with it,” said Linde.

From the buyer’s perspective, agencies point to ease of use, cost, targeting ability and the evolution of a campaign cycle as reasons why banners are still so widely used. “The standard static unit resonates because it’s commonly accepted and it’s the fastest way to get your message out there across many different platforms,” said Razorfish’s Pahilajani.

“Standard banners have more premier targeting to identify niche audiences, and they can also be sold on performance pricing models, which make them a bit more palatable for some of the direct-response advertisers,” said Digitas’ Rifkin.

“If it’s the first test-and-learn [mobile advertising] opportunity, we’re most likely going to test the lowest cost [format] possible. We’ll use standard banners just to get a sense of how qualified that mobile consumer is as opposed to the web consumer, and utilize the metrics to define the next steps for engaging with rich media or video,” said ID Media’s Baliber.

As the “known quantity,” banners have a leg up on newer mobile ad formats for the same reasons banners are still a popular desktop format: proven utility, cost-effectiveness and advertiser inertia. However, as more big brands turn their attention to mobile in 2013 and their dollars flow into mobile display advertising, eMarketer expects total spending on mobile social media ads, mobile video and mobile rich media ad formats will surpass the total amount spent on mobile banners.



Factors Influencing Mobile Advertising Costs

The tension between supply and demand and the methods used to buy and sell inventory remain the primary forces influencing the cost of advertising across mobile devices. Still, the introduction of new formats, targeting capabilities and industry standards hold significant sway over campaign costs as well.

Last year, according to eMarketer estimates, roughly 116 million consumers used smartphones and 79 million used tablets in the US. Chitika data showed mobile devices generated 27% of website traffic in September 2012. And as of January 2013, more than 800,000 apps were available in Apple’s App Store and in excess of 700,000 were available for Android devices through Google Play. Meanwhile, 90% of publishers surveyed by Alliance for Audited Media (AAM) in October 2012 said their content was formatted for mobile devices, and the remaining 10% said they planned to implement mobile content in the coming year.

These are significant milestones and they have led to a surplus of display ad opportunities for advertisers to invest in. However, the vast majority of advertisers have been slow to follow the migration of eyeballs to mobile devices. eMarketer estimates that time spent with mobile devices in 2012 outweighed the level of ad spending in the channel by nearly a factor of five (11.7% vs. 2.4%).

% of total

Share of Average Time Spent per Day with SelectMedia by US Adults vs. US Ad Spending Share, 2012

TV*OnlineRadioMobile (nonvoice)Print—Newspapers

—Magazines

Time spentshare

39.8%24.8%13.2%11.7%

5.4%**3.1%

2.3%

Ad spendingshare

38.9%20.9%9.3%1.6%

20.7%11.5%

9.2%

Note: time spent with each medium includes all time spent with that medium, regardless of multitasking; for example, 1 hour of multitasking ona PC while watching TV is counted as 1 hour for TV and 1 hour for online; *TV time spent includes live, DVR and other prerecorded video such as video downloaded from the internet but saved locally; TV ad spending includes broadcast TV (network, syndication and spot) and cable TV; **offline reading onlySource: eMarketer, Sep & Oct 2012146107 www.eMarketer.com

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For insight into why spending hasn’t flowed more quickly into mobile, see eMarketer’s October 2012 report, “Mobile Display Advertising: Aspirations, Revelations and Frustrations.”

Means Used to Buy and Sell Inventory

It’s important to note the use of the phrase “ad opportunities” in the preceding paragraph, because one of the key factors influencing the cost of mobile display ads is a publisher’s or app developer’s ability to sell its inventory directly to advertisers. Indeed, large desktop publishers with established sales teams are tapping existing resources to sell ads on their mobile properties at premium prices. However, with mobile ad revenues still a fraction of those generated by desktop, the larger screen takes priority, often leaving publishers to rely on third-party mobile ad networks and exchanges to keep fill rates high. The downside for the publisher is the risk of lower costs per impression on inventory that could, if sold directly, garner much higher rates. Companies native to the mobile ecosystem—game developers, for example—are even more reliant on indirect methods, and thus more vulnerable to lower CPMs.

Of the 3,500 app developers who participated in a worldwide survey conducted by research firm VisionMobile between October and November 2012, 45% of game developers and 49% of entertainment app developers said they integrated a third-party service within their app to generate ad revenue. Among the most experienced app developers—i.e., those that developed more than 16 apps per year, which VisionMobile contends are developers working for large publishing houses, software companies or agencies—60% said they relied on third-party ad services to generate revenue. The service used most—by nearly two-thirds of those surveyed—was Google’s AdMob network.

% of respondents

Mobile Ad Services Used by App DevelopersWorldwide, Nov 2012

AdMob 65%

Inneractive12%

InMobi 12%

Apple iAd 11%

Flurry 7%

AdWhirl4%

Note: those who use mobile ad services (networks & exchanges)Source: VisionMobile, "Developer Economics 2013: Developer Tools - TheFoundations of the App Economy" sponsored by AT&T, Mozilla and Nokia,Jan 23, 2013150871 www.eMarketer.com

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Given roughly half of all mobile ads are served within apps, VisionMobile’s data suggests a large portion of mobile ads are sold indirectly. An older and smaller survey of US publishers conducted by InsightExpress in December 2011 for mobile ad exchange Mocean Mobile implied the same. Roughly half of the 95 publishers surveyed said they were responsible for selling 50% or less of their mobile inventory themselves, leaving the balance to be sold indirectly or left unfilled.

http://totalaccess.emarketer.com/Reports/Viewer.aspx?R=2001015



Granted, the amount of inventory sold directly vs. indirectly will vary greatly by publisher and developer. But, if the optimal business model for display advertising is to sell a large volume of premium inventory at premium prices, the reliance on indirect means of selling is undercutting the earning potential of mobile publishers and app developers.

On the other hand, advertisers who fish the waters of mobile ad networks and exchanges are finding premium inventory and reeling it in at bargain prices. “It’s still very early days and a lot of the money has not migrated from desktop to mobile the way that people’s attention and time have, so there’s a great opportunity to unearth undervalued inventory,” said Dan Kashman, managing director for media technology at R/GA.

Depending on the focus of a brand or agency, the balance of buying direct from premium publishers or through ad networks varies. Those interviewed for this report said they typically relied on both.

“A fair assessment is we use them interchangeably. For branding initiatives, we tend to extend a lot of our [desktop] display activity into the mobile space and buy directly from a publisher because there’s no ambiguity. We know what we’re getting and the type of placements. For more performance-based [initiatives], networks offer scale. But there’s a ton of them out there, so network buying is a little bit more difficult,” said Razorfish’s Pahilajani. Adding that a large portion of Razorfish’s client base has existing desktop relationships with publishers, Pahilajani estimated the agency buys 60% to 65% direct from publishers and the remainder through networks or exchanges.

The 2012 ANA and MediaVest survey showed marketers’ preferences for buying directly were similar to those described by Pahilajani. Of the US client-side marketers who were using or planning to use mobile media initiatives, 62% said they placed ads directly with branded mobile publishers and 47% said they did so using independent, premium mobile ad networks.

% of respondents

Channels in Which US Mobile Marketers CurrentlyPlace or Plan to Place Mobile Ads, Oct 2012

Branded mobile web publishers68%

Online social networks68%

Proprietary ad networks62%

Mobile web search engines59%

Microblogging sites52%

Independent mobile ad networks—premium47%

Mobile carriers32%

Mobile social networks32%

Opt-in text alert publishers27%

Branded mobile apps publishers27%

Independent mobile ad networks—remnant24%

Mobile search—non-web12%

Other9%

Note: n=34Source: Association of National Advertisers (ANA) and MediaVest, "2012ANA/MediaVest Mobile Marketing Survey," Jan 15, 2013150342 www.eMarketer.com

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“We mainly use mobile ad networks because we can maintain certain quality standards in conversion engagement and control what kind of traffic we get. And, for a lower cost, we can increase scale. Having our hands on the controls in this way pays back massively,” said Robbie Waeschenfelder, senior director of marketing at Ask.com.

Meanwhile, Google, Facebook and Twitter are more closely aligning mobile buying with their desktop programs, which is an attractive and efficient means for advertisers to reach mobile users. “They’ve made it really easy to buy mobile specifically,” said R/GA’s Kashman. “The buying systems at Google and Facebook and Twitter are natural extensions of the desktop ad systems, so it’s easy to allocate money to them as part of the overall program. Also, the performance is easier to measure because you’re looking at consolidated reporting, whereas the data availability from some of the mobile ad networks is challenging.”

Finding the right balance is more art than a science, but it’s one that affects both the cost and effectiveness of a campaign. Mobile publishers’ tendency to sell inventory indirectly suggests opportunities exist for advertisers to save money and improve



performance by carefully researching the offerings of mobile exchanges and networks, and experimenting with the current balance of direct vs. indirect buying.

New and Improved Ad Formats

Compared to the influences that supply and demand and buying and selling methods can have on costs, the degree to which ad format can affect prices may seem minor. However, when financial services firm Cowen & Company asked 50 US ad buyers what factors were driving mobile ad prices higher, two-thirds pointed to improvements made to the ad formats served by mobile websites and social networks. Interestingly, the buyers polled felt the ad format held more sway over ad prices than did consumer adoption of mobile commerce or mobile payments.

% of respondents

Factors Leading to the Increase in Mobile Ad PricingAccording to US Ad Buyers, Sep 2012

Continued rising consumer adoption of smartphone/tablets70%

Improved ad formats from mobile websites and social networks66%

Higher consumer purchasing from smartphones/tablets52%

Improved mobile ecommerce websites and/or improving mobileapps

48%

Smartphones that act as a mobile wallet/allow consumers topurchase goods at POS

44%

Improving mobile broadband infrastructure or higher speeds36%

Source: Cowen and Company, "Internet and New Media," Nov 27, 2012148127 www.eMarketer.com

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Of course, the results of a survey of this size are only directional in nature and “improved ad formats” can mean many things. Still, the consensus among those interviewed for this report was that standards such as the recommended ad units released by the MMA and the Mobile Rich Media Ad Interface Definitions (MRAID), a set of standards released by the IAB to enable greater consistency in the delivery of rich media ad formats across mobile publishers, were enabling advertisers to deploy ads across a wider range of publishers. In turn, this is reducing the time, effort and money once needed to build variations of their creative assets.

“Because publishers and platforms are creating ad servers to be able to deliver ads that are compliant with MRAID standards, an agency doesn’t have to develop 16 different types of rich media. They can just develop an MRAID-compliant banner and give it to any one of their partners to serve and track and deliver the campaign,” said Millennial Media’s Startzel.

According to Q3 and Q4 2012 figures published by MoPub Marketplace, a real-time bidding exchange for in-app ads,

advertisers paid more for MRAID-compliant rich media ads than non-rich media formats. In the six months between July 2012 and December 2012, effective CPMs (eCPMs) for MRAID-compliant rich media ad formats sold through the MoPub Marketplace were roughly 25% higher than non-MRAID formats, and these “improved” formats reached an eCPM high of $1.16 in December 2012.

Performance Metrics for Mobile Real-Time Bidding(RTB) Ads Auctioned by MoPub, by Rich Media Usage,Oct-Dec 2012

Oct 2012 Nov 2012 Dec 2012

eCPMsNon-rich media $0.55 $0.62 $0.83

Rich media $0.70 $0.77 $1.16

Clickthrough ratesNon-rich media 1.0% 0.8% 1.1%

Rich media 1.0% 1.1% 1.3%

Note: ads that meet IAB's mobile rich media ad interface definitions(MRAID)Source: MoPub, "Mobile Advertising Marketplace Report 2012 Q4," Jan 15,2013150391 www.eMarketer.com

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Over the past six months, the IAB and the MMA have released a steady stream of standards and guidelines: an update to the Universal Mobile Ad Package in August, which fine-tuned the recommended ad unit dimensions; MRAID 2.0 in September, with clarifications on rich media specifications; and, in January 2013, they jointly released new “Mobile Phone Creative Guidelines” for public comment. According to a January 25, 2013, press release from the MMA and IAB, “the guidelines provide additional directives necessary to empower creative shops and publishers to use mobile for more dynamic, rich consumer experiences. Additionally, [they also align] across the IAB’s ‘Display Advertising Guidelines.’”

Degree of Targeting

The more targeted the ad buy—whether targeted by device, audience, location, or daypart—the higher the price. To target mobile users on Facebook, for example, advertisers pay a 70% premium compared to desktop, according to social media marketing firm Kenshoo. The firm’s analysis of 2 million Facebook ad clicks and conversations delivered worldwide between November and December 2012 showed advertisers targeting mobile phones and tablets averaged a cost per click of $1.38, which was significantly higher than the average desktop rate of $0.81 for the same time period.

Facebook Ad Cost-Per-Click Rates Worldwide, byDevice, Dec 2012

Mobile* $1.38

Desktop $0.81

Note: *includes mobile phones and tabletsSource: Kenshoo Social, "Facebook Mobile Advertising Performance," Jan 7,2013149940 www.eMarketer.com

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In December 2012, advertisers who used the MoPub exchange and targeted iPhone users paid 30% more than those who targeted Android phones. Those who targeted iPad users paid the most of all ($1.40, compared to $1.04 and $0.80 CPM for iPhone and Android phones, respectively), according to the “Mobile Advertising Marketplace Report 2012 Q4” published by MoPub. Contextual targeting has a similar effect on CPMs. In the monthly “State of Mobile Advertising” report released by Velti, the mobile marketing firm reported advertisers targeting weather apps through the company’s MobClix exchange in September 2012 paid a 15% premium over those targeting education apps, and nearly a 50% premium over sports apps.

The inflationary effect targeting has on CPMs has marketers thinking they need to choose between relevance and style, but that’s not always true.

“We thought that a simple, direct message that spoke to our target consumers’ needs would be more powerful than a full-blown but less connected brand experience,” said Lisa Feria, Procter & Gamble’s brand manager for Puffs facial tissues. “We had planned on static units, but The Weather Company was able to produce more dynamic ad units that helped drive a more personal connection with our consumers. We were able to personalize the message by connecting to a key time when consumers use Puffs to meet their needs (e.g., it’s cold in Brooklyn; use Puffs for your sniffles and sneeze needs).”

The nascent state of mobile advertising means it’s a place to challenge assumptions: buying premium inventory doesn’t necessarily require buying direct; advertising across devices, platforms and publishers is not as burdensome as it once was; and a tradeoff between targeting and immersive ad formats is not inevitable. Advertisers who understand the factors influencing the costs of mobile advertising and have a willingness to experiment will be the most likely to minimize costs and maximize returns.

Conclusions

Mobile ad inventory includes far more than the static banner format. The options available to advertisers are beginning to mirror those in the desktop display world and include a variety of static banners, social mobile ads, rich media formats, video ads and sponsorships. If mobile advertising still “sucks”—and at times it does—it has less to do with the format options and more to do with an advertiser’s inability to leverage the context of the mobile user or take advantage of the inherent capabilities of the mobile device in the creative execution.

In-stream mobile social media ads and mobile video ads are in high demand, but the static banner is advertisers’ favorite workhorse. Facebook and Twitter have made it easy for advertisers to target mobile users as an extension of desktop social advertising campaigns. Spending on these ad types is increasing rapidly as a result. Meanwhile, brand advertisers’ growing interest in the mobile channel and consumers’ increasing consumption of mobile video content have mobile publishers rushing to meet advertisers’ demands for mobile video ad formats. Still, the static banner is irresistible to advertisers as its seniority among the other ad formats means inventory is widely available and relatively cheap, enabling advertisers to expand the reach of campaigns or “test and learn” with little risk.

Supply of (some) mobile ad inventory outweighs demand, which means quality inventory is being sold for less than it is worth. Consumers’ love affair with mobile apps has app stores overflowing and the number of ad opportunities skyrocketing. App developers’ propensity to use third-party services instead of selling ad inventory directly means a significant portion of mobile inventory is being sold at bargain prices. As a result, mobile advertisers are using a healthy mix of indirect buying methods to mitigate campaign costs.

But stepping up from basic banners to more advanced and better targeted ad formats means paying more. Brand advertisers are paying premium rates to deliver immersive mobile experiences with rich media and mobile video formats. And overlaying targeting parameters can drive prices up further. Industry organizations such as the MMA and the IAB are creating mobile ad standards to facilitate the development and buying of these newer format types, which, given time, may ease prices of rich media and video formats.



eMarketer Interviews

Lisa Abramson Senior Director of Marketing

Rhythm NewMedia Interview conducted on January 15, 2013

Jonathan Alferness Director of Product Management for Mobile Ads

Google Interview conducted on January 23, 2013

Taimour Azizuddin Lead Analyst, Global Consumer Insights

inMobi Interview conducted on January 24, 2013

Michael Baliber Senior Vice President, Director of Media Strategy

ID Media Interview conducted on January 15, 2013

Brian Colbert Vice President of Mobile Advertising Sales

Pandora Interview conducted on January 17, 2013

Tim Cronin Vice President, Global Sales and Business Development

Mocean Mobile Interview conducted on January 22, 2013

Lisa Feria Puffs Brand Manager

Procter & Gamble Interview conducted on January 16, 2013

Creighton Grose Vice President of Marketing and Sales

Solstice Mobile Interview conducted on January 23, 2013

Dan Kashman Managing Director, Media Technology

R/GA Interview conducted on January 23, 2013

Ujjal Kohli CEO

Rhythm NewMedia Interview conducted on January 15, 2013

Joe Laszlo Senior Director of the IAB Mobile Marketing Center of Excellence

Interactive Advertising Bureau Interview conducted on January 23, 2013

Alex Linde Vice President, Mobile and Digital Apps

The Weather Company Interview conducted on January 14, 2013

Camilo Lizarralde Group Planning Director

neo@Ogilvy Interview conducted on January 14, 2013

Peter Minnium Head of Brand Initiatives

Interactive Advertising Bureau Interview conducted on January 23, 2013

Howard Mittman Vice President and Publisher

Wired Interview conducted on January 25, 2013

Rory O’Flaherty Group Media Director

R/GA Interview conducted on January 23, 2013

Ravi Pahilajani Associate Media Director

Razorfish Interview conducted on January 23, 2013

Tom Peyton Associate Vice President, Advertising and Marketing

American Honda Interview conducted on January 29, 2013


Gokul Rajaram Product Director, Ads

Facebook Interview conducted on January 24, 2013

Wade Rifkin Vice President, Media Director

Digitas Interview conducted on January 16, 2013

John SanGiovanni Co-Founder and Vice President of Product Design

Zumobi Interview conducted on January 21, 2013

Marla Schimke Vice President of Marketing


Leo Scullin Head of Global Industry Initiatives

Mobile Marketing Association Interview conducted on January 17, 2013

Mandar Shinde Senior Director, Mobile Monetization

AOL Interview conducted on January 16, 2013

Marcus Startzel General Manager, North America

Millennial Media Interview conducted on January 24, 2013

Gregg Stuart Global CEO

Mobile Marketing Association Interview conducted on January 17, 2013

Krishna Subramanian Chief Marketing Officer

Velti Interview conducted on January 11, 2013

Elain Szu Director of Product Marketing

MoPub Interview conducted on January 15, 2013

Robbie Waeschenfelder Senior Director, Marketing

Ask.com Interview conducted on January 22, 2013

John Watts Senior Manager, Digital Marketing

American Honda Interview conducted on January 29, 2013

Frank Weishaupt Chief Operating Officer

Jumptap Interview conducted on January 15, 2013

Ken Willner CEO


Jason Young CEO

Crisp Media Interview conducted on January 22, 2013

Alice McKown Associate Publisher

GQ Interview conducted on January 18, 2013

Will Stickney Communications Manager

Twitter Interview conducted on October 31, 2012

eMarketer Interviews


Related eMarketer Reports

Mobile Display Advertising: Aspirations, Revelations and Frustrations Tablet Advertising: Volume and Engagement Levels Jump Up

Related Links

Alliance for Audited Media AOL Apple Association of National Advertisers (ANA) BrightRoll Chitika Cowen & Company Crisp Media Forrester Research Frank N. Magid Associates Google GQ InsightExpress Pandora ImServices Group Ltd. Interactive Advertising Bureau Jumptap Kenshoo Keynote MediaVest Mobile Marketing Association Mocean Mobile MoPub Millennial Media Mojiva Rhythm NewMedia Source Interlink Media The Weather Company Velti VisionMobile YuMe Zumobi

Editorial and Production ContributorsNicole Perrin Associate Editorial DirectorCliff Annicelli Senior Copy EditorEmily Adler Copy EditorDana Hill Director of ProductionJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistAllie Smith Director of Charts



http://www.auditedmedia.com/

http://www.aol.com/

http://www.apple.com/

http://www.ana.net/

http://www.brightroll.com/

http://chitika.com/

http://www.cowen.com/

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http://www.forrester.com/home

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http://www.pandora.com/about

http://www.imservicesgroup.com/aboutmission.html

http://www.iab.net/guidelines/508676/1488/mobileplatform

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http://www.kenshoo.com/

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