June 22 (Bloomberg) -- Technology and advertising executives have been talking up the potential of ads on mobile handsets since before Apple Inc. introduced the iPhone in 2007. Now, they may finally be ready to use them.
At this week’s Cannes Lions media conference, sports goods company Nike Inc. is featuring an application that uses the global positioning system to track a user’s run on iPhones and Facebook Inc.’s website. Friends send audible “cheers” by commenting on the runner’s page. Brewer Heineken NV is showing its ‘StarPlayer’ app that lets soccer fans interact in real time while watching the European Champions League matches.
Functions to track consumers’ locations, social coupons such as those provided by Groupon Inc., and the spread of large- screened smartphones may finally make mobile advertising a ubiquitous reality as early as this year. Wireless ad revenue worldwide will more than double in 2011 and increase by more than fivefold to $20.6 billion by 2015, according to a report by Gartner Inc.
“One of the things that’s driving it is sheer growth in the penetration of smartphones,” said John Delaney, research director of consumer mobile at IDC in London. “There’s only one way of sending somebody a coupon if they walk past a store. Once those types of inventory start to become widely available, they have significant potential to put steam under mobile advertising.”
Web companies are helping fuel the growth. AOL Inc., for example, is working on improving its mobile offerings using geo- location, and through its Patch local-news sites to attract advertisers for specific markets, CEO Tim Armstrong said. The company is running about five different tests of such technologies, he said.
The increase in mobile advertising revenue will be fastest in western Europe, where it’s set to exceed 800 percent in the next four years, according to Gartner. Asia, which includes the fast-growing wireless markets in China and India, will maintain its top spot, accounting for a third of global spending, the researcher estimates.
“Mobile is just coming at us like a hurricane,” said Dave Senay, CEO of PR agency Fleishman Hillard. “Look at all the emerging countries. What have they skipped over? Hard-wired infrastructure.”
200 Million Minutes
The adoption of smartphones and tablet computers will drive the expansion by potentially giving advertisers the location of a customer, through GPS functions, and the ability to communicate via the devices’ Internet capabilities. Search and map functions will deliver the highest revenue, while more traditional video and audio marketing will grow the fastest, Gartner says.
Game developers, too, are closely watching that space. “Angry Birds,” the hit mobile-phone game with more than 200 million minutes played per day, would make the perfect platform for advertisers, according to its developer Rovio Mobile Oy.
“When a person is playing the game they are much more involved with the content,” Rovio CEO Mikael Hed said in an interview. “When you display an ad it’s much more likely to be taken notice of than something on TV which is a passive experience. Plus you’re much closer to the point of purchase.”
Wireless carriers and the makers of operating systems that run more advanced smartphones are attempting to push the market for mobile ads forward through joint ventures.
Google Inc.’s Android operating system, which has become the most popular software for smartphones worldwide, has joined with Mastercard Inc. and Sprint Nextel Corp. in the U.S. The venture will let customers pay by tapping their phones on a special reader and the software will also deliver advertisements and coupons.
In the U.K., Vodafone Group Plc and Europe’s former state phone monopolies will form a venture by the end of the year to create a common platform for mobile payments. The group, which includes Telefonica SA and Everything Everywhere, a partnership between France Telecom SA and Deutsche Telekom AG, will also function as a single contact for advertisers, the companies said this month.
Previously, advertisers had to approach wireless carriers individually for ads deals, which has held back growth in mobile, IDC’s Delaney said. Umbrella organizations like that in Europe could help the medium take off by giving marketers one platform and contact for their ads.
M&C Saatchi Plc, the U.K. marketing agency, is partnering with a company in China to offer customers free access to their e-mails in return for opting into ads. M&C Saatchi is expanding its mobile marketing arm into cities including New York, Shanghai and Sao Paulo, CEO Moray MacLennan said in an interview.
Still, to make them pay off for marketers, mobile ads will have to be better-targeted and less intrusive than any format that’s come before.
“What’s exciting is that we can finally really do interesting, integrated things on mobile platforms,” said Johnny Hornby, founder of ad agency CHI & Partners. “The bigger challenge is, you can do that, but it doesn’t mean people are going to thank you for it. These messages have to be relevant, targeted, and not annoying to people.”
Finding a way to gauge how effective ads are has also presented a problem for companies that want to know whether their marketing budget is well spent, Delaney said. Measuring customers who click on ads becomes difficult when they move from a mobile network to Wi-Fi, forcing tracking companies like Media Metrics to reach agreements with a number of different providers to evaluate the same ad, Delaney said.
“If you look at social media, it’s becoming largely a mobile thing,” said Alexis Nasard, chief marketing officer at Heineken, the world’s third-largest brewer by volume, which introduced the “StarPlayer” application in April. “There has to be a lot of trial and error.”
--With assistance from Diana ben-Aaron in Helsinki. Editors: Kenneth Wong, Simon Thiel.
To contact the reporters on this story: Matthew Campbell in Cannes, France, via email@example.com; Amy Thomson in Cannes, France via Athomson6@bloomberg.net.
To contact the editor responsible for this story: Kenneth Wong at firstname.lastname@example.org