Bloomberg News

Facebook Mobile Strength Breeds Apps in Hunt for Ad Dollars

February 24, 2014

A Visitor Tests Nokia's Map Application at Mobile World Congress

Location-based programs developed by the likes of Nokia’s Here unit and Yelp Inc. are vying for advertisers’ attention. Photographer: Simon Dawson/Bloomberg

This year’s Mobile World Congress may prove to skeptics of cell-phone advertising that it’s not about uninvited banners and annoying pop-ups anymore.

As the Barcelona event kicks off today, companies from Shazam Inc., which recognizes songs in background noise, to Nokia Oyj (NOK1V)’s maps unit will showcase applications that have helped create a new breed of mobile ads. Advertisers are betting those apps, along with bigger smartphone displays and faster network connections, will grab consumers’ attention.

The move of online commercials from the desktop computer to smartphones and tablets is set to accelerate, with spending on mobile ads forecast to jump 37 percent this year, according to researcher Gartner Inc. Facebook Inc., the largest social media network, has shown that its focus on wireless can pay off, having garnered more than half of its ad revenue from wireless devices for the first time in the most recent quarter.

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“What has changed in the past six months in mobile ads? Facebook (FB:US),” said Victor Malachard, CEO of Adfonic Ltd., an ad-space purchasing platform for mobile that counts Samsung Electronics Co. and carmaker Peugeot SA (UG) among its clients. “Facebook has been able to demonstrate at scale that mobile advertising works -- that has grown the pie for all of us.”

Bigger Pie

Spending on mobile ads will probably reach $18 billion this year, and may more than double to $42 billion by 2017, according to Gartner. It will “really take off” in the next three years because the pool of smartphone users has become big enough for advertisers to devote a bigger portion of their budget on, said research director Stephanie Baghdassarian.

Advertisers want you to use your smartphone to scan, hover and tap. At this year’s Super Bowl, the most watched event on U.S. television, ads for Bud Light beer and Jaguar cars showcased “shazaming.”

Using Shazam’s application during Bud Light’s ad unlocked a free song that can be downloaded to the phone, while Jaguar’s started a video game.

With its listen-in feature, Shazam is collecting information about when and how ads manage to attract consumers’ attention, as well as how they react. With that data, the company can build up user profiles to generate analysis it can then sell to brands or use to advise them on ad strategies.

NFC Posters

Location-based programs developed by the likes of Nokia’s Here unit and Yelp Inc. are vying for advertisers’ attention. Yelp’s application, for example, recommends restaurants, shops and bars as users point a phone’s camera around. The localization data and how one reacts to Yelp’s suggestions will help the company accumulate knowledge about the user.

WPP Plc (WPP)’s mobile marketing agency, Joule, recently ran a campaign for Paramount Pictures in Los Angeles, using posters that can communicate with phones equipped with near-field communication chips to advertise the film “Star Trek Into Darkness.” Users tapped their phones against posters to get exclusive clips of interviews and trailers.

Joule also promoted Yum! Brands Inc.’s 24-hour KFC chain in China by allowing potential customers to locate their closest restaurant with just one click and share that on social networks. The campaign logged 150,000 socials shares and 282,000 KFCs were located, according to the company’s website.

WhatsApp Deal

Facebook, whose 1.2 billion subscribers make it the largest social-networking site, has been courting smartphone and tablet users by adding applications such as instant messaging. It last week agreed to pay $19 billion for mobile-messaging startup WhatsApp Inc., after buying photo-sharing service Instagram in 2012.

Mobile promotions generated $1.25 billion in revenue for Facebook in the fourth quarter of last year, accounting for 53 percent of the company’s ad sales.

Facebook shares have gained 26 percent in 2014. They closed at $68.59 on Feb. 21, valuing the Menlo Park, California-based company at $174 billion.

“Facebook got it right,” said James Connelly, CEO of Fetch, a marketing agency that places mobile ads on behalf of companies including EBay Inc. and Krispy Kreme Doughnuts Inc. “It’s big, it has native ads in the news feed and most important it has a wealth of user data so advertisers can make sure the rights ads are being shown to the right people.”

Lower prices of Internet-enabled phones will also give a boost to the mobile-ad industry. Nokia plans to unveil its first smartphone based on Google’s Android platform today, a move likely to intensify competition as manufacturers look to emerging markets for growth, people familiar with the matter have said.

‘More Intelligent’

Shipments of the smartphones jumped 38 percent last year as more than 1 billion units were sold, according to data compiled by researcher IDC.

“Advertising is becoming more and more intelligent using data like location information and past behavior,” said Naveen Tewari, CEO of InMobi, a Bangalore, India-based digital advertiser whose customers include Unilever NV (UNA), Nokia and Volkswagen AG’s Audi unit. “Everytime you’ve seen an ad, it means it’ll become smarter the next time.”

To contact the reporters on this story: Marie Mawad in Barcelona via mmawad1@bloomberg.net; Kristen Schweizer in London at kschweizer1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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