Does Mobile Display 2012 = Online Display 1999?

Mobile image (not Prince image) copyright bloomua

For the record, it’s not my idea to search for a Katy Perry song on Pandora. The request for “Firework” comes during a recent trip with my 5-year-old daughter, who’s getting antsier by the minute as we wait to board our flight to Arizona for a wedding.

Eager to avoid a meltdown, I launch the app and suffer through a random audio ad for Panera Bread that ends after 15 seconds or so. But the sandwich chain isn’t done with me. A banner ad for Panera soon appears, consuming three-quarters of my iPhone screen. I’m struck by the intrusion on my user experience and the lack of targeting — there isn’t even a Panera Bread at the airport. My daughter fidgets; “Where’s the song, Daddy?” she asks.

I have an equally pressing question: Is mobile display advertising spiraling down the same path as desktop display?

Allow me to back up for a minute. Mobile advertising is growing rapidly. Total spend in the U.S. during the first half of this year hit $1.2 billion — a staggering 95 percent jump from last year, according to an October report from the Interactive Advertising Bureau and PricewaterhouseCoopers. Many forecasts predict that this growth won’t slow, and I believe them.

Viewing this through the prism of mobile display, it’s clear to see that critical needs are being served. Display can build brand exposure and heighten awareness. Plus, display is easy to buy.

However, this is where the trouble starts. Data is hard to come by, reporting is opaque, and tonnage trumps targeting. All advertisers have to do is sign up with one of the myriad mobile ad networks and, boom! Banners go everywhere, shares of ad networks soar and everybody wins. Party like it’s 1999.

Actually, this whole thing feels like deja vu all over again.

The parallels between desktop display back then and mobile display right now are downright eerie. According to historical data from the IAB, desktop display in 1999 was the dominant Internet ad format, grabbing 56 percent of a $4.6 billion market. Search was a whopping 0 percent.

Executives demanded that their marketing departments have an “Internet strategy.” So companies spent billions on banner ads, throwing up billboards every few feet on this new stretch of highway. Visiting any Web site in the late ’90s/early 2000s felt like teleporting into the advertising carousel of a European soccer stadium. It mattered not where these ads were placed, or who saw them. Conventional wisdom told us that as long as there were ads, customers would follow.

But this party started dying as advertisers noticed that search — not impressions — equals performance. It wasn’t just enough to be visible on the Internet; businesses wanted real customers. They wanted ROI, control, targeting and measurability, all of which gave rise to Google and other performance-based ad networks focused on search. Consumers benefited, too, from a more relevant desktop experience.

It’s not shocking what happened next. Display bottomed out, shrinking to 19 percent of the market in 2004, and generating less than half of what it did in 1999. At the same time, search was on fire, claiming 40 percent of the $9.6 billion Internet ad market. With the emergence of sophisticated targeting, programmatic buying and creative optimization, display ultimately regained its footing and growth with advertisers and publishers.

And here we are, about to enter 2013. Smartphone adoption reached a tipping point this year. Now, mobile is the Next Big Thing, yet it looks like history is bound and determined to repeat itself.

Executives are demanding that their marketing departments have a “mobile strategy.” Once again, companies insist on throwing billions into display/banner ads on mobile, even though the return is questionable at best. When consumers do click on mobile display ads, they’re usually accidental. At Marchex, we took a recent data dive into mobile display experiences and found that more than 90 percent of actions were accidental — or worse, actions from trying to close an ad. I mean, when was the last time you deliberately clicked on a mobile display ad?

We have to learn from the past. Because, in advertising, there’s this huge iceberg called performance. And that iceberg is even bigger in mobile. You’re dealing with more fragmentation at the publisher level (such as thousands of developer apps), significantly different form factor (smaller screens), and much higher rates of accidental clicks and incidence of spam (robo-dialers).

Increasingly, businesses will want to know, “Does mobile work?”

The future of mobile advertising depends on what that answer is.

Pete Christothoulou is President of Marchex, a performance-based mobile advertising company.


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