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Era of cheap mobile advertising ‘is over’

The ubiquitous nature of mobile devices such as smartphones and media tablets means businesses have a great opportunity to target consumers through this channel. As adoption rates have increased in recent years, with consumers seeking constant connectivity on the move, marketers have sought to capitalise on this emerging platform. Ever-greater proportions of their marketing budgets are being diverted into mobile, in a bid to influence consumer spending choices on the move.Mobile advertising appeals to business marketers for a number of reasons. The immediacy of the channel is a major plus point, with device users receiving messages instantaneously, rather than when they check the mail, open their inbox or log on to the interent. Messages can be distributed to people all over the world, providing the company has their contact details. And with marketers able to take advantage of personalisation and targeting, they are usually able to command better response rates.

How affordable is mobile advertising

Another of the perceived benefits of mobile marketing has been its relative affordability. Companies, which in the past may have invested significant sums on TV, radio or printed ads, have been drawn to the platform on grounds of cost. There is no need for firms to pay for postage, printing or air time, and the price of sending mobile messages via SMS is much lower. Also, businesses have been able to reduce costs further by sending messages in bulk.

However, there are signs that this could be changing. According to a new report from M&C Saatchi Mobile, a number of factors are combining to push up the cost of mobile advertising. The firm claims that rising demand, increasing mobile ad budgets, the proliferation of smart devices and the upward trend in premium inventory cost means that the era of cheap mobile marketing is over. The firm claims that average smartphone advertising rates have increased by around six pence within the last 12 months. This represents around a 20 per cent rise, which has the potential to drain companies’ marketing budgets.

More sophisticated targeting needed

“The blanket approach of blindly distributing campaigns has passed,” commented James Hilton, chief executive of Saatchi Mobile. He claimed that mobile ad agencies now need to be “far more sophisticated” in targeting and not just rely on a run of network campaign buys. Essentially, they are being forced to invest in improvements to their mobile marketing output in order to stand out from the rest of the field.

“It is this sophistication that is playing a key role in driving up the cost of premium mobile inventory, while wholesale inventory in many areas remains low,” he stated. “Companies are now fighting to reach the same upper echelons because they deliver higher conversion rates and increased return on investment. However, this has pushed inventory prices up.”

But is this bad news for mobile marketing?

From a cost perspective, businesses want to get their mobile ads out to as many consumers as possible, as cheaply as they can. But where the medium is highly affordable, it brings a multitude of other players into the marketplace to compete for the attention of consumers. And this can have the negative impact of oversupplying consumers with marketing messages. If they are bombarded by mobile ads, members of the general public are quite likely to just ignore them altogether. Rising costs may discourage some providers from using the platform, which helps alleviate this ‘spamming effect’ and increases the impact of the ads that do arrive.

“The biggest pressure on cost is supply, and we’ve seen a general shift over the last 12 months, especially within the UK, from oversupply,” said Mr Hilton. “Whereas previously ad inventory was available to buy at rock bottom prices, today demand is continually outstripping supply,” he noted. He said the focus on reaching high-value tablet users, particularly those with Apple iPads, has also pushed up costs. “Inventory is still low and networks and publishers are not decreasing rates as inventory levels increase, since the platform is delivering strong results for advertisers” Mr Hilton stated.

Mobile marketing is maturing

“The rise in cost is also indicative of the growing maturity of mobile advertising generally in the wider media landscape,” he commented. “All new forms of media go through growing pains, and mobile is no exception. But the growth of mobile has been faster than anything we’ve seen before, and that means the understanding of how to get the best out of it and how to build really effective campaigns is still concentrated in the hands of the mobile experts.”

He said that when mobile stops being treated as something separate and apart from other forms of media planning and buying, it will become more open and democratic. Mr Hilton suggested this will be a positive development for mobile agencies which are keen to advocate the benefits of the channel as a means of targeting consumers and building brands.

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