Sending the right signals

In late March, Google was awarded a slightly unusual patent — for advertising based on environmental conditions. That sounds odd enough, but how it will work is even stranger. The idea is to have in-built sensors in mobile phones that can gather information about the user’s surroundings; based on that, relevant, targeted ads will pop up on screen when the user browses the net. For instance, on a blistering hot day, ads for ice cream or air conditioners could appear.

A cold wave may bring offers from coffee bars and coat-sellers. Or perhaps, if you are arguing with your partner on the best route to a restaurant and call for directions, based on analysis of the background noise, details of counsellors or divorce lawyers could appear on the screen. Okay, the last is a little far-fetched but it’s still not certain when or how Google will use its patent if ever, but you get the idea. Virtually anything is possible on the mobile. And why not? Worldwide, mobiles outnumber fixed lines five to one, and mobile broadband connections outnumber fixed broadband connections in the ratio 2:1. In countries like India, toilets are more of a luxury than mobile phones — the latest census data shows that only 46.9% households have lavatories, while 53.2% have a mobile phone.

Not only do mobiles have an unparalleled reach, subscribers are also spending more time on them. According to a study done by inMobi, released during the Mobile Congress in Barcelona 2012, the average mobile user spends 7.2 hours every day consuming media. Of that, about 27 % of the time spent is on the phone compared with 22% on TV. In India, a Google study found that 56% of smartphone users in the country access the internet multiple times a day on their devices and nearly 40% surf the net at least once a day. 

For brands and advertisers, then, the mobile as an advertising platform is an opportunity waiting to be seized — after all, that’s where their consumers are. According to Berg Insight, a global telecom research firm, the global market for mobile ads is likely to grow at about 37% every year to $22 billion in 2016, from the $3.4 billion in 2010. This is likely to increase the share of mobile marketing in overall advertising from 3.8% to 15.2%.

Big potential

Will the market in India register similar growth? Mobile advertising is still minuscule here — barely ₹100 crore at present — but it is tipped to grow to ₹1,000 crore in the next five years, on the back of the large mobile subscriber base, according to MADhouse India, a mobile marketing solutions company.

Helping it along will be the increasing penetration of smartphones and tablets. India is already the world’s second-largest mobile market and research firm IDC expects the country to emerge as one of the top five markets for smartphones by 2015, with marketshare increasing from 2.2% in 2011 to 9.3%. The larger screens and faster processors should open up new avenues for advertisers. “As the capabilities of the phones increase, the ability of an advertiser or an ad to engage with the user is also much higher” says Naveen Tewari, CEO and founder of Bengaluru-based InMobi, one of the world’s largest independent mobile ad networks.

But even more significant than the smartphone and tablet numbers (which, admittedly, are still not too high) for India is the fact that several million mobile subscribers in the country use their phones — smart or otherwise — to surf the net, which is fertile ground for advertising. (See: Outnumbered) “Advertisers are not loyal to a feature phone or a smart phone. The advertiser is loyal to a large user base,” concurs Dippak Khurana, CEO and founder of Mumbai-based mobile advertising network Vserv.

Census data shows that only 3.1% of the population has access to a computer with internet, but India has 112 million internet users, which proves just how popular mobile internet is in the country. Indeed, most users will first surf the net on their mobiles. For both brands as well as content developers in India, then, the next few years will be about understanding and grasping the opportunities and challenges of this new avenue. Are they ready?

Baby steps

Thus far, brands in India have been rather conservative when it comes to mobile advertising. Over the past few years, only an adventurous few have attempted to engage with this new medium — but they’ve all been pleased with the experiment. “Due to the sheer quality of engagement possible on internet-enabled mobile devices, mobile advertising has become a top priority for all our upcoming campaigns,” declares Kedar Teny, category head, deodorants, Hindustan Unilever (HUL).

HUL’s Axe was an early adopter of the mobile platform; in 2009, it ran the Axe Call Me campaign using interactive voice response technology and engaged with more than 4 million consumers. Last year, when it launched Axe Googly in time for the cricket World Cup, it developed an app named after the variant that allowed users to view live match scores, download wallpapers and play games. The app even had an “Axe Assistant” — a beautiful, scantily-clad virtual woman — for reminders and match schedules. In three months, the app was downloaded over 1 million times. “For brands like Axe, the target audience expects to be ‘engaged with’ and not just ‘exposed to’ content. Mobile advertising allows this through in-game or in-app options,” says Teny.

Mobile advertising can be an effective tool for advertisers to reach out to a large user base at any time of day or night. “Mobile internet is a mass medium that gives advertisers a definite targeting opportunity because [using tracking software] you know the location of the user, the kind of handset he owns and the kind of content he browses,” points out Madan Sanglikar, CEO of AD2C, an independent mobile advertising and marketing agency that recently set up shop in India.

What that means is that brands and advertisers can slice and dice the market according to user profiles and tailor communication for their target audience. For instance, in January 2012, Mercedes-Benz asked inMobi to run a certain campaign only on NDTV’s app for tablets. The reason? The luxury car-maker felt most corporate CEOs — its most likely customers — would not only have tablets, they would also be checking news online frequently. Similarly, when Tata Photon wanted to build awareness for its Photon MP3, it ran ads on Vserv’s mobile ad network, which sent the ads to consumers based on telecom circles: more ads were sent to subscribers in non-metros and smaller towns, which was the target market for the product. The result: more than 80% leads came from these locations.

There’s another benefit from mobile advertising: seamless integration with a wider media campaign. Consider a campaign for a car. Data analytics can track what features attracted the most consumer attention in the mobile ads — in interactive ads, analytics can capture the specific choices viewers made for, say, colour and add-on accessories. That information can then be used while designing outdoor campaigns and even product planning in terms of inventory. “Mobile integrates very well with other mediums, be it TV, online or a mall activation. So it can be effective as part of an entire media mix,” agrees Vinod Thadani, COO, MADhouse India.

Resistant to change

If mobile advertising can have such targeted results, why are brands still lagging their customers when it comes to mobile adoption? Part of the reason is inertia — traditional advertising is working, so why try something new? Indeed, that’s part of the reason online advertising has taken so long to pick up in India. “Our customers are moving to the mobile web platform faster than we are advertising currently,” agrees Amit Somani, chief products officer of Makemytrip. Still, there’s hope that advertisers will be faster to jump on board mobile advertising than internet advertising, given that the user base is already in place and is now fast growing (See: Everyone’s invited).

But that’s not the only problem. First, websites are viewed differently on mobile phone screens than on computers and laptops, so companies need to create mobile-optimised sites. That’s still not happening and “Marketers need to fast track the creation of mobile-optimised sites,” says Praveen Sharma, head of media sales, Google India.

Then, handsets come with different screen resolutions and sizes and operating systems, which makes it very difficult, if not impossible, to have a standardised campaign. Advertisers have to contend with technology from one firm, content from another and various ad formats and targeting options. The advent of HTML 5 — a technology platform that helps develop ads that are compatible with various platforms — will help, but adoption is still quite slow. Companies too are uncertain about which websites to advertise on and how. But this is an area where the mobile advertising companies can offer help. 

Bringing in the experts

Mobile advertising companies like Google, Apple, inMobi and Vserv, help advertisers get onto the mobile platform. “There are 5 million websites in India and advertisers don’t have the bandwidth to know about all of them. Ad networks play a critical role in bringing together demand and supply, which drives growth for this medium,” says Arnab Mitra, national director, digital, Starcom Mediavest Group, one of the world’s leading media communications company. Ad mobile networks bring together advertisers and websites that want to host ads; they aggregate ad space and use a central server to deliver ads to consumers based on demand from advertisers.

Not only does that mean more targeted communication, it also brings global visibility for the brand. For instance, inMobi generates around 90 billion ad impressions (views) every month and serves over 100,000 mobile optimised websites and applications across 165 countries. It offers this global inventory in India as well.

Like with regular internet, most of mobile internet’s revenues still come from search, which makes up nearly half the market; the other half comes from banner ads on websites or inside applications. Advertisers are charged based on the number of views (cost per impression) or by the click-through rate (CTR, the cost per click). Google’s Sharma points to a critical difference with mobile advertising — significantly higher CTRs on mobile ads compared with online ads; which means mobile internet users are engaging with the brand more than ‘regular’ internet users.  

On an average, ad networks retain around 30-40% of the advertising revenues generated; the rest goes to the host, which is either the website publisher or the app developer. “We need entrepreneurs and app developers to develop content. We are doing our bit to develop the ecosystem in India by giving a disproportionate share of revenues to developers so that in the long run we can all make money,” explains Atul Satija, VP and MD, Asia Pacific, inMobi.  The idea is to get content developers into the ad network fold, since good content is one of the biggest draws to attract consumer traffic. 

For their part, app developers are only too happy to join hands with ad networks. Since most applications are free downloads, advertising is virtually their only source of revenue (Apple is the exception where paid apps outnumber those than be downloaded for free). “There are millions of users, but no way of monetising them. We can recover our production costs only through mobile advertising,” agrees Virat Singh Khutal, director and CEO of app developer Twist Mobile.

Twist has created 26 apps that have been collectively downloaded 50 million times so far, but all for free. In 2010, it tied up with Vserv and claims to have earned $200,000 in the past year through in-app advertising. The revenue generation apart, outsourcing ad inventory to a network allows app developers to get back to what they do best. “By hiving off the ad selling, we can focus on our core expertise, which is building games and driving user traffic,” says Nitish Mittersain, CEO, Nazara Technologies, an app developer that tied up with an ad network last year. 

Telecom twist

Where do mobile operators fit into this cosy circle of advertisers, ad networks and content developers? Right now, at the fringe. The biggest advantage mobile service providers have in the advertising space is their access to customer data. It is a gold mine for advertisers who want their communication to reach only their target customers. Operators in the West have already come together to leverage the mobile advertising platform: the three biggest telecom operators in the UK — Vodafone, O2 and Everything Everywhere are working on a joint venture to create a one-stop shop for mobile advertisers to run their campaigns for a national audience, besides allowing them to run loyalty programs for their stores.

In India, the progress has been slow. “We know that mobile advertising can be a decent revenue stream for us. Therefore, we are trying to understand this space,” says Sashi Shankar, chief marketing officer at Idea Cellular. “We are working on the infrastructure and the platform required but it is still early days.”

Mobile ads have gone far beyond spam messages and pesky callers. The new generation of mobile ads are ‘pull’ messages that the customer clicks on only if he wants to; in videos, the viewer even has the option to skip the ad. Moreover, customers can pay for ad-free games or apps and location-based ads ask for permission before relaying the communication. Marketing agencies feel that as long as brands and advertiser get their target segment right, mobile advertising will not be seen as intrusive. “Consumers have a problem with advertising when they don’t relate to the offer. Besides, in the mobile space, consumers mostly decide what they want to see,” says AD2C’s Sanglikar.

Despite its non-intrusive nature, there are privacy issues that make mobile operators wary. After all, the National Do Not Call registry was created because pushy telemarketers and intrusive text messages were getting out of hand — the last straw was finance minister Pranab Mukherjee getting a home loan offer in the middle of a sensitive meeting with Opposition leaders. “The information we can share with media agencies and advertisers regarding our customer database needs to be defined,” says Idea’s Shankar. “Based on the information available, we can decide on the products that can be advertised effectively through us.” 

Clearly, there are still many gaps in the mobile advertising ecosystem that will have to be filled before the vertical can fully deliver its promised benefits. But one thing seems certain: advertisers will ignore the platform at their own peril. If brands have to keep up with their consumers, they need to know where they’re heading. “We’ve gotten used to seeking information. And increasingly, the first place we’ll seek it is on the mobile. So if a company doesn’t have a mobile marketing strategy, it will lose out,” predicts Starcom’s Mitra. The real question, then, is not whether mobile advertising will take off, but when. And the answer: sooner than we think.