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March 11, 2013 4:28 pm

Digital cinders spark mobile ad forest fire

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Jeff Zucker warned a gathering of television executives in Las Vegas five years ago that the media industry was living through its version of a forest fire.

Advertising and subscription revenues were in danger of burning to the ground amid the proliferation of digital media, he said, cautioning that the industry was trading so-called “analogue dollars for digital pennies”.

“We didn’t ask for it, and it is unfortunate to live through,” said Mr Zucker, then the chief executive of US broadcaster NBCUniversal and now president of cable news broadcaster CNN Worldwide. “But if we are lucky, it may very well leave behind fertile soil, clear ground and the opportunity for robust growth.”

A similar fire now rages on, with the flames fuelled by surging audiences to mobile websites and applications. This time, it is those already reduced digital dollars that the media industry is trading for even cheaper mobile pennies.

“People were concerned with the transition from print to digital and TV to digital. Get ready, it’s going to get a whole lot worse,” said Quentin George, a veteran digital media and advertising executive.

Media companies show off new mobile sites and applications, trumpeting their fast-paced growth. As much as a quarter to half of publishers’ traffic now comes via mobile devices – in some cases more than double from the same time last year.

Yet despite much hype, ad revenues remain minuscule.

While mobile ad spending is the fastest growing among all media categories, it captures $6.5bn, or just 1.3 per cent of total advertising revenues, according to Interpublic’s ad buying firm MagnaGlobal. In five years, mobile ad revenues will inch up only slightly to 3.3 per cent of total ad revenues, the group predicts.

Of the ad dollars directed to mobile, search ads dominate and Google captures more than half of the market, according to industry analysts. That leaves a limited battleground for the thousands of websites and apps that sell display ads to fight over.

“It is going to be terrible. It is going to be disruptive,” said Karsten Weide, a media and entertainment analyst at IDC that has tracked the stunted development of the mobile advertising market for the past several years. “Mobile is going to have a really negative impact online and on the broader media market.”

The rapid surge in people visiting mobile websites and applications doesn’t help. Instead, it has perversely created an oversupply of opportunities to buy mobile ads, forcing down the price that publishers could charge for any individual ad. Media buyers report opening negotiations with mobile ad sellers by asking for at least a 50 per cent price cut – and receiving it.

Media and advertising executives are quick to list the barriers stifling growth in the mobile ad market, but offer few viable alternatives.

In attempts to capture consumer attention, several marketers rushed to build jazzy apps with games, video and other interactive capabilities. Some marketers generated success, including Nike with workout apps and Procter & Gamble’s Charmin toilet paper with its “SitOrSquat” public rest room finder app. But most marketers ran into a problem: unless they advertised the apps, the audience was minimal.

Ad executives also dismiss the display ads that appear on the border of a mobile web page or inside an app as too small, dull, annoying and ineffective at conveying an emotional message. That format originated in print and then to the web, and simply borrowing it does not take advantage of the unique attributes of a smartphone, such as location-based and touchscreen technologies.

“You have these old-world media players that are trying to use what worked for them in the past and slapping it on mobile,” said Phuc Truong, managing director at Mobext, a mobile ad agency owned by Havas. “It is not the same thing at all. It is not even close.”

In addition, buying ads and making sure that they look appropriate across thousands of devices with hundreds of variations is a logistical headache. Meanwhile, metrics and technologies that allow marketers to target ads to appropriate audiences, then measure the effectiveness of an ad campaign are lacking.

To unlock revenue growth, media companies and a new generation of mobile advertising start-ups are furiously attempting to develop new mobile marketing models.

Mobile video advertising, for one, has registered some success, with advertisers paying as much as $25 to reach 1,000 viewers. In the most recent quarter, Facebook’s push to introduce ads into the news feed on mobile devices helped drive ad sales at the social network.

Many are completely ditching standard advertising. Other publishers are charging for content. BuzzFeed, the popular entertainment and news site, which generates about 40 per cent of traffic from mobile, sells marketers the opportunity to sponsor branded stories. The promotions, which have a similar sensibility to the stories on the site, appear regardless of whether people are visiting the site from a computer or a mobile phone.

Motorola, for instance, recently sponsored a post titled “The 10 Worst Times For Your Phone To Die On You”. The list ranged from when a person is locked out of the house to when a blind date isn’t going well. At the bottom of the list was a picture of its new phone, highlighting its 32-hour battery life.

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