Making Sense of the Mobile Marketing Spending Disparity

Shouldn’t advertisers be where the people are? The ubiquity of mobile devices is no secret, yet there is a $22 billion gap in mobile advertising in the U.S. alone, according to Mary Meeker’s 2016 trend report. This disparity is bigger in mobile than in any other media channel. In fact, mobile marketing spends more on newspaper ads than consumer consumption warrants.

Mobile advertising allows us to make good on the longtime mantra of our industry by more precisely reaching our target group at the right time, with the right message. So why aren’t we capitalizing on it? It is in part because of outdated-yet-persistent beliefs about advertising best practices. Let’s take a closer look at the factors contributing to the mobile spending mismatch.

Mobile’s rapid growth rate
The use of smartphones, tablets and other wireless devices has grown at an unprecedented pace. Now it is not rare to have more devices than phones in a home. This explosion occurred faster than anyone, industry pundits included, could have expected. By 2020, we will have 6.1 billion smartphone users in the world. Last year, we had 2.6 billion. Global mobile data traffic will grow at a compound annual growth rate (CAGR) of 53 percent from 2015 to 2020, according to the Cisco Visual Networking Index™ (VNI) Global Mobile Data Traffic Forecast (2015 to 2020), published by Cisco Systems.

Mobile advertising spending is increasing, but it is not keeping pace with the sheer volume of mobile devices, or the frequency at which consumers engage with them. According to research from Flurry, people now spend more time using apps than they do watching television. Marketers just aren’t spending enough to keep up with those stats.

A paradigm shift: Buy people, not a proxy
A deep-rooted factor behind the spending lag is a fundamental paradigm shift that many marketers still struggle to grasp: You no longer need to buy the proxy of the property—mobile allows you to target actual people, regardless of the site or app they are engaging with. It is no longer valid to make blanket assumptions based on demographic information. For example, in the “old days” of advertising, if you wanted to reach young men, you bought an advertisement in Sports Illustrated or similar. If you were targeting homemaking women, you bought in Good Housekeeping. Audiences had limited media choices, and marketers relied on the demographic summaries of those media choices to make their spending decisions. But today we realize that plenty of women follow sports, and men are interested in cooking, parenting and home décor, too. We no longer rely on snapshots and stereotypes. The influx of available data affords us a deep understanding of our customers, especially on mobile, since every mobile device has a unique ID, like a thumbprint.

We can now match location data and device IDs with great precision, helping us to not only find the right people, but to reach them at a precise time in a particular place. You don’t have to rely on a proxy. This is a fundamental paradigm shift, one that takes time to adjust to. Today, it doesn’t matter if your message reaches your target customer while he or she is watching a sports clip, reading a recipe or playing Candy Crush. The perception of a media outlet is less important than ad performance. This is the new-school way of thinking about advertising.

Goodbyes can be tough: Farewell cookies
On desktop and on the mobile web, advertisers rely on cookies for targeting. Those cookies leave behind “crumbs” which they follow to try to find their intended user. It is an inexact process, but it is more effective than the alternative – not using cookies at all – and advertisers have become comfortable with its performance. Plus, companies have spent a lot of money and time on following those cookie crumbs around. The industry is invested.

But as consumers move to mobile, cookies are no longer valid; that’s because you can pinpoint an exact device and an exact location. There is no need for crumbs. This, too, is a massive paradigm shift. Mobile allows users to target more precisely, but it is a departure from a familiar process. Ad buyers need to become more comfortable with mobile targeting methods.

Simple physics: Inertia
Frankly, people are content doing things the way they have always done them. When something new comes along, there is almost always a built-in lag time. But with challenges like viewability, addressability and targeting facing digital advertising, coupled with advertisers’ desire to employ and understand more data, it is inevitable that this tendency to remain unchanged will be challenged. Marketers need to expect more because we have the technology to deliver more. The mobile spending gap is already shrinking. Mobile spending is growing faster than any other digital ad category. Mobile ad spending in the U.S. is predicted to reach nearly $42 billion in 2018, which is a five-year CAGR of 43 percent from 2013, according to data from BI Intelligence. Marketers that don’t embrace modern tactics and accept where their customers really are will find themselves left behind.

Consumers’ relationships with media and mobile devices have changed. Advertising needs to change as well. We now have the ability to reach a specific person on his or her personal device at a precise place and time. The responsibility is with advertisers and their agencies and service providers to demand the granularity and specificity that you can only achieve with the targeted data you get from mobile advertising. Marketers must stand up and challenge the practices of yesteryear so they can make good on the multibillion dollar mobile advertising opportunity.

Josh Speyer is CEO of AerServ, where he oversees execution on the company’s vision, product and market initiatives. Along with his longtime colleague and collaborator Andrew Gerhart, Josh has built a management team that blends the best minds of publishing, advertising, technology, and data.