Vincent Pelillo, EMEA partner/manager at S4M, explains why 2014 will not be the year of mobile advertising.

Gartner’s latest report on the mobile advertising market is encouraging. The analyst firm projects that mobile ad spend globally will hit $18bn (£10.8bn) this year, up from an estimated $13.1bn in 2013. Whilst it does point out that in the short term at least, growth is slowing due to ad inventory outpacing demand (and depressing prices), by 2017, Gartner estimates that the market value will have increased to $41bn.

Elsewhere, the latest IAB report released this week shows that with smartphones now accounting for over three quarters of handsets, advertisers are continuing to invest more in mobile advertising. It grew, like-for-like, by 93 per cent to £1.03bn in in 2013 from £529m in 2012 and accounts for 16 per cent of all digital advertising spend (£1 in every £6, compared to 10 per cent in 2012). At an anecdotal level we are also hearing the big media agencies now actively seeking to allocate significant share of budget to the mobile channel.

Almost everywhere, there seem to be optimistic mobile growth statistics that the industry itself is quick to rally behind. Big projections about the health and future value of the industry certainly grab headlines, but do they really tell us the whole story? The problem is that growth on its own is easy to measure. These are naked values, that can be quantified and benchmarked against what has gone before. Growth is of course one measure of success, but the mobile advertising industry is much more nuanced. There are areas that the mobile industry needs to tackle head-on to build a more long-term and sustainable future.

Imbalanced medium
Back in 2009 Mary Meeker, an analyst at Kleiner Perkins Caufield & Byers, made the now famous prediction that the mobile would overtake fixed line browsing by 2014. By all accounts we are nearly there. And yet (according to the IAB UK) mobile only accounts for 16 per cent of all digital ad spend. Mobile advertising analytics firm Flurry has also highlighted an interesting discrepancy. In a recent study, the firm said mobile is the most imbalanced digital medium when it comes to ad spend versus time spent by consumers with the medium, at 1 per cent compared to 23 per cent, whilst the desktop equivalent is 16 per cent (ad- spend) versus 22 per cent (time spent).

This suggests that, far from being the year of mobile advertising, we still have some way to go. In December 2013 the IAB released its annual Snap Shot Research, which uncovered useful insights into the current knowledge surrounding mobile advertising and uptake with today’s current media climate.

Alongside case studies to evidence work, campaign tracking was seen as the single most important area that would help media agencies to do their job better, and in the same report, 51 per cent of respondents indicated that the lack of tracking and measurement is restricting mobile ad-spend.

We also know from looking at what happened on the desktop web that the key to growing digital investment is measurement. If advertisers can see a clear and simple view of ROI that they can trust and understand then they will invest. Look at search, email and affiliate. Actually, even TV ad spend.

Beyond the click
The problem is that the prevailing industry standard for measurement is clicks, with advertisers putting all of their efforts and confidence in measuring them as a barometer for campaign success. Clicks are a useful measure of volume but not meaningful consumer behaviour (conversion). After all, it doesn’t matter if someone clicks on an advert for a new kettle, only that the consumer is using that kettle to make a cup of tea a few days later. Alongside the problem of false attribution, click measurement leads to an inaccurate false positive picture for advertisers.

Moreover, since mobile ad campaigns command relatively small budgets which are spread over multiple mobile media channels and ad networks, tracking campaigns and reporting on their performance has been extremely difficult. The process needs to be defragmented so that campaigns can be managed in a single view across multiple channels, networks and media. The technology to do this is catching up. For marketers, this consumer journey can be shaped by the measurement and manipulation of the right parameters. But we need to define what it is we can and should measure – right?

App installs
In an app-driven world, clicks (as a measurement metric) are increasingly being replaced by other parameters like app-installs. Again, as a campaign metric this only tells a brand that a relatively minor outcome has been achieved.

Mobile app use increased 115 per cent in 2013 (according to Flurry Analytics), and the average smartphone user has 26 apps on their phone. However, another study, by the Pew Research Centre in the US, found that 68 per cent of users have just five or fewer apps that they actually use at least once a week. In other words, we are happy to download apps but we don’t necessarily use them.

This means that downloading an app might be a campaign parameter, but is only equivalent to unlocking the shop door. You need to be able to define and measure active users and look at the lifetime value of that user to get a useful picture of how well your ad campaign is working (and shift budget accordingly). How often did the user re-engage with an app? What would the advertiser consider to be a success?

Now that measurement is possible. You can serve, track and measure accurately your entire mobile spend across apps and the mobile web with one tool. This means any format on any inventory, and you can seamlessly connect your ad spend to your own, self-determined objectives two or three steps beyond a click, achieving a view of all the data that you need in one place to get a clear picture of ROI.

It follows that with meaningful measurement in place, display ad spend will grow. Skip back to the Gartner report and beyond the show-stopping headlines, the analyst suggests that growth in the mobile advertising industry will come from improved market conditions, citing things like provider consolidation, measurement, standardisation and targeting technologies.

Ask the question again: will 2014 be the year of mobile advertising? The answer is connected to the issue of measurement and whilst the technology is now here, it is where brands, media planners and buyers are on the measurement adoption curve that marks out the future growth of the industry.

Vincent Pelillo, EMEA partner/manager at S4M, explains why 2014 will not be the year of mobile advertising