Mobile Advertising – The Journey from Banners to Rich Media

With the recent $321 million acquisition of Amobee by SingTel, mobile advertising has one again been in the news. Let’s explore the history a bit to understand how mobile advertising became a multi-billion dollar opportunity (and valuations of mobile advertising companies increased so dramatically). Frost & Sullivan has tracked the Global mobile advertising market since 2003, when mobile penetration rates were less than 50 percent; mobile Internet was still “WAP” (wireless Internet protocol), and mobile data revenues were only a tiny fraction of what they are today. There were hardly any mobile video services and mobile advertising was synonymous with application-to-peer (A2P) messaging. Clearly, we have come a long way since 2003. In this piece, I will discuss the evolution of mobile advertising while my next blog will focus on the emergence of Private Mobile Advertising Exchanges in the U.S. market.

Mobile Advertising – A Historical Perspective

Ad networks – such as Third Screen Media (acquired by AOL) , AdMob (acquired by Google) and GreyStripe (now a division of ValueClick) – and leading publishers were the early movers in mobile advertising. Display advertising was largely confined to mobile Internet (or WAP). There was some in-application advertising as well (thanks to efforts by industry participants such as GreyStripe); however, the app revolution did not truly materialize until Smartphones came along. In 2006 and 2007, Tier-I mobile operators such as Verizon Wireless and Sprint became early adopters of on-deck display mobile advertising. Operator inventory was sold at a premium, with hundreds of millions of ad impressions served every quarter in the on-deck WAP environment.

The mobile advertising industry – in its quest to maximize the revenue opportunity – also witnessed the emergence of ad network “aggregators” and ad mediation layers. These aggregators basically accumulated remnant (as well as some premium) inventory both from ad networks as well as individual publishers and in turn sold it - usually on a pay-per-click basis - to advertisers. Ad aggregators represented huge amounts of inventory – billions of ad impressions were served every month – yet that somehow did not consistently translate into high revenue streams due to certain limitations of the mobile channel – including absence of cookies and lack of third-party reporting and analytics. Some of these issues were addressed by the emergence of Smartphones. Devices such as the iPhone and various versions of Android devices started to generate strong usage of mobile data services.  Suddenly, there was a glut of inventory – industry participants were struggling to generate high fill rates and mobile inventory was at a risk of losing its “premium” status. Industry fragmentation, lack of transparency, and inability to deliver a consistent advertising experience across different mobile data channels (with lack of aggregated reporting) were some additional reasons for this drop in ad rates.

Industry participants continued to seek ways to overcome some of these challenges by delivering a differentiated, richer advertising experience on mobile phones. Many industry participants started to work together to develop an ecosystem that leverages the best practices and strengths of each member to deliver an improved advertising experience. For example, Crisp Media (known earlier as Crisp Wireless) partnered with Jumptap in 2010 to deliver rich media ads ad campaigns across the Jumptap network. However, lack of true standardization in mobile advertising remained an issue, and In late 2010, leading mobile advertising industry participants such as Crisp Media, The Weather Channel, and TringAppsannounced the Open Rich Media Mobile Advertising (ORMMA) initiative   to address the existing industry fragmentation challenges and simplify the serving of rich media ads into mobile apps by creating an open standard and a set of industry best practices.

Current State of the Industry

Today, mobile advertising solution providers are increasingly required to integrate with existing publisher-side ad servers. This is done to manage the communication between 1) first-party and third-party ad servers in online and mobile and, 2) ad networks, agencies, ad mediation layers, and other participants in the value chain. Over the past three years, the mobile advertising landscape has become relatively more complex due to the diminishing boundaries between online and mobile advertising. Eventually, the distinction between “online” and “mobile” advertising will cease to exist for most campaigns, and advertisers will be able to plan, execute, and measure results for their campaigns seamlessly across the online and mobile environments.

Demand side platforms (DSP), an important element in the online ad buying process, will increasingly be used for mobile buying as well. Similar to the online trend of DSPs being integrated into multiple ad networks and exchanges, mobile-only or mobile-enabled DSPs will be integrated with multiple ad networks and ad-bidding platforms for mobile. However, device and operating system fragmentation is a challenge here due to disparate technologies and ad serving protocols being used for rich media ads in mobile. Frost & Sullivan expects the mobile real-time bidding (RTB) ecosystem to evolve gradually and support a majority of rich media ads in future. For that to happen, the industry has to agree on a set of standards to enable rich media ads to be displayed across multiple ad destinations seamlessly. Only then should we expect the DSP and RTB side of the mobile advertising ecosystem to truly emerge as the key enablers of rich media advertising in mobile. With that said, existing industry participants (such as Nexage) that are focused on enabling a mobile real-time bidding platform continue to serve billions of impressions every month in the United States and are now compliant with standards such as ORMMA and Video Ad Serving Template (VAST) that allow them to deliver ad campaigns across different destinations in mobile.

In my next blog, I will talk about mobile private exchanges and how these exchanges will become important for the growth of mobile advertising.  Here is the link to our most recent study on the U.S. mobile advertising market.