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Digital Ecosystems


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Andrea Febbraio on the workings and future of the Mobile Advertising Industry

Dan Ginger Tuesday, 13 January 2015.

A speaker at this year's EntrepreneurCountry Forum on the 3rd February, Andrea Febbraio founded Ebuzzing – now Teads – in 2011. An expert on the advertising industry, Andrea directed Ebuzzing to annual revenues of €100million, and here gives us a crucial insight into the dynamic and rapidly developing mobile advertising industry. EntrepreneurCountry Global spoke with Andrea about the workings of the industry and what we can expect to change in the future – to hear more from Andrea regarding the emergent advertising industry, be sure to buy your EntrepreneurCountry Forum ticket here.

Andrea FebbraioHow has mobile advertising changed in recent years?

"Firstly, there has been increased spending in the mobile, social media, and digital video spaces, which will propel U.S. digital advertising revenue to nearly $50 billion this year - with this number reaching $82.7 billion in 2018 according to an updated BI Intelligence forecast. Mobile advertising will reach a five-year compound annual growth rate (CAGR) of 49.7percent at this time also.

The major driver of this growth in these areas has been the large adoption of smartphones and tablets by consumers. The latest comScore smartphone subscriber figures are out, and they reflect nearly 72percent smartphone penetration in the US. This relates to a very important element of brand advertising – 'size does matter'. The combination of higher penetration of smartphones, tablets and phablets (a smartphone with a bigger screen - think for example at the new iPhone 6) with the availability of a bigger screen allows brands to plan more engaging advertising formats. This is something new and the results of these advertising campaigns are far better compared to the standard banners of few years ago, engaging the user in more responsive and powerful ways. Most traditional mobile banner ads were plagued by a phenomenon called "fat fingers" - accidental clicks due to the screen being too small. This is rarely happening with the phablet revolution and new trends in screen sizes.

A further key trend in the industry is that the number one format for branding, video advertising, is growing further in its traction: Mobile video ad revenue in the US will top over $4.4 billion in 2018. As has been stated, mobile devices were once thought of as much too small to use for video advertising. In the last few years however, as screens have gotten larger and signals stronger, the rise of video consumption on mobile has soared. In 2013 alone, for example, spending on mobile video increased nearly 350%. It's easy to see why it's gotten so popular. First, mobile devices, much more than PCs and laptops, are seen as very personal. If you want to get personal with potential customers, targeted mobile video is a great way to do it."

You claim that 'money follows eyeballs' – can you explain what you mean by this, and what are the implications for mobile advertising?

"Can you remember when you first heard of Facebook? Well, it was only launched nine years ago and but it's already reaching more young people in the USA than free television.

With the adoption of the smartphone, brands can finally leverage a potential audience similar if not bigger than television. This has a huge impact on media planning. Traditional advertisers – often Fast-Moving Consumer Goods (FMCG) companies like P&G, usually plan their media budget based on Gross Rating Point (GRP). They consider the reach of an advertising campaign (let's say how many women between 25-50 years old the campaign will touch) and the frequency (how many times the ads will be shown). When they advertise, scale for this kind of big spender is everything. This is the reason why events like Super Bowl are flooded with advertising dollars: it's an opportunity to show an advertising message to hundreds of millions of people at once. Mobile represents the new opportunity in terms of reach but with way higher levels of targeting and interaction: for example a brand can advertise based on location, sex, age, interest and device of the user. This represents a tremendous opportunity and because the scale is now also there, money will soon follow. It is also very easy to deploy a TV ad on a mobile device. The advertising asset is the same (video) and doesn't need any customization, making easier to launch a campaign."

How have brands like Facebook and Snapchat utilised mobile advertising?

"This is a very interesting question at is at the core of a big debate in the industry. Most of Facebook's tremendous advertising revenues growth is based on Mobile Ads. For the ninth consecutive quarter, Facebook beat earnings projections thanks to 1.12 billion mobile users contributing 66percent of its ad revenue. This is an incredible achievement considering the fact that Facebook is not "mobile native". It used to be mainly a desktop website, but evolved very rapidly in to an awesome App able to quickly capture usage by avid mobile users. As we said, mobile is the future and Facebook's move was really well executed. It was a U-turn at the speed of light to the mobile space.

Most of Facebook's growth is now tied to Mobile Ads, but specifically to a single product called 'App Install'. Recently, some people have started to worry that Facebook's revenues may have an entrenched weakness that CEO Mark Zuckerberg is not informing investors about: the number of advertisers on Facebook who are venture-backed technology start-ups. It is thought that these will go bust as soon as the supply of venture capital that backs them starts to shrink, as it did in the dot-com bust of 2000. The App Install product is a specific advertising product tailored for Mobile App Developers. It is a simple advertisement that appears in your feed within the Facebook Mobile app, suggesting to download a game or product. It is sold on a cost-per-install and is therefore a performance based product. The suggested issue here is that as soon as the game developer burns all the cash available in their marketing budget, Facebook's revenues fall. I personally don't believe so and the reason is simple: scale. As we said before the scale of Facebook is so large that brands will be more and more interested to invest money on the platform for branding.

On the other side, Snapchat is growing extremely fast however doesn't yet have the scale to attract large advertisers and FMCGs. Snapchat is powerful in part because of its unique demographics. Snapchat's users are majority female, and most users are between the ages of 13 and 25 according to press reports, but this is also a limitation of the platform. The largest spenders on advertising are the Automotive and Financial Services sectors, which will have a hard time to advertising to these demographics."

What technologies are behind the mobile advertising revolution?

"The most important technologies are Real Time Bidding (RTB) and Proximity Data Targeting. Thanks to programmatics and RTB, media agencies can optimize ad buying for the exact target demographics and the exact time, all at the most convenient price. EMarketer expects ads served on wireless devices to contribute 44.1percent of the total programmatic market this year ($4.44bn), further forecasting that such units will eclipse the value of desktop ads, generating 56.2% of all programmatic display spends in 2015.

Proximity Data Targeting is also another technology component that is disrupting the market. Thanks to beacon technology and geofencing, it is now possible to advertise to a user when they are close to a specific location - let's say Barilla will show you an ad with a coupon because they know you are in a shop looking at a new Barilla packet of pasta. Even better, the advertiser will be able to buy audience profiles based on the location - for example the people that have been to a Starbucks store three times in the past week. Companies such as Beintoo, xAd are making this possible."

What are the challenges for the mobile advertising sector?

"Mobile is a device that is always with you – therefore I believe that privacy is the most important challenge for the industry. Everything you do on your mobile phone is inherently personal. For an advert to stand out in that environment, it needs to be as personal and as relevant as everything else you do, otherwise it will seem out of place. Consumer data must be protected as their demographics are collected and turned into relevant ads – this must be a transparent process that must occur in tandem with the personal nature of advertising on mobile devices."

Andrea was speaking to EntrepreneurCountry Global – look out for more articles featuring Andrea in the near future, and don't forget to secure your place seeing him speak live at the EntrepreneurCountry Forum by purchasing your ticket here.

 

 

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Dan Ginger

Dan Ginger

Dan joined entrepreneurcountry in November 2014, following the award of a First-Class BA (Hons.) degree in Geography from Keble College, The University of Oxford. Alongside writing articles for EntrepreneurCountry, Dan works as an Analyst for the Ariadne Capital team, and is particularly interested in the development of global emerging markets.

LinkedIn Profile: http://uk.linkedin.com/pub/daniel-ginger/5a/b62/804
Twitter: @DanGinge

 

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