It was supposed to be different: Smartphones, of course, and increasingly tablets, are spreading rapidly and are everywhere—yet for advertisers, these modern devices remain largely uncharted territory. Although there has long been talk (the WAP mobile data transmission standard was introduced about 15 years ago) that mobile advertising is on the verge of a breakthrough, these hopes have not yet been realized. It is primarily these obstacles that stand in the way of a breakthrough:
Limited data set
There are no reliable figures on the mobile boom in Switzerland. Surveys and estimates of penetration rates are available from consulting firms (White Paper, PWC). For example, last December’s mobile study by IAB Switzerland found that 57 percent of the adult resident population in German- and French-speaking Switzerland own at least one internet-enabled mobile device, meaning that a total of 3.4 million people in both language regions are currently reachable for mobile online advertising. Regarding mobile website usage, NET-Metrix has been conducting an audit measurement for apps and mobile sites since last spring; however, only about twenty brands—mostly from the publishing industry—have participated in the program.
In the *Werbewoche* survey, the trade association Smama, the Swiss Mobile Association, therefore made the following demand: «The data must, in any case, be brought up to the same level of information as in the online sector. This data is urgently needed, as mobile Internet usage will definitely surpass desktop usage this year—if it hasn’t already done so.» However, there are no signs that, despite how desirable it would be, the data for mobile will catch up with that for online in the current year.
Optimize Websites
Many types of content are still difficult to access via mobile devices because they aren’t optimized for display on small screens. This frustrates users and damages brands. For many website operators, this problem has been tolerable so far, since the number of mobile users driven away by it has been relatively small. As a result, many have so far refrained from investing in upgrades to their web infrastructure, even though the technical solutions are available.
Websites can be designed using responsive web design, which adapts the display of content based on screen size: A traditional website appears as a long vertical layout on a smartphone. Alternatively, adaptive web design can be used, in which the content itself is modified to suit the display devices and their usability: Instead of downloading all the images and videos on a website over a slow data connection, only core elements are displayed.
With mobile web traffic on the rise, a website optimized for mobile devices is a must these days. Apps, on the other hand, are the icing on the cake. It’s becoming increasingly difficult to justify the development costs involved. After all, there are now countless apps, so many of them end up in the “app graveyard” rather than on the screens of their target users. Furthermore, with the HTML5 markup language, websites can now be displayed on mobile devices in ways that were previously only possible with apps. Thus, an app only makes sense if it provides clear added value. Because in many cases websites are not yet optimized for mobile, these companies also invest very little in mobile advertising. After all, it makes little sense to use a QR code, for example, to attract mobile users to your own website if there isn’t at least one adequate landing page for a mobile campaign available there.
Networks That Are Too Expensive
Anyone traveling by train between Bern and Zurich while also using the internet will soon be hoping for more cell towers and, consequently, a better data connection. While it’s easy to browse the web via Wi-Fi at home or in the office, telecommunications providers’ networks are indispensable when on the go. And the more people are on the go with their mobile devices, the more transmission capacities become overloaded. Solutions to this problem include expanding the networks, though this is severely hampered in Switzerland by restrictive regulatory requirements and objections. Much hope rests on the new standard for mobile data transmission, LTE, which, however, is currently supported only by the very latest devices. Meanwhile, telecom companies are working full steam ahead to upgrade their networks for LTE.
Swisscom aims to cover 70 percent of Switzerland with its LTE network by the end of the year. With its new subscription plans—which are priced according to bandwidth—the “Blue Giant” has laid out how it plans to respond to future bandwidth bottlenecks: through pricing. At the same time, mobile data traffic in Switzerland is currently considered far too expensive. Many consumers will therefore continue to react sensitively in the future if they feel they are being charged excessively for the transmission of intrusive advertising messages.
And publishers face the dilemma of whether they want to earn good money with rich media ads and streaming services, and in doing so risk losing their carefully built
To alienate mobile users. This is because the laws of physics do not allow us, with the frequencies currently available, to offer over-the-air data connections that are as fast and inexpensive as those we are accustomed to with landlines. In the long run, therefore, the infrastructure will not be able to meet the desired level of usage.
Difficulty Gaining Acceptance
«The ads are unbearable! No other app is cluttered with more junk! Not recommended!» That’s how one user vented his frustration in Apple’s App Store about the latest version of the free 20 Minuten app. The latest update has significantly increased the flood of ads: In addition to the ubiquitous banners at the bottom of the screen, there are now pop-up ads that take up the entire screen and have to be clicked away multiple times while reading an article. This has apparently pushed a large portion of the audience past their breaking point, as evidenced by the numerous negative comments in the App Store. This example makes it clear: Advertising on mobile devices is only tolerated in small doses.
Mobile Cannibalizes Online
The mobile boom is no cause for celebration, especially in the publishing industry, as it is now putting pressure on online revenues in addition to print revenues, which have been declining for some time. At 20 Minuten, more than half of users access the site via mobile, and at Blick, the mobile share is approaching one-quarter, according to Net-Metrix. Part of this comes at the expense of online usage, while another part represents new, additional usage. While up to twenty ad units can be displayed on a website, on mobile devices there is room for only one or, at best, two. Yet CPM rates in the mobile sector—averaging 50 to 60 francs (with a range of 20 to 150 francs)—are only slightly higher than for online, even though mobile ads receive more attention and have higher click-through rates than online ads. There is no improvement in sight as long as mobile is viewed not as a distinct media category but as a variant of online. If this perspective changes, entirely new business models will emerge—models that are currently being sought after around the globe, by mega-corporations and mini-startups alike.
Interesting but delicate opportunities
However, it would be a mistake to write off mobile as an advertising medium because of these obstacles, especially since mobile service providers are reporting rising revenues. These trends will shape developments in the mobile market in the coming months:
Mobile First: Soon, more than half of all web traffic will come from mobile devices, so it only makes sense to approach business processes and website design with this in mind from the outset. Until now, the term was a common catchphrase, but it is now gaining increasing significance, especially since technologies such as responsive web design (see above) are available to implement it.
Video: Despite widely fluctuating network performance and potential acceptance issues (see above), video campaigns on smartphones and tablets are on the rise. This is because interactive ad formats featuring engaging videos attract three times as much attention as static banners. There will be new formats that enable targeted interaction during the video.
Payment: Today, smartphones are already frequently used to research purchases, and soon they will be widely used for payments. Last year, LeShop’s mobile app accounted for over 22 percent of sales, and the trend continues to rise. As was announced around the turn of the year, SBB plans to launch its own mobile wallet through the Wally project and is seeking technology partners for this purpose. Two candidates stand out: Google with «Wallet» and Apple with «Passbook.».
The two tech giants are active in the mobile payments sector because it’s not just about the payment process itself, but also about the commercial analysis of the associated user behavior signals. These signals are made available to the user again via «Google Now»—for example, by adding the purchased flight to the calendar and automatically notifying the user of any delays. An important element of m-payments is an NFC (Near Field Communication) chip, which is built into the latest Android devices but not into Apple’s iPhone 5. Another important aspect in the m-payment sector is so-called m-couponing (see Werbewoche 8/2012, p. 36).
CRM Instead of Advertising: Examples related to mobile payments reveal a profound trend: Consumers always have their mobile devices with them, so it is important to avoid media discontinuities and to manage the entire customer relationship—driven by CRM—through these devices. User-oriented information and benefits (e.g., through personalized m-coupons) are thus replacing traditional digital advertising.
SoLoMo: A CRM approach can often be improved by also taking into account data from social media connections and users’ locations (Location) via mobile devices. As demonstrated by winter sports destinations such as Laax and Davos, mobile advertising will increasingly adapt to customers’ situations. Hiltl is a pioneer in this field—the restaurant has been rewarding Foursquare check-ins with coupons for quite some time. For now, such features are being used more extensively in the gaming sector. Examples from Switzerland include Gbanga Game and Spontacts.
Prices: Currently, the focus in Switzerland is on mobile CPM or fixed placements, with CPM rates varying considerably between 20 and 150 francs and the average CPM ranging between 50 and 60 francs. Gross rates are generally higher than those for the web, but publishers appear willing to negotiate, as the ever-growing mobile inventory remains difficult for them to monetize at this time. However, there is a growing trend from abroad toward performance-based models. Numerous Swiss apps and sites from the so-called “long tail”—which lack access to the advertising market—have already joined large networks (primarily Google), making reach bookable on a CPC basis. Currently, the price-performance ratio for mobile ads is attractive, as click-through rates are often many times higher, while the CPC is usually lower.
Christoph J. Walther