The Three Phases Of Mobile Advertising

We all know mobile advertising is big today and will only get bigger (read Mary Meeker’s internet trends if you need to be convinced). As consumer time continues to shift to mobile devices, more dollars will shift to mobile advertising. While mobile ad spend lags behind today, it will eventually catch up and surpass desktop and television if you believe, like I do, that Facebook’s 59% of Q1’14 earnings from mobile are the bellwether. Best of all, this rising tide will only get higher as mobile ads evolve in their format and targeting abilities.

Because of all of the above I view the mobile advertising landscape as having three distinct phases:

Phase I (before my time to 2012)

 

  • Traditional IAB units shrunk to fit inside a small screen, resulting in a bad user experience
  • Targeting mobile ads was difficult because every app was its own silo with no cookies, re-targeting
  • Incentivized advertising dominated because of volume of installs they could drive and the nascent understanding in app purchasing

Phase II (2012 to 2015)

  • Native ads took off with a better user experience, but largely the same content and goals as previous ad formats
  • Targeting improved to match levels of web-based ad targeting (including cookie equivalents, re-targeting, and real-time bidding).
  • Facebook — and soon, others — created world class self service ad tools to attract large amounts of direct marketing / user acquisition marketing spend.

Phase III (2016 to beyond)

  • A class of mobile-only advertising units such as sponsored push notifications, try before you buy app previews, and other to-be-determined formats emerge and take off.
  • Mobile-only targeting data where the data mined originates from our device sources, such as current location, current apps installed, calendar, and address book data deliver massive value to marketers.
  • All the big players (Facebook, Alibaba, Yandex, etc) make piles of money through direct monetization and via mature ad networks that share 90% of revenue with publishers.

So, where are we today, mid-way through 2014? I believe we are firmly into Phase II and starting to see some evidence that Phase III is ~24 months out. As an investor, I am trying to find key opportunities around products that will support large businesses once Phase III is in full swing. Like the web, large communities of users and communication applications are the early winners, but there will be more variety as mobile devices grow and our time spent on them increase.  Can you think of others? If you have ideas in this area, of course, please drop me a line.

Note: Tomorrow I’m on a panel talking about Mobile Native Ads at Grow.co so decided to prep for the discussion by blogging my current thoughts on Mobile advertising. Feedback

I go on stage tomorrow at 2:15pm PST is much appreciated.  🙂