Mobile advertising is still in its infancy, even though smartphone usage has taken off. A recent report from U.S.-based Comscore Inc. estimates that as of December 2011, 45 per cent of mobile phones in Canada are smartphones — up from 33 per cent last March. The old-style cellphone is clearly on its way out.
Fang Wan, an associate professor of marketing at the University of Manitoba, says advertising on a smartphone requires a different approach than traditional online ads. For example, web pages often include several ads along the top, bottom or side of the screen, or a short video ad that must be viewed before the desired page opens. That's not likely to work well on a three-inch mobile screen.
"From a consumer's perspective, obviously, the mobile thing cannot be as cluttered as online," said Wan, who specializes in online consumer behaviour.
Wan also says that mobile ads can feel more intrusive. Consumers have come to expect ads when they surf the web on a computer that they share with family members, but a mobile in their pocket feels a bit more private.
"That personalization, that intimacy, can create more resistance (from consumers)," she said.
But the fact that mobile phones are so personal could be a gold mine for advertisers. Data garnered by the browsing history on a family computer can come from multiple people. But the same data on a smartphone is likely to come from one person, so advertisers can more precisely target their pitches.
"What's happening is that we're leaving a lot of data trails based on what we like to do online, and certainly that's very valuable information to marketers," said Rajesh Manchanda, another professor at the University of Manitoba who specializes in social marketing.
"That's the big advantage right now with the smartphone technology ... to just be able to drill down to that level of detail and create, not full-blown ads, but just messaging that will resonate with people for the product and brand that they're interested in."
Mobile technology also offers a new frontier for advertisers in the form of geofencing. They can send ads to your phone based on your location, which is relayed by your mobile phone.
In 2010, the technology was used at a conference of parking authorities in Long Beach, Calif. Delegates who signed up for the service received tailored messages when they arrived at certain locations.
When they landed at the airport, they received a message instructing them on how to get to their hotel. When they got to the hotel, they received discount coupons for nearby attractions.
The idea is to send consumers an ad when they are most likely to buy the advertised product.
"You could be going down the road and you might be just outside Best Buy, and boom, before you know it, Best Buy offers you a promotion to come into their store," Manchanda said.
So given all the potential advantages, you'd think the number of mobile ads would skyrocket. That's what Duncan Stewart, director of technology research with business consulting firm Deloitte Canada, predicted two years ago.
"We were desperately and gratuitously wrong," Stewart chuckles.
"The mobile ad industry is really only about three years old. So the fact that they haven't figured out how to do it right yet doesn't mean that it will be never figured out, but it is important to realize that they haven't figured out how to do it right yet."
Mobile advertising is estimated to account for only about 10 per cent of all online advertising worldwide, Stewart said.
Format is part of the issue. Can a banner ad be effective on a mobile phone? Or will people be angered because it gobbles up precious screen space? How about the 15- or 30-second video ads frequently seen on web pages? Would smartphone users be ticked off about advertisements eating into their data caps?
Advertisers also have to be convinced that people will actually see ads created and formatted for mobile browsing. Even with the sharp rise in smartphone use, more than 90 per cent of web page views in the U.S. last year were on bigger screens, not mobile phones, Stewart said.
"We use computers many, many more hours per month than we use our smartphones."
The amount of money spent on mobile ads will rise, Stewart predicts. But by how much and how soon remains to be seen.