Ad tech wants to go mobile. Will marketers follow?
While commodity markets debate whether the world is hitting “peak oil,” many in the ad exchange community are analyzing global digital inventory trends and concluding we’re hurtling toward “peak desktop.”
Even though the value of automated ad commerce continues to climb rapidly, the total volume of desktop inventory is beginning to stabilize as the last holdout publishers make their ad space available to ad exchanges for programmatic and real-time bidding transactions. As a result, ad tech players have been left to bet on where they can build the next big market. Many of them are firmly banking on mobile, but the bigger question is whether advertisers and the whole technological ecosystem are ready for them—especially in Canada.
Mobile audience measurement is evolving at a rapid pace but on a mix of standards that still makes it hard to know exactly how much time consumers are spending on their devices. What is clear is that the mobile revolution is taking over and the advertising industry is trying desperately to monetize it. Industry analysts believe we are near the point when half of all online activity comes from mobile devices. In the U.S., eMarketer research found consumers spent more time online on mobile devices in 2013 than they did on computers. Domestically, IAB Canada has similarly estimated that consumers spend 1.9 hours per day on mobile versus 1.8 hours on computers. Almost half of Canadians have smartphones, and growth of new mobile users shows no signs of slowing down: according to a Google CEO Larry Page, 1.5 million Androids are activated every day around the world—in other words, there are more Google smartphones activated daily than there are babies born.
AppNexus pivots with Millennial in tow
“Once we get to the point where the majority of computing is done on mobile devices, I think that’s going to completely upend the way that a lot of people think about [the digital ad] industry,” says Michael Rubinstein, president of New York-based programmatic trading platform AppNexus. AppNexus recently inked a deal with mobile ad network Millennial Media to add Millennial’s 47,000 app publishers to its exchange, including EA Mobile, NHL GameCenter, Craigslist and Gtalk. Using AppNexus’ RTB platform, the Millennial Media Exchange (MMX), a recently launched real-time auction house specializing in premium native app inventory , will share inventory with AppNexus’s own exchange, boosting mobile inventory for both partners. The deal is part of AppNexus’s o cial commitment to go “all-in” on mobile, announced by CEO Brian O’Kelley late last year.
There will be big rewards to whoever can get a headstart in is becoming a hotly competitive market segment. The pace of change means strategies can evolve in a hurry. Less than six months ago, O’Kelley told PandoDaily that mobile was “really not significant,” and only made up 3% of AppNexus’s display business. After those comments, his company’s new push into mobile raised a few eyebrows in the ad tech community and is just further proof that the pace of change in this space often needs to be measured in months, not years.
AppNexus isn’t the only big programmatic player that began positioning itself seriously for mobile in the second half of last year. Twitter made its first foray into mobile programmatic trading in September, announcing the $350-million acquisition of mobile publisher network and RTB exchange MoPub just days before it shared its plans to go public. According to eMarketer, Twitter accounted for 2.4% of the $18.2 billion advertisers spent on mobile last year, making it the world’s third-largest mobile seller. The number two spot went to Facebook, which surprised investors this year with a significant boost in sales and profit driven by mobile ads and now gets nearly half its revenue from mobile. It took a test of its off-site mobile exchange offline for a nine-month hiatus but, sensing an industry sea change, announced a restart in September.
Millennial Media ranks sixth by share of global mobile spend and, as one of the only non-tech-giant networks in the top 10, it’s a natural partner for AppNexus. Despite a red-hot IPO in 2012, the company’s stock took a Facebook-like post-IPO swoon, and has recently been sitting at level more than 40% below its initial price. That slide lent some urgency to an aggressive comeback strategy that involved acquiring competitor Jumptap and launching MMX with AppNexus. In just a few months, Millennial has already expanded MMX beyond the U.S. to Europe, Latin America and Asia. Together AppNexus and Millennial want to build a buying environment that can quickly match desktop RTB in scale.
By building a bigger and better mobile platform, AppNexus and Millennial hope to close the gap between consumer mobile adoption and dollars spent by advertisers. While mobile inventory is growing rapidly, it’s fallen short of optimistic expectations, and still represents only a small fraction of desktop display. eMarketer’s numbers show worldwide mobile spend grew 106% in 2013, 120% in the U.S. and 127% in Canada—and while those growth rates are very impressive, mobile still only makes up 14.2% of global digital spend, 22.5% in the U.S., and in Canada, a meagre 9.4%. Even though consumers may be splitting their time evenly between desktop and mobile devices already, it is expected mobile digital ad spend won’t be on par with desktop dollars until at least 2017.*
Rubinstein at AppNexus says the biggest impediment to mobile growth has been a lack of advertiser demand. Advertisers haven’t shown much enthusiasm for it—especially in Canada, which eMarketer has highlighted as a market where mobile spend is trailing significantly behind global growth. “Ad agencies are the ones typically controlling most of the ad dollars, and they don’t move overnight,” he says. “It takes them a while to figure out how to take advantage of new media, and to develop the processes and skills to take advantage of it.”
However, Rubinstein says he sees a “tipping point” coming as agencies become increasingly ready to buy. “Now it’s clear: the industry’s growing, it’s going to be a real thing. You have public companies like Millennial Media who solely and exclusively do mobile and have hundreds of millions of dollars in annual revenue.”
Not quite a buyer’s paradise
Tipping point or not, AppNexus and other ad tech players have more convincing to do to get the Canadian ad market on board. One argument is that consumer eyeballs may be there, but the ability to reach them with relevant ads is not. Peter Vaz, vice-president, director channel engagement at M2 Universal and chair of the mobile and emerging platforms committees at IAB Canada, says one major reason that agencies and advertisers have been slow to embrace mobile programmatic ad trading in Canada is because the technology hasn’t developed as quickly as anticipated.
That’s not to say platforms like AppNexus lack the capabilities that advertisers want. Rather, it’s an infrastructure problem. “The ecosystem around [mobile]—which includes [mobile-optimized] websites, ad servers, tracking, etc.—has not all fallen in place,” Vaz explains. He highlights one glaring issue around mobile-optimized websites: most Canadian publishers and advertisers don’t even have one yet.
“As a user browsing the mobile web, you immediately notice that for one of every three sessions you end up on a desktop site. The consumer does not have the availability of a lot of content.” For marketers, it often doesn’t make sense to advertise on mobile when they also don’t even have a mobile site of their own and any click on the ad sends the user to a lacklustre desktop site. In the early days of mobile, optimists assumed that the big move to mobile would benefit from existing infrastructure for programmatic buying, ad serving, targeting and measurement. But mobile turned out to be a whole new animal, largely because of the diversity of devices and operating systems that needed to be accommodated. Programmatic tech has had to be redeveloped from the ground up, with solutions specifically for mobile—and many of those solutions are still missing.
For one thing, the granular audience targeting that has been such a major advantage for programmatic display buyers isn’t nearly as well-developed in mobile. Targeting technologies designed for desktop rely heavily on browser cookies, which aren’t used by mobile apps and are difficult to follow on mobile browsers because of device and browser fragmentation. The same problem makes it difficult to track conversions, ruling out conversion-based optimization and reducing the efficiency advantage that’s also central to programmatic. The lack of tracking even affects consumer experience—without a way for advertisers to control frequency, mobile users often find themselves bombarded with the same ad.
Mobile does offer new options for targeting, like geolocation, which have a lot of appeal to advertisers. But these technologies are still nascent and without standardization across networks and exchanges. Some publisher platforms, like Millennial’s, offer proprietary solutions that can track user behaviour across apps that have Millennial’s software development kit installed. Millennial uses unique user IDs to piece together users’ mobile behaviour and assign them to probable segments. The major challenge to this approach is that it’s not standardized across networks, so a campaign can’t be targeted across multiple marketplaces. For Millennial, whose stock-in-trade is native apps, that means buyers can target in-app ads, but not mobile browser ads. As with desktop display, sticking to a single marketplace can make it hard to achieve the scale that digital advertisers seek.
What’s more, it’s difficult to judge how accurate new forms of mobile targeting are without reliable third-party verification. Which raises another big gap that needs to be filled in mobile: audience measurement. Mobile measurement solutions offered by the two major providers, comScore and Nielsen, are far behind capabilities for desktop. Without a reliable means to verify audience reach and demographics, it’s difficult for agencies and marketers to tell whether experimental mobile targeting actually performs, and harder still to justify increases in mobile spend. In the Canadian market the problem is especially pronounced, since neither comScore or Nielsen offer detailed mobile measurement solutions, and all of the numbers on the size and engagement of the Canadian mobile audience come from U.S.-based estimates. New measures for the Canadian market have been promised for testing this year, but as one tech executive quipped to Marketing, “I’ll believe it when I see it.”
While technological roadblocks may mean that mobile will take longer to go mainstream, most marketers realize that switching from desktop to mobile isn’t an “if” but a “when.” AppNexus, Millennial and their aggressively mobilizing competitors think the answer is “now,” and that 2014 will be the long-anticipated “year of mobile.” Whether the future arrives that fast or it’s a year of experimentation and anticipation is now in the hands of major brands and agencies.
* These numbers have been updated to reflect eMarketer projections published since this article ran in the magazine.
Illustration: Otto Steininger
This story originally appeared in the March issue of Marketing. Did you know you can purchase individual issues of Marketing on your iPad?