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The Coming Mobile Ad Monsoon

Smartphone screens may soon be filled with quite a few more words from the sponsors.

In its earnings report this week, Internet music streaming site Pandora said it’s losing revenue as eyeballs shift from computers to the smaller, and still relatively ad-free phone screens. Facebook expressed similar concerns in its IPO prospectus in February. To make up for those losses, experts expect these firms and others will look for ways to shift more advertising to phones, with displays increasingly resembling pocket-size billboards.  “You are going to come into contact with more mobile advertising of all kinds,” says Melissa Parrish, a senior analyst covering interactive marketing at Forrester.

But, because smartphone ads can be much more targeted, the ads users will see will hopefully be more useful, Parrish says. For example, GQ and Calvin Klein worked together on a 2010 “advertorial” promotion, where people reading about new Calvin Klein clothes through an app would see ads telling them that the clothes were currently in stock in a store a few blocks away. A similar promotion that launched a few months ago tells targeted users where the closest Victoria’s Secret is based on where they are right now. “It’s totally useful. It gives you something you need at that moment,” Parrish says.

Useful or not, the change may seem jarring to users who’ve so far enjoyed an extended ad holiday, analysts say. Mobile ads are harder to ignore than the ones in the margins of web browsers, they say, but consumers aren’t going to have much of a choice. That’s because spending on mobile advertising, which remains miniscule, is about to explode, according to projections by Forrester Research. In 2012, “interactive” advertising spending (including both PC and mobile ads) will be just 18% of all ad spending, but by 2016, it’ll grow to 26%, according to Forrester. And mobile ads will be the fastest-growing piece of the “interactive” pie, growing roughly 38% a year while the total category grows about 17% a year.

Aside from the irritation of increased advertising, these highly targeted ads may also raise privacy concerns. In surveys, consumers say they wouldn’t want to see ads like these, “because it feels like an invasion of privacy,” Parrish says. But in practice, people click on them anyway — far more often than they click on traditional display ads, she says. “The numbers I have seen for these well-targeted mobile ads are quite impressive,” she says.


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