Can Mobile Ad Sector Overcome Consumer Intolerance?

  |  October 24, 2006   |  Comments

Jupiter Research predicts wireless ad spending will surge to $2.9 billion in 2011, but consumer intolerance for incessant cell phone messages could put a damper on overall growth.

Researchers are predicting wireless ad spending will surge to $2.9 billion in 2011 -- up from $1.4 billion -- but the good news comes with a warning that consumer intolerance for messages on cell phones will put a damper on the best laid marketing plans.

According to new data from Jupiter Research, ad spending on mobile marketing will grow substantially over the next five years, driven primarily by mass-market penetration of cell phone usage in the U.S.

However, despite the uptick in spending, the report found that less than 10 percent of cell phone subscribers have been targeted or participated in mobile marketing.

“By the end of 2006, 29 percent of agencies and 22 percent of online advertisers plan to be using SMS/MMS campaigns, while 16 percent of agencies and 18 percent of online advertisers will be leveraging short codes on product packaging and within non-mobile ads,” according to the report, which was prepared by Jupiter analyst Julie Ask.

Jupiter is forecasting mobile display advertising to grow from $56 million in
2006 to $224 million in 2011, but the increased supply will force average CPM (cost per thousand) rates to decline over the next five years -- from $41 in 2006 to $23 in 2011.

While text-based SMS has the broadest reach, the limits on characters means advertisers in the mobile space must make “trade-offs” between reach and media richness. “MMS and Web browsing offer a richer media experience that can include color graphics, photos, video, and audio, but is used by 14 percent of mobile subscribers,” Ask wrote in the report.

Going forward, the research firm argues consumer acceptance of mobile marketing will be tricky. For starters, cell phone users will likely be annoyed by the incessant interruptions that come with mobile advertising. Issues of privacy and the cost of commercial text messages will also present challenges.

“Among the 78 percent of mobile subscribers that are aware of commercial SMS, 28 percent are concerned about getting charged for SMS messages and 21 percent are concerned about receiving SMS SPAM,” the report said.

Among those mobile subscribers unfamiliar with SMS commercial messaging, the rate of concern is significantly higher in both categories.

Jupiter suggests carriers and advertisers adopt user education campaigns to help grow consumer openness to being targeted on the handset. Those consumers unfamiliar with commercial text messages are 28 percent more likely to say that they never want to receive one, the company warned.


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