Further, he says, conversion rates—the percentage of people who take action after seeing an ad—are devilishly difficult to measure. A persuasive mobile promotion for, say, Best Buy, may be more likely to make us visit a brick-and-mortar store, or BestBuy.com on our computers, than to make us enter our credit-card information on a mobile touch pad. As long as phones are primarily research devices rather than digital wallets, mobile ads will appear less valuable to advertisers than they really are.
The most fundamental challenge is that advertising is still an old-fashioned game of “lookie here!”—and on a four-inch screen, there isn’t much to look at. Across platforms, ad rates on a per-person basis correlate with display size. TV ads are the most expensive. Then come full-page ads in printed newspapers and magazines. Then banner ads on your desktop. And finally, way, way down at the bottom of the list, are the little rectangles on your smartphone. Ad rates per mobile viewer are, on average, five times lower than those per desktop viewer and, by one estimate, some 10 times lower than those per print-magazine reader.
Jason Spero, Google’s head of mobile advertising, approaches the mobile-ad puzzle more like a behavioral economist than a marketing executive or an accountant. He thinks about moods, intents, and incentives, and how they change when people step outside their house and navigate the world with a phone.
“We’re not too concerned about cost per click now,” he told me, although a recent analyst report estimated that Google makes an average of just 51 cents when you click a search ad from your phone, less than half of what it makes when you do the same from your laptop. “We’re worried about getting the experience right. One in three mobile queries for us has a local intent. People are trying to solve a problem called lunch. Or they’re shopping and want to look something up. Or they want a locksmith right away.”
Those are three totally different contexts, Spero pointed out, and Google wants to respond to them with distinct types of ads. For example, “click to call” buttons, which allow users to dial the advertiser from their phone in seconds, work for travel agencies and insurance companies, where the first interaction might naturally involve a phone call. But what about for local businesses like dry cleaners? “People don’t call dry cleaners, they just walk in, so that ad should be a map.”
Hyperlinked phone numbers and pins on maps barely scratch the surface of mobile capabilities. But with the advent of location-based services, we are starting to see the germ of a bigger, if perhaps creepier, idea—ads that talk to you and know you personally. Imagine you introduce a friend to your favorite coffee shop. You both point your phones toward a bar code displayed at the counter. You receive a loyalist’s deal on your phone—10 percent off anything—while your friend gets a onetime coupon on coffee, because the ad knows that it’s morning. This is the promise of place-based advertising, and companies like Scanbuy are working to introduce it everywhere.