The New Advertising Age

How Mobile Ads Add Up For Small Business

Although multinational brands dominate mobile ad spending, many experts believe the segment's next significant evolution lies in local promotions that capitalize on the location-aware technologies so tightly integrated into the DNA of wireless devices. Data published in mid-2009 by media research firm Kelsey Group forecasts that local mobile ad revenue will top $3.1 billion in 2013, up from $160 million in 2008. Kelsey Group adds that mobile search will make up the majority of revenues at $2.3 billion, far outstripping SMS, which garnered $100 million in 2008.

"There used to be only a limited way to do geo-targeting before the iPhone, but now we have next-generation platforms with greater client-side awareness of location," says Jason Spero, vice president and general manager of North American operations for mobile advertising network AdMob. "If you're a regional movie chain or a citywide restaurant chain, there used to be enormous waste in doing mobile ads. But now we can target consumers effectively. For example, a car dealership can pick specific areas where they have coverage and make effective use of their ad dollars."

The problem limiting localized mobile advertising is that so few small, regional businesses have built effective mobile web destinations, says Paul Palmieri, president and CEO of mobile advertising network Millennial Media. "We're at a stage where mobile has enough scale to be relevant not just to large advertisers, but also to small businesses looking to use digital formats to drive customers into physical locations," he says. "Innovative entrepreneurs can gain an advantage by building out a mobile presence before their competitors do. If you're the local pizza guy, you should be building a mobile site right now, before your competitors do. If someone using Google Maps on their iPhone searches for a pizza, you want your locations to come up, and when the user clicks on them, you want them to go to a mobile website people can read."

Nevertheless, small businesses are advertising on mobile, says Ragnar Kruse, CEO and co-founder of mobile ad platform provider Smaato in Redwood Shores, Calif. They're just not the mom-and-pop, brick-and-mortar businesses that once defined the profile. "Most mobile players themselves are [small businesses], like small developers and content providers," he says. "Look at advertising on the iPhone--about 25 percent of ads in apps are for other apps. That's typical on emerging platforms. Look at the way e-commerce started." --J.A.

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Chicago-based writer Jason Ankeny is the executive editor of Fiercemobile content, a daily electronic newsletter dedicated to mobile media, applications and marketing.

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This article was originally published in the March 2010 print edition of Entrepreneur with the headline: The New Advertising Age.

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