• by Mark Walsh  @markfwal, October 5, 2011

Mobile rich media ads may dazzle the eye and capture engagement, but the economics behind the format still doesn't add up. That was the view of mobile ad experts convened on a panel to discuss the pros and cons of rich media ads at the Mobile Media Summit in New York.

The promise of the format characterized by the use of sophisticated graphics, animation or video is that it provides an immersive user experience that translates into higher interaction and conversion rates than standard mobile banners. Another selling point for rich media units is that they allow users to interact with the ad without having to leave the app, rather than click through to a mobile browser.

Apple's launch of the iAd last year bolstered awareness of the ad category, which in turn has benefited other rich media ad providers such as Medialets, Crisp Media, Greystripe and Celtra. But agencies and their clients aren't necessarily sold on rich media, given its cost compared to running mobile banner ads.

"The economics of rich media is still trying to normalize," said Michael Collins, CEO of Joule, the mobile marketing agency within GroupM.

He explained that a rich media campaign might be 10 times more expensive than running banners, carrying CPMs of $15 to $20 compared to about $2. What's more, he noted that the user experience between an in-app rich media ad and a banner can be quite similar, making it that much harder to accept the premium paid for rich ads. "We're having a very tough time justifying rich media in its current state to a good chunk of our client base," he said.

Mihael Mikek, CEO of Celtra, defended the superior performance of rich media over banners, which he said can lead to longer wait times for a browser window to load and thus reduce engagement. Sal Candela, mobile director at PHD Media, also noted that 30% of Web publishers don't have a mobile-optimized presence, leading to a frustrating user experience if someone clicks through on a banner to the marketer's site.

Mikek acknowledged, however, that rich media advertising will become more widespread when CPMs come down to the range of $4 to $6 dollars and when the line between rich media units and banners becomes more blurred. Celtra and other rich media vendors have also launched self-serve offerings to allow agencies and marketers to create ads at lower cost using automated tools and templates.

Even if rich media offered higher value because of higher interaction rates, Collins said other hurdles remain in addition to cost, including lack of scale for campaigns and the difficulty of planning and executing buys across different device types, operating systems publishers, and apps. "It's cumbersome right now," he said.

Paul Longo, senior vice president, group digital director at Mediavest, added that the fragmentation associated with mobile advertising also makes it difficult to standardize metrics to prove to clients the effectiveness of campaigns. "We just need to have one unified way to look at data and roll it up," he said.

Candela suggested engagement measures like time spent are more important than the click-through rate, which historically has been the key metric for display campaigns on the PC-based Web.

He also acknowledged that accidental clicks are more of a problem on the mobile Web than on the desktop because of the smaller form factor. A study earlier this year by lead-gen agency Pontiflex and Harris Interactive suggested that nearly half (47%) of mobile app users have clicked or tapped ads by accident more often than on purpose.

Candela argued that because rich media executions focus on behavior beyond just clicks, it's less likely to lead to wasted ad spend based on cost-per-click buys. The panelists all agreed that tablets represent an even bigger opportunity for rich media because of the larger screens and ability to interact more easily with ads.

For the most part, Collins said the barriers holding back rich media from faster growth are mostly tactical issues that will be resolved over time. An updated forecast released by eMarketer Tuesday predicts that U.S. mobile advertising will grow from $1.2 billion this year to $4.4 billion in 2015.

The share of dollars going to rich media and banner ads together is expected to increase from 30.7% in 2011 to 36.4% by 2015. The firm doesn't break out spending on banners and rich media separately.