• by Laurie Sullivan  @lauriesullivan, July 11, 2011

U.S. advertisers will spend more than $1 billion this year on mobile display and search ads to reach consumers who will make more than $8 billion in retail purchases on their mobile phones, according to a Forrester Research report released Monday.

As the adoption of high-end mobile devices continues to rise, consumers will not only text and search on the Web for information, but consume content and media. By the end of this year, brands will find consumers on any of the nearly 100 million smartphones that Forrester estimates will ship.

In the Forrester report, "eBusiness: The Future Of Mobile Is User Context," analysts note that mobile delivers immediacy, simplicity and context, making content relevant to individuals rather than the masses. The formula drives success. For instance, music services such as Shazam or Internet radio station Pandora not only made delivery of content immediate, but also made it incredibly easy to identify the name of songs and purchase them through Apple iTunes.

In an effort to assist marketers, Forrester has defined a vocabulary to help them discuss, plan and execute on the opportunity to deliver services, messages and transactions with full knowledge of the customer's situation, writes Forrester analyst Julie Ask. She calls this the "customer's 'mobile context' and defines it as: "The sum total of what your customer has told you and is experiencing at his moment of engagement."

If there's a downside to this convenience for consumers, Forrester points to a lack of privacy. The research firm, however, believes consumers will "voluntarily" relinquish privacy in exchange for the benefits of mobile convenience. In this scenario, products become services, consumers consume content through individual Internet streams, and businesses could create audience segments for content similar to ads.

Brands will need to keep a keen eye on privacy, while improving the convenience of mobile services by improving the use of context in delivering mobile experiences. Opt-in services will become necessary. As an example, the Forrester report points to technology deployed by Continental Airlines that can tell how close a passenger is to a departure time and deliver relevant content. By integrating location into the research and purchase processes, Continental's marketers make use of context.

Forrester analysts believe context is underused. During in-depth interviews with 24 digital marketing and strategy professionals across a variety of industries, Forrester set out to access the use of context in the delivery of mobile services. Among those professionals, only nine used location-based context beyond GPS to find the nearest ATM, gas station, store or other physical location.

When marketers were asked why not leverage more context and user-content in the design or the delivery of mobile services, 17% of survey participants said it was too low a priority; 11% cited technical challenges and a lack of expertise; 3% noted privacy concerns; and a combined 6% pointed either toward organizational ownership, financial resources and cost, or an inability to justify the return on investment.

While brands continue to increase their budgets for mobile and search engines integrate social signals into serving ads on computers, Forrester analysts view the lack of integrating user-generated content in search and display mobile ads as a missed opportunity.

Forrester views the evolution of context in four phases.

Phase 1: Master the basics, such as time of day and base behavior or preferences.

Phase 2: Layer in intelligence, such as location and privacy settings.

Phase 3: Break from PC contexts supported by sensor technologies that, combined with sophisticated display and video elements, will offer new services such as detecting body odor.

Phase 4: Embrace motion-detecting on one semiconductor chip with a common programming layer that simplifies the use of applications.