Before worldwide mobile advertising revenue, including search, can reach Gartner's estimated $24.5 billion in 2016 -- up from $11.4 billion in 2013 -- the industry needs to revamp cost structures, ecommerce features, and privacy concerns that put a stop to apps collecting data from contact lists and mobile commerce transactions.
MassiveImpact Founder and CEO Sephi Shapira sees the data market split into three segments, each accessing a variety of consumer data: developers, ad networks, and post-click purchase history living with the retailer.
The data lives in silos, fundamentally disrupting the value chain and making the "value chain broken," he said. "If you're an advertiser trying to sell a product on a mobile device you must go to an ad network like Google or Enmobi and buy a banner click," he said. "The optimization of the ad network is done by who clicks on the banner, and not if they buy the product."
A profitable MassiveImpact generates $30 million in mobile advertising annually, with an expectation to reach $60 million in 2013. About 25% of revenue comes from the United States, 50% from Asia, and the remainder from the rest of the world.
A candid discussion with Shapira reveals his thoughts on the three biggest issues in mobile advertising and search optimization for brand marketers.
First, ad networks don't know whether a click leads to a sale, so that requires the advertiser to continually optimize the traffic and change the bids to achieve a return on investment. Ad space isn't optimized by how many sales are made, but rather the number of clicks. It's stifling the market. MassiveImpact uses sale analysis to optimize inventory.
Second, barriers to entry requires companies to recreate themselves. Some small and-medium-sized companies find it difficult to launch campaigns because they must build an app, mobile Web site, and have knowledge of privacy regulations. Buying advertising -- even from Google -- requires a team of experts, buying team and analysts to calculate keywords and conversion rates.
Finally, payment systems are rudimentary. While there are standards for mcommerce, the process remains cumbersome and Web sites often don't process information properly.
I also asked Shapira's opinion on a comment from Google Founder Larry Page during the company's Q4 2012 earnings call. Page mentioned companies that should not necessarily build a mobile site, but optimize the site for mobile instead.
Shapira said people want functionality. They don't want the stripped-down mobile site. It's not a compromise most consumers are willing to make.