The Devil In The Details

Editor's Note: We liked yesterday's Online Pulishing Insider by David Koretz so much, we had already published it a month ago. OK, it was a mistake -- although, as before, the column generated a number of comments on the OPI blog. Below is the story David actually sent us for his June contribution.

Every time an ad guy uses the absurd example of your mobile phone displaying a coupon when you walk by a Starbucks, an angel loses its wings.

This is one of those incredibly stupid ideas that only sound good when you ignore all the details. The mobile advertising industry needs to grow up, get realistic about how to drive revenue, and damn it, pick a better example.

Every time I hear someone use this example, I can see a new bubble forming around them.

Let me count the ways this Starbucks coupon example is inane:

First, consumers are not going to tolerate advertising on a phone service they are paying nearly $100 a month for. Neither are business users. The demographics of users that will deal with ads skew much lower on the value scale for advertisers. Even the users that will accept some advertising are not going to want to be bombarded, so there are further limitations on type and frequency of advertising, reducing the potential of mobile advertising.

Second, the technology is not there yet. The penetration of phones that have a sufficiently sized screen, 2.5G or higher Internet access, and GPS is south of 10%. Plus, the buyers of these phones are either business users or high-end consumers, so they are the least likely to tolerate advertising. It is going to take several years for penetration of smartphones to reach the segments that will accept ads.

Third, if your phone pushes ads at Starbucks, what happens when you walk by the plastic surgery center? I can only assume that having your telephone recommend "enhancement surgery" would make an awkward first date even more awkward. The reality is that America, for the most part, is a driving nation. Nobody wants ads delivered at 60 miles per hour. Furthermore, in the few walking cities this country has (i.e. New York, Boston, San Francisco), there is an extremely high density of stores. If your phone rings when you walk past each store that wants to advertise to you, it will drive you crazy. This means the user needs to be able to choose which ads they would like delivered.

If the user chooses which ads they want, they are no longer ads.

Fourth, advertisers are not going to spend money for customers they are going to get anyway. When I'm standing outside a Starbucks, you don't have to convince me to go inside. Long ago, we as Americans somehow managed to convince ourselves that spending $5 on coffee with syrup and an Italian name was a practical decision. A 50-cent coupon is not going to sway the average purchaser.

More importantly, because even enhanced GPS technology is not precise enough to detect whether you are near a Starbucks or in a Starbucks, Starbucks will be offering coupons to customers already standing in line.

Why on earth would Starbucks want to pay absurdly high mobile advertising CPMs to offer a discount to a customer that was ready to pay full price?

The future of mobile advertising is not about ads or coupons when you walk by, it's about micro services.

Micro services are simple, fast workflows that let users accomplish things quickly. Ideally, these services leverage stored data or knowledge about you to make them even faster and simpler. For example, your mobile phone could detect your location, show you five restaurants for lunch nearest where you are standing, and let you make reservations. It already knows your name and credit card, so you would not even have to enter any data.

Here are some other examples of micro services:



· Instantly view movie show times and buy tickets at the theaters closest to you.

· Upgrade to business class, or change flights. If there are open business class seats four hours before the flight, why not offer them to travelers at a reduced cost to maximize revenue?

· Automatically upload all my photos to an online photo service where they can be backed up, printed, or enhanced.

Asking advertisers to pay $20 CPMs for a tiny ad on a 2" screen is a huge stretch. Instead, micro services enable advertisers to pay on a CPA model and eliminate risk. Well executed, they would not be perceived as advertising, so you could reach premium consumers and business users.

If you are in the mobile advertising business and insist on using a Starbucks example, here is a much better one: an app that stores your favorite Starbucks drinks, and enables you to order them with one click when you are five minutes away so you don't have to wait in line. This would help make Starbucks even more of an impulse buy, while avoiding discounting.

When is the mobile advertising industry going to realize the devil is in the details?
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