The State of the Industry: Mobile Advertising

The State of the Industry: Mobile Advertising A Survey of Over 100 Major Brands & Advertisers on Performance & Future Spend Written by: Melinda Gipson, DM2PRO Co-Presented by: Millennial Media

Table of Contents PAGE 3: Executive Summary PAGE 4: Forecasted Mobile Advertising Spend PAGE 5: Who is Buying Mobile Advertising PAGE 6: Leveraging Mobile Targeting PAGE 6: Causes for Campaign Under-performance PAGE 7-8: Brands On Mobile Advertising PAGE 9: Barriers to Entry PAGE 10: Conclusion 2

Executive Summary Millennial Media collaborated with DM2Events.com in an in-depth exploration of attitudes and spending plans of leading marketers and publishers to help us oﬀer benchmarks for attendees at our Sept. 17th digiday:MOBILE conference. To complete, “The State of the Industry”, we surveyed 100 leading agencies to compile an in-depth analysis of mobile advertising performance and forecasts of future spending. As the mobile advertising industry continues to evolve, this data provides a critical view on where the industry stands today: where the industry, is and is not, exceeding advertiser’s expectations and why advertisers are planning to buy mobile in the future. With 60 percent of non-mobile marketers planning to employ mobile advertising in 2010, the increase in mobile spend is among the leading highlights. Mobile spending is expected to increase next year, with 31 percent of agency respondents stating that they will invest between $100K and $249K. More than 15 percent (15.4 percent) plan to invest more than $1 million. More than half of Q4 mobile campaigns will represent between 1 percent and 10 percent of their clients’ total spending, but, for a few, that number will be a whopping 40 percent - 50 percent. Current participation remains high with nearly ¾ of the 100 leading agencies that responded to “The State of the Industry” stating that they have developed mobile campaigns for themselves or a client. Meanwhile, 28 percent have not taken the plunge. Mobile advertising performance meets expectations and remains valuable. Among those who have executed mobile campaigns, 78 percent of respondents said the medium met their campaign goals, and an additional 9 percent said mobile performed “beyond our wildest expectations.” For most agencies (89 percent), the mobile facet of a campaign is just one portion of a multi-platform buy. But nearly a third (30 percent) said mobile has become an “indispensable” part of the media mix. Another 67 percent ranked mobile as “somewhat valuable” and only 2 percent said it was not valuable in their overall media mix. An additional takeaway, internal resources remain a barrier to entry. More than 80 percent of agencies who have participated in mobile campaigns have hired or developed internal resources to support them. Nearly 90 percent stated they are typically the ones to suggest that a client employ mobile as part of their campaign strategy. Still, it often involves multiple partners to expertly execute on the promise of mobile media. Partners include technology, metrics, buying network and app developer resources among others. Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009. 3

Forecasted Mobile Advertising Spend Satisfaction will likely translate to greater spending in the coming year. While the largest cohorts said they are spending less than $100,000 on mobile advertising in 2009, the most popular answer for 2010 was between $100,000 and $250,000. Those spending up to a half million dollars tripled, as did those spending between a half million and $1 million. More than 15 percent of respondents plan to invest more than $1 million with the top tier, where 2.6 percent, project spending of greater than $5 million. The fourth quarter will see a ramp up in mobile spending compared with last year. While the largest cohorts of agencies’ 2008 holiday spending, 38 percent, was zero, 33 percent said 2009 spending will represent between 1 percent and 5 percent of their clients’ holiday marketing. For nearly 20 percent, that ﬁgure climbed between 5 and 10 percent (Figure 1). How much is your projected mobile spending for 09/10? (Respondents: Agencies) (Figure 1) 52.2% 21.7% 4.3% Less than $100K 2009 Spending $100K - $249K 2.2% $250K - $499K 10.9% $500K - $999K $1MM - $5MM >$5MM 8.7% Don’t know 23.1% 30.8% 12.8% 2010 Spending 7.7% 12.8% 2.6% 10.3% 0 5 10 15 20 25 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 14. Millennial Media 2009. 4

Who is Buying Mobile Advertising The CPG, Retail, Entertainment, Travel and Restaurant categories are expected to lead mobile spending. Engagement leads the number one sought return for an investment in mobile marketing, though “opt-in”, or list building, was cited as the most likely goal for Q4 campaigns. Most agency respondents were relative novices, having completed 10 or fewer mobile campaigns; however, 17 percent of respondents had completed between 10 and 50 campaigns and 11 percent had completed more than 100. Mobile networks represent the leading means by which agencies target their mobile campaigns. In fact, 80 percent of mobile campaigns employed a mobile ad network of some kind and about half of those have a single favorite provider (Figure 2). On average, how many mobile ad networks do you/do you clients employ for the typical mobile campaign? (Respondents: Agencies) (Figure 2) 1 40.0% 2 40.2% 3 2.2% More than 3 15.6% None (we buy directly 8.9% from publishers) None (we only develop targeted apps.) 11.1% 0 5 10 15 20 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 24. Millennial Media 2009. 5

Leveraging Mobile Targeting By far the most commonly used form of targeting was geography (52.2 percent), followed by age (39 percent) and gender and behavior at 28 percent respectively (Figure 3). However, the demographic or behavior that is targeted with mobile media can vary by campaign. Said one agency respondent, “We are using [mobile advertising] for every target. The big question is: Does the mobile idea conceptually work with the campaign?” In optimizing your mobile campaigns, do you target by (Respondents: Agencies) (Figure 3) Geography 52.20% Age 39.10% Gender 28.30% Behavior 28.30% Location 26.10% Carrier 17.40% Channel 15.20% Handset 13.00% Platform 10.90% Income 6.50% Metadata 2.20% One-to-one 0.00% All of the above 13.00% None of the above 10.90% 0 5 10 15 20 25 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 26. Millennial Media 2009. Causes for Campaign Under-performance When a campaign was judged to underperform the primary reason cited, by far, was insuﬃcient reach (26 percent of respondents), followed by “wrong creative”, which was cited by 18 percent of respondents. The one thing most agencies cited to improve their mobile marketing experience was “standardization of device interfaces or ad units.” “Technology barriers” were cited as being more responsible for underperforming campaigns than reach, and one respondent admitted, “We didn’t promote it heavily enough or far enough in advance,” making clear that even a substantial investment in mobile media can be enhanced with collateral marketing. 6

Brands On Mobile Advertising Brand advertisers responding to the survey were generally less experienced than their agency counterparts. Only 48 percent of respondents had developed a mobile campaign, application or a persistent mobile presence. Yet, when brands ﬁnd what works, they are inclined to repeat it. Some 12.5 percent of the total surveyed had each completed between 10 and 50 campaigns, between 50 and 100, and more than 100 campaigns. Consistent with agencies that have tried mobile advertising, 75 percent of brand advertisers said the medium either met or went beyond their wildest expectations for their campaigns. Double the number of agency respondents – 63 percent – labeled mobile advertising an “Indispensable” part of their overall media mix (Figure 4). How do you view mobile as part of the overall media mix? (Respondents: Brands) (Figure 4) Indispensable 62.5% Somewhat valuable 37.5% (nice to have) Not valuable 0 1 2 3 4 5 6 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 39. Millennial Media 2009. Only roughly two-thirds of brand marketers have internal resources to support their mobile campaigns. Logically, an equal number rely on agencies and technology partners. It would also appear that brands rely on their agency in this context to employ a buying network, as they are twice as likely to rely on metrics, creatives and carriers as they are upon such networks. More than 83 percent say that they accomplish mobile targeting “through our ad network partners.” Of course, brands also claim to be the ones to bring up mobile most often in campaign strategy sessions (88 percent state, “typically, we bring it up”). 7

Brands On Mobile Advertising (continued) Projected mobile spending by brands reveals a much larger jump than it did for agencies, though the total number of respondents was smaller. While half the brand respondents pegged their 2009 spending at less than $250,000, the same percentage projected 2010 spending between $250,000 and $5 million. As an average value, brand respondents forecast at least a 15 percent increase (Figure 5). How much is your projected mobile spending for 09/10? (Respondents: Brands) (Figure 5) 25.0% 25.0% 12.5% 2009 Spending Less than $100K 12.5% $100K - $249K 12.5% $250K - $499K 12.5% $500K - $999K $1MM - $5MM 12.5% >$5MM 25.0% Don’t know 25.0% 2010 Spending 25.0% 12.5% 0 0.5 1 1.5 2 2.5 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 44. Millennial Media 2009. The most popular campaign goal for brands was surprisingly not “Awareness,” but the metric they most used to measure their investment was “Engagement” (Figure 6). If I did do mobile advertising, my main success would be (Respondents: Brands) (Figure 6) Engagement 31.7% Acquisition/Opt-in 22.0% CTR to my Web site 17.1% Purchase 17.1% Loyalty/Retention 7.3% Awareness 4.9% 0 2 4 6 8 10 12 14 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 111. Millennial Media 2009. 8

Barriers to Entry Among marketers who had not yet tried mobile advertising, the majority, 53 percent, cited the lack of internal resources to support their primary reason for refraining (Figure 7). However, marketers seem to be gaining confidence, based on the testimony of their peers. Of those who have not fielded mobile campaigns, 60 percent will do so in Q4 or in 2010. What is the main reason why you haven't developed a mobile campaign or Website? (Respondents: Agencies) (Figure 7) No internal resources 52.8% Don’t know where to start 30.6% Too complex 19.4% Not our target market 19.4% Too expensive 8.3% Insufficient reach 8.3% Insufficient targeting 8.3% Not measurable 2.8% 0 5 10 15 20 Source: DM2PRO – “State of the Industry: Mobile Survey” – September 21, 2009, page 112. Millennial Media 2009. This “State of the Industry Survey” was conducted in collaboration with DM2PRO.com, the membership site for digital media and marketing professionals. The full slide deck can be downloaded from the research section of the site, using the promotion code, “MOBILEPRO.” 9

Conclusion Written by: Millennial Media Mobile advertising presents brands and agencies with creative, engaging and innovative solutions that drive user interaction and ultimately deliver campaign goals. Data continues to support this. Leading mobile advertising networks, like Millennial Media, offer significant advantages in the mobile planning process. Our industry experts provide a full range of resources and mobile specific solutions to deliver maximum campaign performance and to meet your unique goals. Providing a seamless mobile advertising buying process, Millennial Media provides the greatest opportunity to reach and target your audience with our industry-leading technology and reach. To learn more about mobile advertising opportunities with Millennial Media please visit our website: www.millennialmedia.com or Contact Us at marketing@millennialmedia.com. About Millennial Media Millennial Media, the largest and fastest growing mobile advertising network in the U.S., offers the only true, end-to-end platform for mobile advertising – with full-service and self-service solutions designed to meet a vast spectrum of advertising objectives. The company is committed to growing the mobile advertising marketplace by becoming the preferred partner to all advertisers seeking to reach mobile consumers, all publishers seeking to maximize ad revenue, and all mobile operators seeking to further monetize their networks. For more information, please visit http://www.millennialmedia.com or follow us on Twitter at www.twitter.com/millennialmedia. About DM2PRO DM2PRO.com is a knowledge base for digital media and marketing professionals affiliated with DM2Events.com and digiday:DAILY. Membership of $20/month affords access to all the digiday:EVENTS video (including digiday:MOBILE and digiday:APPS), plus state of the industry surveys, how-to tutorials on cutting edge media genres, plus winning creative and content award entries for the MOBI, SAMMY and DPAC Awards. Joining the community portion of the site is free, and gives members a platform where they can share white papers and recent campaigns and post video and audio for other community members. We think you'll agree it's the first site of its kind that treats professionals like you like grown-ups with as much to contribute as our own professional staff. We use @DM2PRO as a kind of user-generated assignment desk, and strive to live up to our tag-line, which is, "when you NEED to know." For questions about the data in this report, or for recommendations for future reports, please contact us at research@millennialmedia.com. ©2009 Millennial Media, Inc. All rights reserved. All product names and images are trademarks or registered trademarks of their respective owners. 10

The State of the Industry: Mobile Advertising

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