Mobile app-vertisements don't add up for all brands

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Smartphones still represent a minority of U.S. mobile device purchases, accounting for 23 percent of handset sales volume in Q1 according to recent data from market research firm NPD Group. But for advertisers, smartphones are where the majority of the action is. A new consumer study conducted by researcher GfK Technology on behalf of social networking service provider Brightkite reports that while 38 percent of all U.S. mobile subscribers recall seeing advertising on their phones in the first quarter of 2009, the number increases to 59 percent among smartphone users. No less noteworthy, most feature phone users cite SMS as the dominant advertising channel on their devices, but smartphone users encounter most of their ads on the mobile web. In addition, GfK notes that 20 percent of smartphone users saw ads in mobile social networks and 15 percent viewed them in the context of mobile TV/video services. The firm forecasts that at the current rate of growth, some of these new ad formats should surpass the mobile web and/or SMS by year's end.

Advertisers are ahead of the curve--for a growing number of companies, marketing on mobile already extends far beyond traditional banner ads and text links. Instead, they're turning to so-called "app-vertisements"--i.e., branded mobile applications and in-application ads. This week, Medialets--the firm behind a much-discussed "shakeable" iPhone app-vertisement for Dockers--announced the completion of a $4 million Series A financing round; according to Silicon Alley Insider, Medialets-powered ads sell for more than 10 times the price of traditional mobile banner ads, fetching premium rates in the range of $20 to $30 CPM (cost per 1,000 impressions). Companies from across the spectrum of industry have now introduced branded iPhone applications, including such success stories as Zippo's virtual lighter app and Kraft's iFood Assistant, which boasts more than 7,000 recipes. But with the App Store closing in fast on the 50,000 iPhone and iPod touch application benchmark, app-vertisements face just as much of a challenge standing out from the pack as any other app.

For that matter, a new study released by Forrester Research contends that despite the app-vertisement frenzy, mobile applications don't make sense for all brands and industries. To start, Forrester notes the iPhone remains limited to one mobile operator in most countries, limiting advertiser reach, and while consumers across multiple age groups express desire to purchase an iPhone, interest does not yet represent a mass market. Forrester adds that a successful app-vertisement must provide value to the end user while furthering the brand's own strategic objective--marketers seeking to drive deeper affinity and intent to purchase might also integrate interactive features enabling users to engage with a community of friends. Forrester also cautions companies to carefully weigh developmental costs and promotional budgeting before taking the plunge, and also warns of the dangers awaiting poorly conceived or buggy apps, which could damage consumer perception of the brand. Or in other words, brands should apply common sense--as big a flap as the Baby Shaker application created, just imagine the controversy that would have ensued had the app been sponsored by Pampers. -Jason