By Kevin Hannan

Despite all the excitement about mobile advertising in the press this year, the price of mobile ads remains very low.

According to data from a May 2012 Kleiner Perkins Caufield & Byers study, mobile display ad prices are, on average, one fifth the price of online display ads. Based on current prices for generic inventory on mobile ad exchanges, you could send a display ad introducing yourself to everyone in New York for only a couple thousand dollars.

Why? Fundamental economics.

Searching for answers
Supply of mobile display ads is growing almost exponentially. On the demand side, advertisers remain suspicious that mobile does not deliver value, and are not voting for mobile with their ad dollars.

Unlike in online advertising, advertisers have not been able to identify audiences of interest, or track purchases outside of downloads that deliver value for the ad buyer.

To address these challenges, mobile display needs to drive relevant ads and offers to each user and provide a mechanism to make it easy to buy on the phone.

To better understand this problem, it is worth considering what has really worked in online advertising: search and retargeting. Both of these methods are based on some level of purchase intent.

Search has translated well to mobile and accounts for half of the mobile ad market, according to an eMarketer report from September. Retargeting has not yet taken hold because technical limitations prevent marketers from finding a specific user across mobile applications and Web.

This leads to the question: Is there a way to target based on intent in mobile, when the technical underpinnings to find a specific user across publishers are lacking?

The answer is yes – by tapping into social and location data on mobile, marketers can uncover user intent.

For example, intent can be derived from what people tweet on their phones and using those intent signals to target ads.

If I tweet “psyched for my trip to New Orleans,” then I am signaling that I am probably in the market for travel services and restaurants. Marketers are leveraging this intent and targeting with good results.

With location data, marketers can identify shopping patterns of mobile users — regularly visiting a location can indicate being in the market for a specific product.

The clearest example is one where a mobile user visits multiple car dealerships in a short-time. This user has shown a strong intent signal that she is in the market for a car.

Will it click?
Location data when combined with predictive analytics can also open up the possibility for location-based retargeting.

Location data can reveal that a user shops at Target every other week. This user can be retargeted based on this behavior. Target, for example, can reach the shopper through offers and messages to increase their trip frequency.

Likewise, Costco could use the shopping behavior to convert the user to its own store. Location retargeting has the added benefit of being able to reach the user in advance when she is planning her purchases.

By understanding consumer intent, marketers are driving engagement and clicks. But converting users on their phones remains a challenge.

Like with online commerce in its early days, it is tough to get a user to enter her credit card and billing information on the phone, which leads to a big drop-off.

In certain categories such as professional services or restaurants, a call is often better than a click and click-to-call works well today.

However, to open up the full potential of mobile display across all categories requires that the industry make it easy to buy on the phone with one-click purchases.

With the heavy push behind mobile wallets from industry leaders, this challenge will likely get solved in the next year.

MOBILE PROVIDES a new way to infer intent and understand purchase behavior.

When this insight is combined with a one-click purchase, mobile display will become a capable medium for driving value for ad buyers and publishers.

Industry leaders such as Google, eBay’s PayPal and Amazon recognize the potential of combining mobile targeting and on-phone purchases and are building solutions to close the loop and give mobile display a new chance at making real money.

Kevin Hannan is vice president of product management at Sense Networks, San Francisco. Reach him at
[email protected].