#DigitalZeitgeist: Why the $25B Mobile Spend Gap Exists (And Why It Won't Last Long)

Most of us have probably seen or heard about Mary Meeker's monstrous 2015 Annual Internet Report. One slide, however, has been getting a great deal of attention: the chart showing the $25B ad spend gap in mobile.

To sum it up: the attention of populations has moved swiftly to mobile devices, but advertising dollars have yet to follow in proportion, resulting in a massive gap (and opportunity). But why does this gap exist in the first place?

Ultimately, mobile has been plagued by a lack of brand-friendly creative opportunities as well as technical sophistication -- which is required to properly target audiences and measure the impact of advertising dollars. These factors lent themselves to an atmosphere where mobile was considered safe to ignore, leaving billions of dollars on the table.

Let’s take a closer look at the specific factors that contributed to this phenomenon:

(1) Mobile targeting has been an enormous challenge for marketers over the past decade, namely because the technical environment of a mobile device has important differences from desktops. Mobile environments are not very "friendly" to browser cookies. Oftentimes they are either blocked by default, or fail to persist between sessions, making it difficult, if not impossible, to do proper behavioral or audience targeting. Today that problem has been solved by using unique device IDs, instead of cookies, to track and target audiences. From a location targeting perspective, marketers had to rely on IP addresses, which are notoriously inaccurate, especially on mobile devices. But today, with so many GPS-enabled devices, and so many people willing to trade their privacy for app utility, advertisers can pinpoint audiences in extremely precise ways.

In summary: Immaturity in mobile targeting technology used to be a major impediment to marketer adoption, but it’s now light years ahead of where it used to be, and it will only get better.

(2) The creative options on mobile devices have historically been very dull. Most marketers, when thinking about mobile creative immediately think about the standard 320x50 banner that sits either at the top or bottom of mobile screens – not exactly the most impactful canvas on which to convey your messaging. But that is no longer the case. Marketers today have the ability to run full-screen interstitial ads either in apps or on lock screens. Additionally, the emergence of native ads within social media feeds has given birth to a completely new and effective format. With the consumption of video skyrocketing on mobile devices, it's now possible to run high-impact, in-stream video ad campaigns.

In summary: The creative options and the advertising experiences on mobile used to be extremely limited, which severely hindered the influx of advertisers dollars. But the creative opportunities on mobile continue to grow and get richer, which should greatly appeal to brand advertisers.

(3) Tying everything together as a marketer and understanding the impact of advertising dollars is crucial, but mobile has had measurement challenges from the beginning. Furthermore, we now live in a multi-screen world where audiences constantly move across devices. Earlier this year, Sean Downey from Google claimed that there has been a 500% increase in multi-screen consumption and 90% of customers move sequentially between devices. But while the consumption of content across multiple devices accelerates, advertising dollars haven’t followed at the same rate.  This is because of the massive challenge in being able to measure everything in a standardized way, create a single view of the customer, and make sense of attribution in an increasingly complex ecosystem and customer journey. There are many ad tech companies focused on this challenge, but only a few are clearly ahead of the pack [1].

In summary: Proper measurement and attribution are key requirements to attracting advertising dollars, but on mobile specifically, the technology was lacking. Today, there still isn’t a cross-device “silver bullet” so selecting the right partners in your tech stack is key.

Over the past decade, mobile has been maturing slowly as a marketing channel. It was technically and creatively challenging at first, which caused the majority of marketers and ad dollars to sit on the sidelines and wait it out. That's why we have a $25B spend gap in mobile today. But that is no longer a viable stance. Now that we live in a mobile-first world that will only grow in magnitude, and now that consumer attention is clearly spread across multiple devices, mobile is no longer just an option; it's a must-have for every marketer. As a result, I doubt the $25B spend gap in mobile will last much longer.

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[1] It's no surprise that last week Google announced new cross-screen measurement capabilities. According to Neil Mohan, Google's head of display advertising, they are "making sure advertisers and publishers have the tools they need to reach consumers in a mobile-first world. One of the biggest announcements is cross-screen measurement..." Another major ad tech player that is well poised to tackle the cross-screen challenge is Facebook. Facebook, along with Google, dominate mobile ad spend, and they will keep dominating mobile ad spend because they have the most robust identity systems. Both are deterministic in nature, which means that the data they are using to determine a person's identity is declared by the user, stored in their databases, and associated with all the other profile data they have about those users. This is a marketer's dream, and why they are well positioned to continue dominating mobile ad dollars.