The Drawback to Smartphone Ads

AT two inches wide and one-third of an inch tall, a display ad shown on a smartphone isn't much of a canvas for a creative marketer seeking to promote a product or service.

That's one reason smartphones are not working well as a medium for many advertisers. The evidence is telling: advertisers are willing to pay much more to reach a thousand pairs of eyes gazing upon a computer or tablet than a thousand pairs looking at a smartphone screen.

“Size absolutely does matter,” says Christine Chen, director of communication strategy at Goodby Silverstein & Partners, an ad agency in San Francisco. “If you look at the real estate available on a smartphone, it's really sad compared to not just banner ads on the Web, but also to TV, print and outdoor advertising.”

Size isn't the only problem. Advertisers are also limited by what they can find out about smartphone users. It's not technically possible to use cookies with smartphone apps the way it is with a browser. On the Web, publishers typically record users' actions so that advertisers can make an educated guess about a user's identity and interests.

“What makes Web ads so attractive to advertisers is the ability to track actions and optimize accordingly,” Ms. Chen says. Because a smartphone cannot use the same technology, she says, “your ability to track and optimize is much more blunt, or in some cases nonexistent.”

These limitations depress demand for smartphone ads and lead to low prices. A banner ad on a Web page that costs $3 to $5 for every thousand impressions may cost only 75 cents or $1 for a thousand impressions on a smartphone, Ms. Chen says.

Another reason advertisers don't value smartphone ads highly is that users tend to lack a receptive mind-set when using their phones. “It's an activity you do for a short burst of time,” Ms. Chen says. “It's very functional.” That is not a good time to try to make users stop what they are doing and give their attention to an advertiser's message.

Ms. Chen says she tells her firm's clients not to bother advertising on smartphones.

Jeff Lanctot, global chief media officer at Razorfish, says context is much more important on smartphones than on larger devices. “Requesting a marketing-related action while looking at wedding photos would be considered intrusive,” he says, “but while playing a game, it might feel very natural.”

Mark Himmelsbach, director of digital strategy at BBDO North America, sees some potential uses for cell phones as an advertising medium, but he says most marketers take care to limit the size of ads on phones “so as not to irritate people.”

“Mobile ads are relegated to a tiny portion of the screen and are often invisible or ignored by consumers,” Mr. Himmelsbach says.

Phones do have some benefits, like the ability to serve up ads based on location or to integrate advertising into apps that are used for something else, he says. But of all the possible options, he says, “mobile display ads give us the least amount of creative opportunity.”

Location-based mobile advertising, known as geofencing, is directed only at nearby prospects, and it has proved to work well, says Doug Ray, president of Carat North America, a media planning and buying firm. “Knowing where you are geographically and delivering a contextually relevant offer has been effective in driving conversions and sales,” he says. “Geofencing is not possible with a desktop PC.”

Consumers, however, don't necessarily want to be reminded that their phones are location-tracking devices for advertisers. “A mobile device is one of the most personal forms of technology we have,” Ms. Chen says. Location tracking is perfectly legal but apps ask users' permission during installation.

Using the Web on a desktop, laptop, or even a tablet, isn't likely to feel as tightly bound to our personal selves. Much Web content is mass media, broad in reach, and that's good for the advertising business because users do not treat the accompanying ads as an intrusion into their personal space.

“Media consumption is less personal than, say, a Facebook page, a text message or a phone conversation,” says Mr. Lanctot of Razorfish, “and so historically is better suited to be ad-supported.”

MR. LANCTOT mentions three companies that are doing well with mobile advertising: Pandora, Twitter and Foursquare. But each of these is fortunate to be in a business where it doesn't have to contend with “banner blindness” among users.

Pandora inserts audio commercials into its music stream, Twitter puts sponsored ads into tweet streams and Foursquare lets advertisers try out geofencing.

“The advertising on all three is a very natural part of the user experience,” Mr. Lanctot says. “It's not intrusive.”

What doesn't make his list is the smartphone's minuscule display ad. Digital advertisers working with smartphones must somehow make their ads large enough to be noticed, but not so large as to be an interruption. And they must be chosen to match a user's interests, but not so closely as to induce a shiver.