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When Kate Sayre, the global head for consumer goods strategy at Facebook, has to sell the importance of a smartphone to anyone, she sometimes asks them to unlock their device and hand it over to the person next to them.
The usual hesitation that follows demonstrates that these devices are becoming an incredibly intimate part of our lives. “Today people are much more likely to get their information from a mobile phone than they are from more traditional sources of information,” Sayre tells finweek.
For an online advertiser like Facebook, this is good news as it has created an increasingly lucrative market. Research group eMarketer expects global mobile internet advertising spend to surge from $61.1bn in 2015 to $166.63bn in 2018.
There is a similar story in SA, as according to Statista the local mobile internet advertising market is expected to grow from $474m in 2015 to $887m in 2018.
Facebook, which owns picture-sharing site Instagram and messaging service WhatsApp, gets a fair chunk of this spend. Sayre points out there are 1.6bn people using Facebook and “about one in every five minutes consumers spend on mobile, is on our platform”.
The scale of this shake-up can be seen in how the internet grew compared with radio and TV over a 20-year period from the moment they were introduced. Radio generated about $5bn in ad revenue, while that generated by TV was at about $23bn and the internet was at $60bn. “Each new marketing channel has grown faster than the previous one,” Mary Meeker, a partner at venture capital firm Kleiner Perkins Caufield & Byers, noted in her annual technology trend forecast.
But just because the internet (especially mobile internet) has grown so rapidly as an advertising market, it does not mean consumer goods companies have adapted well to this change.
In fact, consumer goods brands are in a quandary. The types of media – TV, print and radio – they have historically used are losing audiences, and they still have to get their heads around the thing that’s replacing them – people constantly peering into their mobile phones.
This dilemma could be seen in the fact that 25% of total media time was spent on mobile devices in the US in 2015, but only accounted for 12% of total ad spend, according to Meeker. By comparison, consumers spent 4% of their time consuming print but this accounted for 16% of ad spend. “Advertising is right now over-indexed to legacy media,” said Meeker.
Switching to mobile, however, is not as easy as it sounds, as Sayre points out that the way people consume media over their phones is very different from how they consume other media.
There are millions of these devices but they are deeply personal to each user, so ads on them must be personalised. “We have moved from having one message reach tens to hundreds of millions of people, to having a message that is much more tailored to individual segments and individual people,” says Sayre.
Under the old marketing model the formula was simple. Come up with a concept, test the ad, place it and then measure if it had any impact on sales. But this meant waiting for feedback from retailers, which could take weeks.
With the mobile internet, companies can get feedback within a day, as they are able to track through social media which demographic and in what region people showed interest in a particular advert.
The changing environment gives manufacturers the opportunity to reshape the power balance between themselves and retailers, said Martin Sorrell, CEO of UK-based multinational advertising and public relations firm WPP, at a recent conference in Cape Town.
Under the old rules, they had to work through the retailers to form a relationship with consumers. They needed the retailer to place their products and to keep them informed on how well and where their goods are selling.
The combination of smartphones and social media, however, gives manufacturers a chance to build a direct relationship with the consumer. They can in effect cut out the retailer.
Sayre says this ability to build direct relationships with consumers is especially revolutionary for smaller businesses. Before, they were limited by small marketing budgets but now they have the ability to directly target people.
One such company was local yogurt chain Wakaberry. It specifically targeted ads at a “tech-savvy youth” demographic through Facebook, and managed to boost sales threefold in a campaign in December 2013, and sales doubled in January 2014.
This article originally appeared in the 14 July edition of finweek. Buy and download the magazine here.
