2013 will separate the strong from weak in mobile commerce

April 3, 2013

2013 is a make-or-break year for mobile startups and advertisers alike. We’re at a crossroads as brands move away from the “test phase” in the mobile space and toward real adoption into the marketing mix. Consumer smartphone adoption is approaching saturation, and the media consumption shift to mobile as the “new first screen” is hitting full stride.

For mobile startups, big brand interest is what makes 2013 critical. Our products must be ready for prime time as brands pour larger and larger budgets into mobile. As a result, our offerings — and business models — will be tested.

There are hundreds of thousands of apps on the market, and the majority don’t make a dime. Yet mobile startups are not nonprofits. From a monetization standpoint, startups have options — and some are better than others.

The mobile commerce model seems to have lots of potential, but we haven’t found users buying from their phones en masse just yet. The virtual goods model — akin to pumping quarters into an arcade — works well for specific companies like Zynga. And the freemium model, which is working relatively well in the online music space, has its limits. Spotify recently topped 6 million paid subscribers, though it pays significant fees for content acquisition and artist royalties. Any company using the freemium model must ask itself, “If only 20 percent of users decide to pay, how do I cover my expenses for the rest of users?”

For those of us aiming to keep the lights on and make money, the great news is that mobile advertising is set to explode. According to Forbes, mobile spending will increase four-fold across the board over the next four years. It has already grown significantly: My company inMarket was bootstrapped and was profitable in just two years. We see real dollars being spent now, and it’s coming from those beyond the early adopters and corporate visionaries.

What’s in it for brands?

From a usage standpoint, phones and tablets already represent 23 percent of all web traffic and desktop computer shipments are falling like a rock. Yet only one percent of ad spend targets mobile users. Now that millennials make up the majority of the prime-spending demographic, brands risk completely missing a huge and vital audience.

Our close partner Mondelez International is a prime example.The $36 billion global snack powerhouse spun off from the smaller Kraft last year. Home to Oreo, Halls, Trident and many more, Mondelez recently dedicated 10 percent of its global marketing budget to mobile.

The shift shows tremendous vision on behalf of Global Media VP Bonin Bough, as they’re the first industry titan to align with changing consumer behavior in such a big way. This precedent foreshadows what we’ll see in 2013: multinational brands shifting major dollars toward mobile.  They must if they want to keep up with their consumers.

For many brands, it’s not a question of if they should shift money to mobile — it’s how. They realize that mobile advertising is not about just translating banner ads to a smaller screen or repurposing video content.

That’s where the startups come in. Entrepreneurs have broken ground to create new consumer engagements where they matter. More relevant advertising based on targeting options like point-of-sale have proven especially powerful on the bottom line. For example, brands we work with have seen ad engagement lasting for 90 seconds — or three times the average TV commercial — that lifts purchase intent by 30% while shopping in-store.

The impact increases by reaching consumers when they’re out shopping, as opposed to in their office chairs or on the couch. Messaging at the critical “moment of truth” is able to drive measurable incremental sales. It’s a groundbreaking prospect for marketers: Deploy the accountability of online advertising into the real world, where over 90 percent of all transactions still take place.

Think about that for a second: Advertising via mobile can be tied to real-world sales. The savviest brands are already leveraging this idea to their advantage.

We see the smartest large companies focusing on agility and proactively adapting their strategies to capture market share during this once in a generation opportunity. With campaign data justifying mobile’s impact on real-world sales, “waiting and seeing” no longer holds merit. It used to be the case that brands operating in mobile possessed an unfair advantage. Now, those that haven’t entered mobile are playing with a handicap.

For entrepreneurs with their sights set on the cutting edge, the mobile future they imagined when launching their companies is finally here. Brands have moved beyond speculative interest, and new companies with powerful ideas are ready to make things happen. Time will tell which companies are making the right investments, but its clear that mobile will be crowning new winners in 2013.

Veteran entrepreneur Todd Dipaola co-founded inMarket in 2010 to bring the performance and accountability of digital marketing to the realm of retail. Under Todd’s leadership inMarket has partnered with brands like Coca-Cola, Procter & Gamble, and Unilever, and others.

Copyright 2013, VentureBeat

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