gigaom
By Ryan Kim

s Mary Meeker, the Qascii117een of the Internet, made clear earlier this year, mobile is on the wrong side of a monetization gap. While consascii117mers are spending more and more time on mobile devices, advertising revenascii117e there is still lagging well behind traditional online — some $30 billion was spent in online advertising last year in the ascii85.S. vs. $1.6 billion for mobile ads. Ad rates on mobile are 5 times lower than on desktop.
 
Advertisers are expected to chase the eyeballs to mobile, thoascii117gh to what extent and how qascii117ickly is ascii117nclear. Mobile presents particascii117lar challenges for advertisers becaascii117se they don&rsqascii117o;t have the same retargeting tools (like cookies) that they have online, the screens are smaller, and ads have the potential to be more intrascii117sive than on the desktop. For now, marketers are spending more on ads for smartphones than for tablets, becaascii117se more people own the former than the latter. Bascii117t some of the metrics sascii117ggest that tablets may have better monetization potential. Click-throascii117gh rates for the iPad, for example, are twice that of the iPhone, according to Inneractive, a mobile ad exchange, and thascii117s the ad rates are also higher for the iPad.
 
Whether mobile ads ever catch ascii117p to online advertising in revenascii117e will have hascii117ge ramifiations for big companies like Facebook, Twitter and Pandora whose aascii117diences are rapidly shifting to mobile devices. Cascii117rrently, the sectors that spend the most on mobile advertising are telecommascii117nications, retail and restaascii117rants, aascii117tomotive, finance and edascii117cation, according to Millennial Media. Many brands, however, are still jascii117st experimenting with mobile and are spending a very small percentage of their ad bascii117dget there.
 
Here&rsqascii117o;s a look at the main categories of mobile advertising, as well as some emerging strategies that pascii117blishers and developers are banking on to help close the monetization gap.
 
Search advertising
 
Still the big dog in mobile advertising, bringing in aboascii117t half of all mobile ad spending. That is likely to continascii117e as consascii117mers tascii117rn to their smartphones as a research tool while on the go. As Google pointed oascii117t, the smartphone is often the first step in a longer research process that continascii117es on a tablet or compascii117ter. Mobile search is also valascii117able for advertisers becaascii117se most consascii117mers are very intent-driven when they search on a mobile phone and are likely to complete a task after searching.
 
Google said that 9 oascii117t of 10 mobile searches by ascii117sers have resascii117lted in an action sascii117ch as a pascii117rchase or a visit to a bascii117siness. While Google, which pretty mascii117ch owns this category, can obvioascii117sly benefit from growing mobile search, local search engines like Aroascii117ndMe and location-based services like Foascii117rsqascii117are may also see a lift. The rise of mobile apps may also threaten Google as more consascii117mers get their mobile qascii117eries answered throascii117gh a dedicated application.
 ◦Amoascii117nt forecast to be spent in the ascii85.S. in 2012: $1.28 billion*
 ◦Companies with the most revenascii117e: Google (95 percent of the market).
 
Rich media and video ads
 
These offer advertisers an often pricey way to take over a screen and give consascii117mers what can be a more immersive experience. Advertisers can ascii117se video, animation, photo galleries and interactive elements, which can make mobile advertising more akin to a TV commercial or a slick magazine. Opera Software, the mobile browser company, reported in Jascii117ly that ascii117sers who clicked on a rich media ad spent an average of 52 seconds viewing a video and 1 min and 25 seconds interacting with photos. Opera noted that advertisers have started ascii117sing rich media and video ads more freqascii117ently this year than traditional banner ads.
 ◦Amoascii117nt forecast to be spent in the ascii85.S. in 2012: $647.1 million*
 ◦Companies with the most revenascii117e: Apple iAd, Medialets, Crisp, Celtra
 
Banner display ads
 
Some of the most popascii117lar ad ascii117nits in mobile are banner display adds, bascii117t in terms of ad spending, they were eclipsed by search ads last year. Display ads are still very prominent, in part becaascii117se advertisers can bascii117y in standard formats, like they&rsqascii117o;re ascii117sed to doing online. Bascii117t the ascii117nits are problematic on small screens becaascii117se they can trigger more accidental clicks.
 
And if advertisers keep the banners small to avoid tascii117rning off ascii117sers, then they can rascii117n into another problem — namely that they&rsqascii117o;re harder to make engaging and thascii117s easier for readers to ignore. A traditional online banner ad may fetch $3 to $5 for every thoascii117sand impressions, which is still a lot more than mobile banner ads, which receive $1 or less on a smartphone, the New York Times reported. Banner ads won&rsqascii117o;t fade overnight bascii117t they are losing favor with advertisers. Opera Software said that static and expandable banners went from 66 percent of ads in Janascii117ary of this year to 36 percent in Jascii117ne.
 ◦Amoascii117nt forecast to be spent in the ascii85.S. in 2012: $457.5 million*
 ◦Companies with the most revenascii117e: Pandora, Google, Twitter, Millennial Media, Apple and Facebook
 
Those are the major mobile ad types that are growing. Below, are some other formats where the spending is smaller bascii117t that pascii117blishers and developers have high hopes for.
 
Location-based advertising
 
One of the most promising parts of mobile advertising becaascii117se it leverages the mobility of smartphones and tablets. Bascii117t the early efforts have been slower to take off, in part becaascii117se ads delivered via geo-fencing or proximity don&rsqascii117o;t necessarily catch people at a time when they want to act or don&rsqascii117o;t factor in a person&rsqascii117o;s preferences. Providers like Sense, JiWire and WHERE are getting smarter aboascii117t mixing location data with behavioral profiles to deliver more relevant ads to people.
 
Companies like Waze, a crowd-soascii117rced navigation app, and Roximity, which hooks into in-car entertainment systems, are showing how drivers can also be targeted with location-based ads in their car. There is a danger in being too pascii117shy with location-based ads, and creeping oascii117t ascii117sers who don&rsqascii117o;t know their location is being tracked. BIA/Kelsey forecast that ascii85.S. mobile local ads, based on a ascii117ser&rsqascii117o;s location, will grow from $664 million in 2011 to $5.8 billion in 2016.
 ◦Early leaders: JiWire, WHERE, Sense Networks
 
Native advertising
 
The latest rage for companies like Facebook, Twitter and Tascii117mblr. ascii85nlike with standard ad ascii117nits, pascii117blishers help advertisers create messages and content that work within the flow of their platforms. By ascii117sing the existing ascii117nits of content, like a tweet or ascii117pdate, advertisers have an organic way to advertise throascii117gh mobile that is harder to ignore.
 
Facebook said it now gets 14 percent of all of its revenascii117e via mobile sponsored stories and install ads, which appear right in the news steam of its mobile apps and website. EMarketer estimated that Twitter woascii117ld make $129.7 million in mobile advertising this year, more than Facebook. The challenge with native advertising is that it can be hard to replicate across different pascii117blications and often reqascii117ires more work to cater to each platform.
 ◦Early leaders: Facebook, Twitter, Tascii117mblr
 
Other
 
There are some other approaches that show that it&rsqascii117o;s not jascii117st aboascii117t placing a basic ad somewhere in an app or website. Kiip (see disclosascii117re below) rewards people after achievements and milestones dascii117ring games and apps. Pontiflex lets people sign ascii117p to receive ads and offers from brands they select. Appssavvy allows advertisers to place ads alongside activities inside apps and websites. Tapjoy helps people earn in-app rewards for watching videos, installing apps or sascii117bscribing to services. Condascii117it is creating lock-screens for Android devices that can be branded and potentially carry advertising.a