The enormous promise (and big challenges) of mobile analytics

The merger-and-acquisition frenzy has continued unabated in the mobile advertising market this year, and the increasing focus on analytics has played a major role. Apple this week spent a reported $200 million to acquire Topsy Labs, a startup that monitors and analyzes user-generated content and Twitter. The move could help boost ad iAd revenues and perhaps provide some much-needed improvement for search and discovery in the App Store. And like John Bartelle astutely noted this week, the pick-up could help Apple improve the interface for iOS, customizing it for each iPhone or iPad owner based factors such as location, browsing history and app usage.

Meanwhile, Facebook recently picked up Onavo in a deal in the range of $200 million, IBM closed two deals centered on mobile marketing and analytics, and Twitter closed its pick-up of MoPub. And a small army of players such as Flurry, App Annie and Localytics have raised millions of investment dollars.

The importance of analytics in traditional online advertising is growing as big data gives marketers an ever-expanding ocean of information that can be used to deliver highly targeted ads. And analytics will become a more powerful tool in mobile marketing because smartphone users produce more data – not only can marketers track their demographics and online behavior, they can access location information, app usage and even address books.

But mobile marketers have been slow to harness the power of analytics. The Guardian, along with Adobe, recently conducted a survey that found an astounding 75 percent of responding businesses use no mobile marketing analytics. That may be unsurprising given how new the mobile advertising space is, and we’re sure to see the importance of analytics grow dramatically in the near future. But I think there are a few big speed bumps that will hinder that growth over the next several years:

  • Ongoing privacy concerns. Mobile phones are the most personal devices consumers use, as you’ve heard before, and they generate a tremendous amount of personal data that can be used to deliver highly targeted ads. So it’s no surprise that marketers and app publishers often draw scorn from some consumers and privacy watchdog groups when they’re perceived to play fast and loose with that data. Legislators and regulators in the U.S. and other markets have been slow to react, but we’re sure to see increasing scrutiny as mobile advertising ramps up. And that scrutiny will slow growth.
  • Evolving business models. As I wrote a few weeks ago, building sophisticated business models often takes much more time than producing new technologies. We’re still in the early days of mobile advertising, which is an extremely complex market teeming with a wide variety of players – from advertisers and publishers to ad networks, technology vendors and, yes, analytics providers. Business models must emerge that will reward each of those links in the value chain. And that will take time.
  • Ever-increasing amounts of data. The collision of mobile and big data is already producing enormous amounts of information, and marketers and their partners are already struggling to discern meaningful patterns to help them present the most appropriate ads to the right users at the right time and place. That struggle will only continue as smartphone and tablet use ramps up.