Russia’s nascent mobile advertising market is set to evolve alongside the growth of mobile advertising worldwide and the rapid development of mobile technology, although the effectiveness of mobile advertising has yet to be determined, and subscribers have expressed some resistance, analysts say.

Independent analyst and co-owner of Proof Provider Review Alexander Militsky said that mobile advertising can be delivered in a number of different ways, the principal and simplest way is that of SMS and MMS marketing, i.e. when advertisements are sent from mobile operators or from third parties in the form of either short or multimedia messages.

Other methods of mobile advertising  are far more sophisticated, usually involving refined technology, voluntary subscriber consent to be exposed to an advertisement, and often even user interaction. For instance, a person in a wine shop directs the camera of his telephone to a barcode and instantaneously receives information about a particular wine. This type of mobile advertising, Militsky believes, has great promise. Nevertheless, he added, it is still in its early stages of development in Russia.

More advanced mobile advertising is not widely distributed, largely because it requires user consent, a great dispersion of smartphones or pocket computers, and a great intellectual contribution, Militsky said. “Returning to the wine example, in order for such a service to be provided, its creators must build databases on a lot of products. This requires great work and huge investments that will not necessarily be cost-efficient quickly. Will enough people be willing to pay for this service?” This question has not left the realm of theory, as demand has not yet reached the critical point necessary for the greater development of this form of advertisement. “A person will not get much from this service until there is a substantial client-base for it,” Militsky concluded, adding that “there is yet a chance that the market will die without even having been born.”

In April 2011, digital marketing, media, and commerce research company eMarketer projected that producers’ overall spending on mobile advertising in Russia would amount to U.S. $20 million in 2011, a 66.7% increase from the previous year. According to Yury Bryukvin, CEO of the St. Petersburg-based information analysis agency Rustele.com, preliminary estimates provide that spending on mobile advertising amounted to around 500 million roubles, or $17 million, in 2011. In comparison, spending on mobile advertising on the world market in 2011 amounted to $3.3 billion, Bryukvin said. Recent eMarketer data show that $655.20 million and $1.45 billion were spent on mobile advertising in Western Europe and the United States respectively in 2011. These statistics reflect spending on mobile advertisements displayed in smartphone applications, advertisements in mobile search engines, as well as advertisements sent in messages via cellular networks. “The Russian mobile advertising market is currently in its early stages of development,” Bryukvin said, adding that growth in the market can mainly be attributed to orders from multinational corporations, as well as to complex advertising campaigns involving mobile technology. According to Bryukvin, up to 800 million roubles, or $27.3 million, will potentially be spent on mobile advertising in the Russian market in 2012.

iKS-Consulting analyst Maxim Savvatin echoed Bryukvin in saying that the mobile advertising market is only just developing in Russia, as mainly large companies and western brands use this channel. However, mobile advertising is becoming more effective in comparison with other methods of advertising, such as television. For effective advertising, “a specific client, who may not even watch television or use a specific channel of advertising, is necessary. Mobile advertising is an additional advertising venue which gives users greater exposure to special offers and news,” Savvatin said.

As to financial gains, according to Proof Provider Review’s Militsky, the percent of total revenue earned by mobile operators from mobile advertising is next to nonexistent. However, “considering the current status of the market, any revenue, no matter how minimal, is vital. There are more phones in Russia than people, so operators have a vital need to find any manner in which to earn more money. The degree to which mobile advertising will generate more revenue in the future is not entirely clear as of now, but operators have clung to this opportunity,” Militsky said.

In June 2011, Ipsos and TNS Infratest conducted a Google and Mobile Marketing Association (MMA) survey called “Global Perspectives: The Smartphone User & The Mobile Marketer”. Among reasons as to why advertisers worldwide (with participating nations of France, Germany, Japan, the United Kingdom, and the United States) have invested in mobile advertising were a greater number of consumers having access to smartphones, the ability to target certain demographics based on devices, and attractive ad formats. Reasons as to why advertisers have not invested in mobile advertising included a limited advertising budget, the absence of a mobile-optimized web-site, and uncertainty regarding how such advertising could work for businesses or the return on investments it could generate.

“Directed research has not yet given a concrete assessment of the effectiveness of mobile advertising in Russia,” Bryukvin from Rustele.com said. Consequently, many major advertising agencies are skeptical about mobile advertising and do not prioritize mobile advertising campaigns. “Not one method of mobile advertising has become a generally accepted standard. This means that advertising agencies have difficulty managing mobile advertising campaigns and have even more trouble assessing the effectiveness of such campaigns,” Bryukvin said, adding that, “all things considered, we should not expect to see systematic changes in 2012.”

Analysts agree that mobile advertising is most effective in the form of targeted advertising, especially offering location-based services. The greatest benefit is that advertisements are tied to users’ interests and their environment. This method of advertising has already been put to use in social networking sites, Savvatin from iKS-Consulting said, such as Facebook and Vkontakte, which track users’ activity and location to automatically expose them to advertisements reflective of their interests. “Without a context and a without a geographical tie, mobile advertising will simply not work,” Militsky from Proof Provider Review said. However, the effectiveness of location-based advertising can only be optimized with more sophisticated advertising techniques and services requiring user consent. “The technology that can be useful today, even that involving free services, requires target-oriented movement – a person has to voluntarily install apps that will provide him with (more sophisticated) advertisements, at least for the moment. If a user does not decide to take steps to make this possible himself, he will simply not be able to receive such advanced advertisements. Maybe in the future, phone makers will install such applications themselves automatically,” Militsky said.

In September 2011, AT&T AdWorks, a project of U.S. mobile operator AT&T, conducted a survey called “Ways that Mobile Marketing Will Evolve According to U.S. Marketers and Agencies”, as presented in the online laboratory “Digital Media Insights: 2012 and Beyond”. Respondents believe that mobile marketing will have more effective targeting mechanisms in 2012 and beyond, future advertisements will offer more of an interactive experience, advertisements will be reflective of improvements in mobile technology, namely speed, mobile advertisements will evolve with the growth and development of applications, mobile advertisements will evolve with the growth of QR codes/MS tags/barcodes, the future holds better tracking in mobile advertising, and that the privacy issues with mobile advertising will be resolved.