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A pedestrian uses his mobile phone while crossing an intersection in Toronto.Darren Calabrese/The Globe and Mail

You're getting drowsy behind the wheel. Your phone detects your drooping eyelids and sounds an alarm. Jolted awake, you pull over and see your phone is guiding you to the nearest place to get a wake-me-up fix – the nearest, that is, in the chain of coffee shops that built the watchful app.

You've just finished a run, and as you log your workout data into a fitness app, up pops a reward: a coupon for a free sports drink.

Your baby is irritable. Her high-tech diaper sends an alert to your phone that explains why, courtesy of your favourite diaper-cream brand.

Welcome to the brave new world of advertising.

While the episodes just cited are more cutting-edge than mainstream, mobile devices such as smartphones and tablets are already transforming Canadian behaviour and, with it, the very nature of advertising. And as advertising changes, it will work its way into the very DNA of businesses that need to perpetually reinvent their interface with customers. As for the media business specifically, the acceleration of mobile augurs well for the likes of Google and Facebook, and poses yet another challenge for the digitally battered publishing sector.

Advertising's age-old "push" model of broadcasting messages to all and sundry, in the hope that someone pays attention, is being replaced by micro-targeted "pull" campaigns that effectively co-opt the customer into accepting messages and even bonding with the advertiser. That means businesses must learn, with the help of their ad agencies, to leverage data about the characteristics, preferences and even real-time location of mobile-addicted consumers.

The speed of change adds to the urgency for business. It was only six years ago that the iPhone was launched. In the past two years alone, the number of Canadians who own smartphones has doubled from 33 per cent to 67 per cent. According to a forecast from market researcher IDC, this year tablet sales will outpace laptop sales for the first time. Tablets are expected to surpass total personal computer sales in 2015.

Until now, advertising dollars have not kept pace. In 2013, out of an $11.5-billion advertising market in Canada, spending on mobile-dedicated campaigns will reach only $215-million, according to media buyer ZenithOptimedia.

That figure does represent growth of about 65 per cent from 2012, but it's still only a sliver of the digital advertising pie. Traditional online display advertising – those banners at the top of a website, or boxes in the corner of the screen promising to reduce belly fat – is worth more than $1-billion.

The new mobile "pull" methods vary wildly, with similarly divergent results, as will happen on a fast-changing frontier.

'Subtle' mobile ads

The earliest mobile advertising took the form of display ads: Banners and boxes, scaled down from the ones seen on larger computer screens.

"It was the new kid in town a couple years ago, and some companies just ruined it," says Bernard Asselin, president of Montreal-based ad agency Bleublancrouge. "They were throwing in advertising that was not adapted to any mobile device. You could barely read what was in there."

It's a syndrome that Google Canada's head of mobile advertising, Eric Morris, refers to as "shoehorning" – trying to make old ad formats work in places they don't fit.

Not only are banners hard to read on a mobile device, they're even more unwelcome than on a PC. "On mobile, the annoyance rate is higher than on my laptop," Mr. Asselin said. "So it [an ad] has to be more personalized, more subtle. Not intrusive."

In contrast to banner ads, the most successful transition to mobile has been in search advertising, where Google rules, draining away ad dollars from old-guard media.

Google users are already looking for information. So when Google responds with results, whether on a PC or a mobile device, it does not feel like an intrusion, even though consumers know some of those results are paid for.

But even for Google, mobile is still a work in progress. It wasn't until recently that the company made it possible for advertisers to manage online search campaigns and mobile buys through a single process. Before, Mr. Morris explains, they had to buy ads separately and micro-manage a raft of different campaigns.

That said, Google is still trying to convince advertisers to use the features it has already put in place for mobile. Although advertisers can include "click-to-call" buttons in their search results – an option that boasts a 6 to 8 per cent uptick in click-through rates – only about one in 10 in Canada have bought in.

Going past search-based advertising on the scale of consumer utility can produce not just a hookup but brand affinity – or so the Oscars of advertising said implicitly last week. It was only the second year that the Cannes Lions International Festival of Creativity gave an award for mobile advertising, and for the second year, the Grand Prix in Mobile did not go to an ad in the traditional sense.

This year's winner was a product developed for a telecom company in the Philippines. It coded textbooks on to SIM cards that slip into even the most low-budget mobile phones. Children received digital access to school materials, without needing the sort of fancy tablets or Web-enabled smartphones that their families cannot afford.

Last year, the winner was a campaign by Google that re-imagined the old I'd Like to Buy the World a Coke song. It placed special vending machines, hooked up to a mobile network, in public areas around the world. Anyone with a smartphone could send the machine a message to give away a Coke to a stranger. The network then sent back a video of that stranger accepting it.

The possibilities for making oneself useful to customers are open to the imagination. This month, the Quebec fast-food chain Valentine launched a pedometer app that presents a coupon for a free poutine every time the user walks off the caloric equivalent of the dish (between 30,000 to 60,000 steps).

"This is essentially an opportunity for the brand to be in people's minds on a daily basis," said Alexis Robin, director of interactive at Montreal ad agency lg2, which developed the campaign. "The app becomes a media platform in itself."

However, the number of advertisers who will have success convincing people to download applications just for the privilege of interacting with their brand will be relatively few. "Most smartphones are app cemeteries," Mr. Robin said.

For most advertisers, it's better to capture mobile users engaged in something they're doing anyhow. Roughly 40 million photos are uploaded to Instagram via mobile every day, and advertisers have joined in, with brands such as Marc Jacobs, Starbucks and Red Bull posting photos and encouraging users to interact.

Recent advertising partnerships that television networks have signed with Twitter are part of an attempt to twin TV ads with those on the "second screens" – typically smartphones and tablets – that people are looking at while also watching television.

The San Francisco-based startup Kiip, founded by Vancouver native Brian Wong, sells advertisers the right to place their products as rewards within existing mobile games and apps.

The sports drink offer mentioned above – from popular app Map My Run – is one example. In January, Kiip announced it had received funding from advertising giant Interpublic Group of Cos. Inc.

Facebook has enjoyed steady growth in its mobile advertising since sales began in 2012. Research firm eMarketer estimates Facebook's worldwide mobile revenue will pass $2-billion (U.S.) this year.

The draw is the sheer amount of time people log on the social network: Facebook checks account for one out of every four minutes U.S. users spend on smartphones. Sponsored messages are designed to appear as part of the "news feed" that users willingly read every time they check in.

Monetizing mobile

The upheaval that the Internet has brought about in newspapers, magazines and other media is well documented. Publishers have complained about online ads being worth dimes, not dollars. But mobile's profit potential so far has been even more limited.

If banner ads – whose effectiveness even on roomy computer screens is in question – do not translate on mobile screens, how do you even sell an ad?

A complicating factor is that there is no such thing as a single mobile experience: Tablet use and smartphone use are wildly different. A study by AOL and ad agency BBDO last year found that over half of "mobile" activity actually happens at home. While on-the-go activities such as navigating with Google Maps epitomize mobile use, "mobile" can just as easily mean curling up with a tablet to read a magazine article.

"That is two entirely different need states," said Franke Rodriguez, president of ad agency Anomaly Toronto. "Most brands and marketers are more focused on the on-the-go because they're trying to make their brands useful … and meet people at the point of need."

The problem is particularly keen for publishers, which have watched Web traffic from mobile devices skyrocket. USA Today was among the first newspapers to see its mobile traffic surpass online traffic from PCs. This week, the chief digital officer at Gannett Co. Inc., which owns USA Today and a host of newspapers, told an industry journal that mobile advertising is "our biggest challenge."

"The sole issue that we should all be thinking about is how we are going to monetize as we move into mobile," David Payne said.

One way content producers can make ads more relevant is by using location-based and other data to better target consumers.

"The real magic bullet will be when somebody can really connect location-based experience with serving up ads," said Karel Wegert, the vice-president of digital solutions at ad-buying company Media Experts.

Loyalty companies are betting they will be best positioned to make that work. Because they already have a relationship with customers, they can ask for permission to send an offer when they detect a frequent shopper passing near one of their stores, for example.

"Everybody has a price for their data," said Asif Khan, founder and president of the Location Based Marketing Association in Toronto.

"If you can provide something that is relevant to somebody,

you can use their location

information. They won't mind."

Still, the rise of mobile advertising raises abundant privacy concerns. But one industry observer suggests this quandary could be an opportunity to rethink conceptions of mobile advertising and the value of the data it relies on.

In a report this year, Drew McReynolds, a telecom analyst at RBC Dominion Securities, proposed that the industry could set up "a personal information exchange ... [to] pay consumers fair market value for personal information."

People would get their own digital locker to store the personal information they choose to share. The exchange would pay a percentage back to the locker owners each time it sells their data to a marketer.

"This to me is what cracks the code, as opposed to taking what worked on the laptop or on TV, and translating it on the phone or the tablet," Mr. McReynolds said.

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