Mobile Has The Opportunity To Re-Think The Ad

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Kleiner Perkins VC Chi-Hua Chien kicked off the “Money Matters” panel at the TechCrunch Mobile First CrunchUp with a telling understatement, “There seems to be a lot of new business models around mobile.” Indeed, what makes mobile unique as a communication platform is that traditional advertising isn’t the default. See: Kiip.

As Chien pointed out, because of constraints on-screen size, display ads won’t cut it when your screen is 3 inches wide. As constraints often necessitate creative solutions, we’re seeing a shift on mobile that has resulted in many businesses trying a multitude of solutions for monetizing mobile transactions, specifically commerce and deals or offers.

“A pop up over on mobile is really obnoxious,” said Chien. “Is [an ad] really a solution if it’s interrupting the user experience without the user completing an action?”

August Capital partner and founding Skype investor Howard Hartenbaum compared the struggle to find a model that works on mobile to Skype’s early attempts at monetization, “The biggest challenge in communication is how to make money off of it,” he said.

“Something will come up, whether its paid candy hearts on Valentines Day …” ¬†Hartenbaum went on, referring to Tango founder Eric Setton’s story about offering his customers hearts they could impose on videos, and pay for. Skype originally planned to monetize by turning itself into an open Wifi network, charging customers who didn’t want to share Wifi $7 to use its voice services.

Companies are also presented with a unique opportunity with monetizing on mobile, the chance to close “the redemption loop,” or track an ad or an offer from where the customer sees it, to when it is redeemed and providing analytics around its redemption like how much was spent and where.

Brands like Foursquare are perfectly poised to close this loop, and are making incremental moves towards the goal, Foursquare most recently with its partnership with Groupon announced this morning.

“It’s more than just the ad, it’s the measurement of its effectiveness,” said Foursquare’s Tristan Walker.

Chien closed the panel by referring to the “redemption loop” as the dream, when one day large retailers and small retailers will know exactly who their customers are, and that companies like Foursquare and LivingSocial will basically function as automated CRM services. He envisions a future when someone will walk into their local store and the merchant will immediately know who they are, and possibly what they want.

“But we’re a long ways away,” Chien said. “Everyone’s [currently] focused on acquisition.”

Watch the rest of the CrunchUp live here.