As users consume more and more content on mobile devices, the advertising that allows publishers to offer that content for free is starting to show up as well.
One problem is that no real standards for these ad units have been created yet, leading Fred Hsu, CEO of RTB.com, the leading performance-based mobile advertising company, to call it "the Wild West – it’s a fragmented environment with no real rules about tracking and privacy.”
Most mobile ads are sold in real-time bidding, or RTB. They target users’ specific interests, and sometimes appear for just a few seconds before disappearing.
“People are experimenting with the size, placement, how long the ad appears, and so on,” Hsu explains. "In the mobile ecosystem, people are the supply, and advertisers are the demand. We buy the supply for tablets and smartphones and then help make sense of it all for advertisers."
Among the largest advertisers in this still young industry are Zynga, Candy Crush, Pandora, Groupon, Living Social, Skype, MLB.com, and eHarmony.
“Mobile advertising reached $4 billion a year last ear and it’s headed to $16 billion by 2016,” says Hsu.
“There will have to be one or two big government interventions in the next few years to institute the rules,” he says. “It is a giant cobweb now with lots of hustlers.”
Hsu adds, “There is so much data about users all over the place. But no data company wants to get in trouble with the FTC over privacy issues, so it's really important to know what you're allowed to log and what not.”
The kind of real-time ad auctions now occuring on mobile are similar to those that have existed on the web for some time now. Some of the earliest online auctions were held by Right Media, which was acquired by Yahoo in 2007. Google also quickly got into the business when it acquired DoubleClick in 2007, along with two other early ad platforms.
Hsu co-founded RTB.com in 2011 in Seattle, but moved the company to San Francisco “because 80 percent of our customers are here.” Those would be many of the advertisers listed above.
The company has about 20 full-time employees right now, but expects to grow to between 30 and 50 by the end of this year.