Emerging Technology

Mobile Investing

Mobile advertising is shifting to suit new ways of experiencing social media.

As social media becomes an increasingly significant component of everyday life, companies are wondering how to harness its power. The importance of reaching people as they click through Facebook (NASDAQ:FB) and scroll down Instagram is pushing companies towards mobile advertising.
However, these companies must strike a fine balance, as audiences have learned to ignore the corporate messages clogging their news feeds. Therefore, a new social network theme in 2016 is an increase in sophisticated social media advertising systems. Savvy companies are accessing social media audiences in novel ways to ensure that their messages are being heard.

New approach to social media advertising compensates users

Many social media platforms get the bulk of their revenue from advertising. Despite this, a Gallup poll states that 62 percent of social media users are not influenced by social media in their purchasing decisions. That means while brands might believe they are accessing and engaging an audience, social media users are in fact adept at tuning out brand-related, sponsored content. The majority of millennials, who companies see as core social media users, said they are not influenced by such advertising.

That is prompting savvy companies to transform how they approach advertising on social media. Palo Alto-based Perk.com (TSXV:MVI.P) is a quintessential example of this social media marketing shift. The company is a provider of a cloud-based mobile rewards platform that offers rewards for users’ everyday mobile and internet usage with Perk Points, which are redeemable for gift cards and cash. Members gain Perk Points through activities as diverse as shopping, watching videos and playing app-based social games.
At the Cantech Investment Conference, Perk CEO Ted Hastings said that the platform “compensat[es] people for their time and attention on mobile apps.” His company recognizes that paying attention to ads is a burden on users, and by offering compensation in the way of Perk Points, it cultivates a more engaged social media and app audience. The success of the company, which has completed four acquisitions since its public listing in July 16, 2015, illustrates that this model of advertising may be the way of the future.

Could the next social network theme be the end of advertising?

However, there is a flip side to every social media theme, and instead of adapting to new mobile ad strategies, some social media platforms are banning them entirely. Ello, an ad-free social network that promises not to share users’ data, raised $5.5 million in venture funding. This round of funding was led by the Foundry Group in Boulder, Colorado.
Last fall, Re/code reported that Ello’s user base was rapidly growing — the number of users jumped from 90 in early August 2014 to hundreds of thousands by October 2014. At one point, the invite-only platform was receiving over 40,000 new invite requests per hour, and according to CEO Paul Budnitz, there are 3 million people on the waiting list. However, today Ello’s profile has waned, as its invite-only platform works to control both members and hype surrounding the platform.

The rapid rise and fall of Ello’s social media profile suggests that the notion of an ad-free social media platform does have significant appeal for some users. However, the continued popularity of ad-based social media sites and the ingenuity of companies like Perk, which seek to compensate users for their attention, suggest that social media advertising is not going away. Rather, we are seeing an evolution that profoundly impacts the mobile advertising and social media spheres.
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This article was originally published on Technology Investing News on February 4, 2016.
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.


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