Bangalore: In 2010, Anil Mathews, chief executive and founder of AdNear Pte Ltd, and his team travelled across the country to map various parts in a bid to create location-based advertising platform for mobile phone users.

AdNear did not use the global positioning system, or GPS, for online tracking, which most other advertising companies typically do. Instead, his company built its own platform to identify locations based on a combination of location data from mobile towers and Wi-Fi networks and relay location-centric advertisements to consumers.

Four years later, AdNear combines this platform with GPS and can now “...tell when a customer is near a McDonald’s burger outlet, or an Audi showroom and we show ads based on that. Burgers can be impulse purchases, but AdNear can tell if the customer can afford to shop for an Audi, based on the locality he lives in, which we figure based on the signal strength where he spends between 10pm and 6am every day. That is intelligent customer targeting", said Shobhit Shukla, vice-president, Asia-Pacific, AdNear.

The Singapore-based company uses more than 25 different types of ad formats, broadly categorized under rich media, video ads and dynamics ads to engage with consumers, and has about 100 million profiled users via 40,000 mobile apps across eight countries in the Asia-Pacific region.

AdNear claims that the current customer engagement rate for its ads—the number of customers that either interact with the ad itself, or visit the advertiser’s website or showroom directly—is 41%.

Unable to ignore a market of over 156 million smartphone users, which is expected to double in 2014, according to research firm Mediacells, Indian companies are slowly waking up to this opportunity, trying to grab consumers’ attentions by making more creative and engaging digital advertising for mobile phones.

“When I started out, almost half a decade ago, advertising was all about scale and footprints, but now successful advertising is about relevant customer targeting and retargeting. And, app advertisements are much better than SMS-based advertisements," said Shukla.

According to Digital Buzz Blog, a website which reports on marketing, 56% of the world’s population in 2013 owned smartphones, spending about 80% of their mobile time on apps. This realization has forced many companies to shift from an SMS-based advertising model to a fully in-application advertising model.

For instance, InMobi, founded in 2007 by Naveen Tewari, was originally a text message-based advertising company but shifted to mobile advertising in early 2012. Ever since, the company made a series of investments—including the acquisition of MMTG Labs Inc., a start-up that operates an app marketplace for Facebook pages and Sprout, an HTML5 (HyperText Markup Language that helps the web browser understand user input) ad builder—toward building its forte in the sector.

Earlier this month, the Bangalore-based company launched an interactive video ads platform that helps build mobile advertisements that are more interactive and intelligent in nature. These advertisements take into consideration factors like location, local weather and proximity to the products, before displaying relevant ads to consumers.

“Consumers have too much knowledge about products and brands these days. We had to build something different. Our ads are intelligent, which means you could be in Bangalore on a hot day and the local weather triggers ads of refreshing cold drinks to be displayed on your device," said Piyush Shah, vice-president of products at InMobi., a Mumbai-based mobile advertising company, founded in 2009 by Dippak Khurana, recently launched Audience Pro, a format of targeting customers with relevant advertisements, for which it has tied-up with Bharti Airtel Ltd.

Sanchit Sanga, head of digital, South Asia and Southeast Asia of Mindshare, the media and marketing services network of the WPP group—a client of, acknowledged that mobiles are altering consumer lifestyle today.

“Mobile advertising will only see stronger growth as it introduces new value to advertisers such as location-based technology, and the potential for targeted, relevant, and local advertisements. We like companies that strive towards unlocking the true potential of this medium with their technology platforms, has been consistently exceeding our expectations on this front," said Sanga.

Industry experts say at least half-a-dozen start-ups crop up in this space annually, each trying a different strategy to target and interact with customers.

For instance, Paisa Swipe Technologies Pvt. Ltd, seeks customer attention by displaying ads on the locked screen of the mobile device, while AdGoi India Pvt. Ltd provides an array of advertisement analytics, beyond just targeting customers. One97, a mobile advertising initiative by PayTM Mobile Solutions Pvt. Ltd, which developed a popular mobile recharge app, and Appucino (developed by Games2win Pvt. Ltd) integrates the social element in mobile advertisements by incorporating chat modules with advertisers.

“There are so many players in this sector not because India has suddenly become a mature market, but because there is an entrepreneurial spirit across the country that has made people recognize this as a market," said Shukla, who has previously worked in the mobile divisions of companies like InMobi and Qualcomm Ventures India Pvt. Ltd.

“Every medium needs evangelists. We need more mobile start-ups to promote this platform for it to really catch up as a market," said Rajiv Narayanan, national head of sales, AdIquity Technologies Pvt. Ltd.

The mobile advertising space, though in its infancy, encounters multiple challenges.

According to Shukla, there are three challenges that mobile companies face: privacy concerns because of enormous amounts of data; deficit of spending budgets for mobile advertising; and lack of standard metrics—apart from click-through rates and conversion rates--to measure the success of an advertisement.

Moreover, digital spending—which includes mobile, social and online ads—is much lower in India when compared to countries such as the US and Japan, which rank number one and two on the spending chart.

According to a report by eMarketer, the US and Japan spent about $42.3 billion and $10.5 billion, respectively on digital advertising in 2013, while India spent only close to $64 million.

“Even a decade ago, digital was known to be the next best thing, but mobile needs to catch up. Normally companies spend on newspaper ads and television commercials. The remaining, usually around 12-15%, is used towards mobile," said Narayanan.

Further, global players like Google AdWords and Facebook dominate the mobile sector, with digital ad revenues of 39.9% and 7.4%, respectively, in 2013.

Nevertheless, the potential remains. According to a report by research firm Gartner Inc., global mobile ad revenue would touch $11.4 billion by the end of 2013, up from $9.6 billion in 2012 and continue to grow five-fold between 2011 and 2016. “We’ve invested in this area for over a decade, which puts us in a great position, through acquisitions and product development. Yes, there is a lot of competition in display ads, but that’s great, because it creates better experiences for users and marketers…and in the process we benefit too," said Praveen Sharma, director, performance advertising, Google Asia-Pacific Lte Ltd.

Note: The story has been modified from its original version to correct a designation.