By Kate Holton and Leila Abboud
BARCELONA (Reuters) - A strange phenomenon hit Hong Kong in late 2011.
As the clock hit 10 pm each night a Coca Cola ad aired on television, prompting thousands of viewers to grab their phones and start shaking them frantically to virtually "catch" the falling bottle caps on the screen and win instant prizes.
Dubbed Chok! Chok! Chok! - meaning rapid motion in local slang - the interactive campaign by McCann Worldgroup became a hit, and sent viewers at home, in cinemas and in front of giant outdoor screens into a frenzy. (http://link.reuters.com/wux36t)
Nine million people saw the ad - 380,000 downloaded the Chok! Chok! Chok! app in the first month - and its success indicates that marketers may be finally figuring out how to direct ads at consumers via mobile phones.
"The consumer is there so we as marketers start to salivate," said Mike Parker, chief digital officer for McCann, in an interview at the Mobile World Congress. "But people are so underwhelmed by banner ads on tiny screens. We are all still searching for the best way forward."
Mobile advertising is set to grow by more than 50 percent a year over the period to hit $40 billion in 2016, according to Informa research, but the figures are still tiny compared to television ads. Global ad spend in 2012 was $500 billion.
Though advertisers are keen to harness the mobile boom, no one has perfected the art of using mobile devices to target adverts to consumers.
There remains a vast discrepancy between the amount of time consumers spend on their mobile devices and the advertising dollars companies spend there. In the U.S., mobile ads only accounted for 1 percent of marketing spend in 2011, according to the Internet Advertising Bureau, even though people spent some 10 percent of their media time looking at their phones.
Mobile has long proved almost impenetrable for a host of reasons, including the small screen, poor presentation of mobile websites and consumers' resistance to the invasion of a space seen as more private than a computer.
Even Google, which dominates online search, is still grappling with how to make money from ads on smartphones, while Facebook is trying to weave marketing messages into people's newsfeeds without offending them.
With many brands still wary of annoying consumers with lots of tiny ads or repetitive text messages, some like Coca Cola hit upon the idea of rewarding mobile owners with coupons, prizes or free content as a way to make a connection.
Helping them make that link is Brian Wong, chief executive of San Francisco-based kiip, a mobile app rewards network that connects brands and companies with consumers. He says his startup has found a winning formula - and that people have contacted him to say thank you for the adverts.
"The rewards are a pleasant surprise for the user. It's like a gift that comes out of the blue," Wong said.
In one campaign run via kiip by Pepsi, a person logging their morning 5 kilometer jog on a fitness app like MapMyRun sees a grey band pop up on the top of their smartphone screen. If they click on it, a window appears: "What a workout! Refresh yourself with a bottle of Propel Zero" and they are emailed a coupon for the fitness drink to redeem at a local store.
Targeting such "moments of achievement", such as when a gamer passes a level or a cyclist beats his personal best, allows marketers to target people at opportune moments in ways that are relevant to them, Wong says.
Kiip only gets paid if the customer redeems the reward and as a result brands are willing to pay more for a system based on results. Although Wong won't say how much kiip charges, it is likely more than the average price for mobile ads, which in turn are cheaper than ads on PCs. A perception that banner ads on small screens are not very effective and the glut of available space has kept prices capped at around $1 per thousand views.
For mobile ads to become more effective - and lucrative - marketers have to get more creative at tapping mobile's advantages, such as the direct link to a person all day and the location data.
The industry is also working on coming up with better metrics to measure effectiveness of mobile ads, which could one day boost their value.
One way to improve the effectiveness of mobile marketing is to link up a person's web browsing history on computers with their smartphone. Mark Strecker, the chief operating officer of mobile advertising technology company Amobee, said companies were in the early stages of such work.
For example, when a shopper walks into a retailer like the Gap, their phone would know they had earlier looked at jeans on the store's website from their home computer and send them details about availability of their size.
The additional information about users also means agencies now make fewer mistakes.
"If we see, from the location, that someone has gone to a car showroom then we could send them car ads," said Dani Cushion, executive at mobile ad platform Millennial Media.
"But if we see they go to the showroom every day, then they probably just work there."
(Reporting by Kate Holton; Editing by Sophie Walker)