Two mobile ad forecasts were released last week almost on top of one another: one from eMarketer and another from BIA/Kelsey (BIA). (IDC is slated to come out with theirs very soon.) The figures they project for mobile advertising in four years are $10 billion apart.
In one way or another most forecasts turn out to be wrong. Forecasts typically either fail to anticipate technology shifts or they have the opposite problem. They are often aggressive in assuming how quickly technology adoption will happen or change the market. Think about past predictions regarding the rise of digial advertising and the erosion of traditional media. It's happening but years after many thought it would.
I've certainly been guilty of incorrect predictions and aggressive forecasts in the past. So I now generally prefer the IAB's methodology, which reports on actual revenues after the fact.
Let's take a look at and compare the eMarketer and BIA mobile forecasts, which are strikingly different. BIA says that US mobile advertising in 2013 will be worth $5.4 billion and $16.8 billion by 2017. By comparison eMarketer is much more bullish, saying that US mobile advertising will be $7.3 billion this year and $27 billion by 2017. The 2017 number is almost certainly way too aggressive.
New York-based eMarketer pegged 2012 mobile ad revenues at $4.1 billion. However my view is that when the IAB numbers come out we'll see something closer to $3.5 - $3.8 billion. However it's possible that eMarketer has it right. Google told financial analysts several months ago that the company's mobile "run rate" was $8 billion globally (including non-ad revenue).
BIA has raised the amount of its overall forecast from last year considerably but dialed back somewhat the portion allocated to local. That's because the firm began to recognize marketers weren't buying local fast enough. SMBs aren't buying mobile ads directly and brands have only recently started to explore local targeting in earnest. Depending on several variables that may accelerate in the next 12 - 24 months.
YP said that it had $350 million in mobile-ad revenue today. It's not selling mobile advertising directly to the company's mostly small business advertiser base. Rather this is how the company is allocating or attributing revenue from ads that appear on mobile devices but are originally sold as part of a broader package.
The local portion of BIA's forecast is dominated by search advertising, which has been the major contributor to local-mobile ad revenues. BIA maintains the assumption that search will continue to dominate local advertising throughout the forecast period. And mobile paid search is consistently expected to have more than 2X local ad revenues vs. mobile display in the BIA forecast.
Yet there are many more display impressions (in apps for example) than search queries. I don't know ratio off the top of my head but it's quite significant. If we're going to see billions in local-moble ad revenue it can't all come from search queries on Google. (Almost all paid search revenue in mobile [95%+] will go to Google for at least the foreseeable future, if not indefinitely.)
Today paid search represents just under half of all PC-based ad revenue. It's likely that will track with mobile over time.
I do believe that location will increasingly be used by mobile display advertisers, networks and exchanges. But it will also be used together with other variables as a way to reach particular audiences. Location will be both simplified for advertisers and incorporated into larger mobile ad-targeting concepts ("context"). Thus location will be a layer, among other variables, in mobile display and probably not remain a single targeting methodology -- except in geofencing and related "conquesting" scenarios.
Emarketer projects that the majority of mobile revenues will be controlled by a small number of companies: Google, Facebook, Twitter, Apple, Pandora, Millennial Media and "other." Other includes a large number of companies, including Microsoft, Yahoo, mobile exchanges/DSPs and still others.
The collective "other" category above is probably much too small. However I do agree that a relatively small group of large companies with significant scale will control and collect the lion's share of mobile advertising in the US, just as on the PC. Google, Facebook and Twitter will certainly be among them.
Google is accelerating the growth of mobile ad revenue with its recent introduction of Enhanced Campaigns, which will push more AdWords advertisers into mobile at higher CPC rates. And by bundling PC and tablet advertising together paid-search on tablets will also grow much more quickly. Location-based ad targeting on tablets is a bit of a wild card: location matters somewhat less on tablets than smartphones but the "ad canvas" is much richer on tablets.
Facebook has also been dialing up the amount of ad revenue it generates from mobile, simply by showing more ads in its apps. Home is a wild card and may or may not favorably impact mobile ad revenue for the company.
What qualifies as a "mobile" ad may become murkier and more of an attribution question as in the YP example -- such as combined tablet and PC ads in search or Facebook ads that appear equally in mobile and on the PC. And what qualifies as "local" ad in mobile is also a bit of an issue. I would argue a local ad in mobile is one that includes an explicit location mention in the ad creative (or landing page). A "local ad" can also be one that has no location mention but uses explicit location targeting at a DMA level or "below." Ads that target by state, province or region should probably not be considered "local."
Google's Enhanced Campaigns and related simplification of media buying and location targeting will significantly boost ad spending attributable to mobile. I think however the eMarketer numbers for 2016 and 2017 are still too high. I also believe the BIA position that most mobile ads will be localized is also incorrect -- unless the definition of local is radically enlarged.
Last week there was a Reuters report asserting the next Google-ASUS Nexus 7 will have an improved screen and may cost as little as $149. The current entry level Nexus 7 is $199. Reuters also said that if it's not the new Nexus 7 than the existing tablet's price may be reduced. The current entry level Kindle Fire from Amazon (with ads) costs $159.
As this all indicates there's a kind of "race to the bottom" going on that may radically depress margins on Android tablets. Furthermore we're likely to see a decent $99 7-inch Android tablet in the next year.
The growth of smartphones and the emergence of these reasonable-quality low-cost tablets such as the Nexus 7 are accelerating a trend toward mobile device adoption at the expense of PCs and further extending PC replacement cycles. In developing countries PCs will likely never reach penetration levels seen in North America or Europe.
In its latest device forecast Gartner joins the party, affirming what we already know about PC erosion in favor of smartphones and tablets on a global basis. In its projection Gartner sees Android as the big winner, effectively replacing Microsoft as the dominant OS on tablets and smartphones.
The particulars and timing of this forecast will undoubtedly turn out to be wrong. However the direction of the forecast is probably accurate. With its resistance to matching price competition (probably wisely) Apple iPads will not reach tablet penetration levels of low-cost Android based tablets (though the company is considering a lower-cost iPhone).
So far, Microsoft's "2.0" efforts in mobile, Windows Phone and Surface tablets, have only made modest gains in selected markets. However Microsoft still makes money from Android OEMs via patent licensing fees. If it has to rely on licensing the company's future will be pretty grim.
If these figures are anywhere near accurate tablets are poised to become the primary computing (and advertising) platform. Yet we're likely to see quasi-converged devices (i.e., tablets with keyboards like the Surface Pro) become laptop replacements in the near term.
Yesterday Facebook introduced its homescreen Android makeover-takeover strategy: Facebook Home. It comes both fully integrated into a phone (HTC First) and as an app download. As you know it replaces the standard Android home and lock screen experiences with a proprietary Facebook environment.
Mark Zuckerberg and others at the press event yesterday confirmed that there would eventually be ads in its "Cover Feed." Cover Feed is the new photo-centric dynamic feed that constitutes much of the experience of Home. It includes Facebook content and select "Open Graph" partner content (e.g., Foursquare, Instagram).
Facebook stressed that it was working to make sure that any ads that eventually do appear (probably within a year, depending on adoption) would be consistent with the aesthetic experience and of sufficiently high quality. We're starting to see more ads in the mobile news feed that are of, shall we say, uneven quality.
However Cover Feed ads have the potential to be quite effective. If they're scarce and if Facebook uses strict standards they could become the equivalent of "Super Bowl ads for mobile." That of course will largely depend on how widely Facebook Home is adopted. There's early survey data that suggests limited demand -- but surveys don't always tell the whole story and can be contradicted by actual behavior.
In the past there have been several startups that sought to offer home or idle screen ads on mobile devices. All failed for various reasons (not enough scale, insufficient ad quality, limited advertiser demand/adoption). Today, to my knowledge, Amazon's Kindle (multiple devices) is the only place where such ads exist at any kind of scale. The picture above, at right is an example of a "Special Offer" on Kindle Fire.
I could find no data about the general consumer attitude toward these ads -- though there is plenty of online discussion about opting out. I also was unable to find any discussion or data about the efficacy of these ads and whether they perform for advertisers.
For many of the reasons already cited it's way too early to project how much Facebook could earn from Home ads. But if there are millions of users who adopt Home in the US and around the world, the ads could generate broad exposure (like TV advertising) and significant potential revenue for Facebook.
An interesting secondary question arises: if the most active mobile users migrate to Home (and use the app less often), do ads on Home then effectively cannibalize ads on the Facebook app in the conventional news feed?
Image credit: lovemyfire.com
Here's another one of those surprising and paradoxical Android vs. iPhone reports: according to January comScore data Android's US smartphone share was 52.3% to the iPhone's 34.3%. However Safari's mobile browser share of US web traffic is now 62%.
This represents the combined smartphone and tablet market share for iOS, according to Net Applications. By comparison the Android browser had roughly 22%. Chrome (which may be on iOS as well) had about 2.5%.
By comparison, according to StatCounter, the iPhone and iPod Touch combine for roughly 52% US mobile browser market share. Android has 37%. The iPad is not included in these data however. So it appears the two sources are generally in alignment.
Despite Android's continuing market share gains and lead its users are much less active on the mobile internet than iPhone users. This is probably because the Android user base is more economically and demographically diverse than iOS users.
On a related note, Google changed the way it calculates Android version share on its developer website. It has moved from total activations to Google Play visits to reflect more active and engaged users.
In what might be considered something of a breakthrough, AdAge is reporting that agency Starcom MediaVest will be working with location-data specialist PlaceIQ to document what "percentage of customers served a mobile banner ad for a retailer subsequently visited one of that retailer's stores."
This is part of a new real-world ROI metric PlaceIQ is introducing. The company's new measurement is called "Place Visit Rate."
I spoke to PlaceIQ founder Duncan McCall about this several weeks ago but it was pre-case study release and so non-public at the time. PlaceIQ uses an unique but anonymous ID to connect users in the aggregate who've seen mobile display campaigngs with in-store visitors. Here's how the company explains its methodology:
PVR is measured by aggregating all of the devices that were messaged during a campaign and analyzing the number of those same devices that were later seen within a specific location or place footprint. Additionally, PlaceIQ can also set up A/B testing to measure PVR lift by identifying control groups or messaging additional PlaceIQ audiences.
PlaceIQ emphasizes that it doesn't track individuals:
Place Visit Rate does not track individuals, but rather measures if a set of anonymous devices moved to a certain location. All location data, device data and histories are disposed of by PlaceIQ after the campaign completes.
The methodology is imperfect and can only identify a portion of users who seen an ad and then shown up in a store. An article in AdAge claims PlaceIQ is only able to track "15% to 25% of all mobile ad traffic it monitors." Beyond this, as we all know, "correlation doesn't equal causation." However this is a big step forward in terms of being able to measure the efficacy of mobile display advertising.
Historically, coupons have been the most reliable way to measure online-to-offline impact. And mobile payments may one-day make "closing the loop" on online or mobile ads fairly routine. However most ad networks and marketers have had to use proxy data (calls, map lookups) to determine the offline impact of mobile ads.
Telenav/Scout can track users who see an ad and then navigate to a store location. It's not clear however how often someone sees a mobile display ad and then invokes navigation to a store.
There are others such as ShopKick and Placed, which measure in-store visits. And there are a "2.0" group of startups working on various flavors of in-store vists and activity measurement. Among them are Euclid Elements and WirelessWERX. The latter uses indoor location to provide business intelligence and analytics services for retailers.
Accordingly there are a range of methodologies now to try and track or capture online-to-offline ad impact. PlaceIQ's approach is a significant new entry into this arena and others may quickly try to match or approximate it.
Bringing new meaning to the term "conversational marketing," voice services provider Nuance has introduced mobile "Voice Ads." The new units use the Nuance voice platform to enable smartphone (and presumably tablet) owners to interact with these ads. It's not clear right now whether these interactions would occur exclusively on display landing pages or in the initial mobile display ad creative.
In a Siri-like way users talk to the ads and potentially receive one of several pre-programmed responses. In one sense these new Voice Ads are not unlike more traditional audio/radio ads (think Pandora).
However the interactivity -- if done well -- could create much more engagement and "lift" for the campaign. Coupled with a campaign such as Old Spice something like this might have worked extremely well. Indeed, the campaign creative and concepts are key. Poorly executed ideas could quickly backfire and become fodder for brand parodies.
Nuance is promoting a range of benefits from using Voice Ads including engagement, brand lift and better recall.
The company says that it has already partnered with leading agencies and mobile ad networks to ensure the units are widely available:
Nuance Voice Ads gives mobile advertisers and creative agencies an opportunity to go beyond the limitations of the four-inch mobile device screen and create a conversation with consumers through the power of voice recognition. Voice Ads finally creates an opportunity for brands to deepen the relationship with their consumers, with targeted interactive ads that deeply engage their core audience – much in the way that the world’s most popular mobile personal assistants have deepened consumers’ relationship with their mobile phones.
Nuance has partnered with many of the leading companies in the mobile advertising ecosystem to ensure broad reach and distribution for Voice Ads – a completely new format for mobile advertising. Creative advertising agencies include Digitas, OMD and Leo Burnett, while mobile advertising companies such as Millennial Media, Jumptap and Opera Mediaworks (AdMarvel, Mobile Theory, and 4th Screen), will provide distribution to more than 100,000 app publishers and hundreds of millions of consumers globally. In addition, mobile rich media ad servers such as Celtra are providing tools for rich media production and analytics on mobile devices.
One could also imagine clever integrations that tie into call centers at the end of the interaction to close a sale. Again, everything is going to depend on strong concepts, execution and user experiences. Nuance offers a relatively tame mock campaign example using Voice Ads in this video.
Earlier this week IDC issued its new projections regarding hardware "shipments" through 2017. The bottom line is: continued growth for smartphones and especially tablets ("connected devices") but negative growth for PCs.
IDC said that in 2012 tablet shipments "surpassed 128 million" and sees increasing demand across markets. While "shipments" is often an inaccurate and misleading metric for market-share purposes, it does indicate the "directional" trend in the market.
Even in emerging, immature markets PCs will only see "moderate single-digit growth" according to the forecast.
The company said that replacement cycles are getting much longer for PCs as tablets and smartphones make more frequent replacement unnecessary. However IDC does continue to forecast laptop growth. I suspect that projection may turn out to be optimistic at least in non-emerging markets.
Device penetration drives internet usage patterns. And while online publishers and marketers "intellectually" understand what's happening they have been generally slow to adapt their strategies and tactics to match the radical changes taking place in the market.
Facebook is the leading app on the iPhone. But does that popularity as an app mean that Facebook would have success with its own branded handset?
Next week on April 4 Facebook seems poised to introduce some version of the long-rumored "Facebook phone." The speculation is that it will be an HTC-made handset carrying a "forked" version of Android. We'll see. But I'm extremely skeptical that anything like can succeed at scale.
HTC previously made two Android handsets in 2011 with deeper Facebook integration: the ChaCha and the Salsa. They both flopped. INQ has also made social-media-centric handsets since 2009, which have not done especially well.
Let's assume that everything on the hypothetical HTC handset is deeply integrated with Facebook: contacts, dialer, camera, maps, apps, messaging and so on. Let's also assume that everything works elegantly. It's highly unlikely that there will be mass-market demand for this phone.
Most people are not so involved with Facebook that they would turn over this most important piece of personal technology to the company. There will also be the inevitable privacy questions and concerns ("Is Facebook tracking me?"). Most people I know are quite content to use a Facebook app on their smartphones. The notion of an entire handset devoted to Facebook seems excessive and unnecessary.
Perhaps the phone will offer some unique and impressive functionality or be priced extremely aggressively. Perhaps "younger people" will be interested. I remain very doubtful, however, that the majority of users will want to buy a smartphone so closely aligned with a single social network.
A new forecast from eMarketer estimates more than half of Twitter's ad revenues (53%) will come from mobile advertising this year, up from virtually no ad revenue from mobile in 2011.
In total, eMarketer estimates global ad revenue at $528 million for 2013, pushing upward to $1 billion for 2014.
But ads on mobile devices are driving incremental growth over the next two years. By 2015, Twitter is expected to pull in $1.33 billion in worldwide ad revenue, more than 60% of which will come from mobile advertising.
The rapid growth in mobile ad revenue is due in part because "Twitter has ultimately benefited from the increased focus on mobile by competitors like Google and Facebook, which have both expanded their own mobile ad offerings and worked to convince advertisers to shift dollars to mobile devices," says eMarketer. Advertisers are clearly showing more interest spending money on mobile ads.
The report shows Twitter ad revenue is slowly shifting globally with 83% of 2013 ad revenue from the U.S., down from 90% in 2012.
BlackBerry CEO Thorsten Heins recently got a lot of coverage, in anticipation of the BlackBerry Z10 launch, for the remark that the iPhone was now outdated.
The much-hyped Z10 is now available in the US from AT&T (soon from Verizon) and a range of carriers in international markets. I went into an AT&T store this weekend to take a look at and get a "hands on" sense of the device. Unimpressive.
It was immediately clear that this handset may keep some number of BlackBerry customers from "defecting" to the iPhone or Android. However it's not sufficiently exciting to lure existing iPhone and Android users to the BlackBerry platform. The UI and software are not entirely intuitive for iPhone and Android users. In addition, the collection of apps is limited.
The phone resembles an HTC device and is generally unremarkable otherwise. Indeed it has a "generic smartphone" quality.
Much has been made that AT&T employees haven't been trained to promote the phone. That seemed evident in my visit. In the store I entered there was not only a lack of promotional signage but the phone was placed in a far corner almost as an afterthought. It was simply there among a row of competing smartphones -- not highlighted in any way. I had to ask store salespeople multiple times where it was to locate the phone.
It's almost 100% certain this device will not be the engine of new growth for BlackBerry and that the device maker will continue to fall out of favor in the US market.