Earlier this month (on December 17) Facebook transformed its “Nearby” mobile-app friend finder into a local search tool. Nearby had previously been a way to locate friends who had enabled location or checked-in somewhere in the immediate area. The new (mobile only) Nearby is a logical and complete overhaul of the service, which holds significant implications for the entire local search landscape – with one major caveat.
Everything depends on Facebook’s commitment to Nearby and how much the company is willing to invest in local.
There has long been an expectation that Facebook would get into search, beyond its existing relationship with Microsoft. A robust search capability on Facebook could provide significant new revenue, in the form of paid-search ads, as well as greater utility to Facebook users overall. The question is: what is the scope of Facebook’s search ambition? Would it be limited to better site search or would it extend to web search more generally? It’s likely that Facebook will take a kind of middle course that relies primarily on site search but holds competitive implications for Google and others. Nearby is something of a model.
All the data in the Nearby “index” are provided by the businesses themselves. Facebook doesn’t show places for which it doesn’t have local Pages. This is by design, partly as an incentive for SMBs to create Pages for their businesses. The company isn’t licensing data or crawling the web for local business information. This makes the database potentially more reliable but also less extensive than competing offerings. There are other significant user-experince limitations as well.
Notwithstanding these current limitations Facebook Nearby could become a major competitor in local search relatively quickly. We won’t have a sense of how real that possibility is until roughly the middle of next year. By then we will know something about consumer adoption, as well as Facebook’s commitment to improving the service.
But despite Facebook’s privileged position in the marketplace the company doesn’t have years to develop Nearby. In order for Nearby to succeed, it must become more visible to consumers. It also must improve considerably during a time-window that is probably not longer than 24 months. Otherwise, Nearby could easily go the way of Facebook Deals and simply be remembered as a provocative experiment that failed.
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As part of a year-end release of data Nielsen indicated that 56% US mobile subscribers owned smartphones as of Q3. By contrast, comScore says smartphone penetration currently stands at 52%. And Pew said earlier this year that it was 53%.
In the smartphone segment, the following are Nielsen's data regarding US mobile operating system share (again, end of Q3):
Here are similar data from comScore's for comparison purposes (November, 2012):
Below are Nielsen's lists of top apps for 2012 for both the iPhone and Android devices. While the lists are different there are several apps that appear on both: Faceobook, YouTube, Pandora, Twitter and "weather."
Google's Gmail and search apps are at the top of the Android list but absent from the iPhone list.
Nielsen is also reporting that there are an average of 32 million Maps users on the iPhone each month. That's more usage than Facebook or YouTube, which both have huge mobile audiences in the US.
It's also a significant loss of traffic for Google. However because there were very few ads on the iOS 5 version of Maps it's not a revenue loss for Google.
Millennial Media has released an infographic that offers year-in-review data. I've excerpted what I thought were the most interesting aspects. However you can see the entire infographic here.
There were two data sets that I found most interesting. The first is verticals ranked by ad spend on the company's network. Automotive was the leading vertical and biggest gainer in 2012. This is mostly car makers doing broad, awareness-oriented brand advertising.
Below is an example of automotive general awareness advertising (though not necessarily from Millennial Media). The screens I've presented are just a few from the ad. The ad makes it possible to locate a dealer to do a test drive -- but that capability is buried a few clicks down and below the fold.
If you take a look at all the categories in the Millennial top verticals list, all are categories in which most of the transactions will be realized offline. However I would bet that few if any of the advertisers in these categories are doing anything like trying to drive consumers into local outlets or stores.
For example, the graphic below shows Millennial's most recent data on the distribution of "post click" objectives associated with the campaigns on its network. Only 19% of these ads contained a "store locator." And those are probably not prominently displayed. Most of these campaigns are simply branding campaigns.
This is a significant missed opportunity. Only 5% of retail spending in the US happens online and an even smaller amount through mobile devices. The rest -- literially more than $4 trillion -- is offline. The ability to lead consumers to a store or point of sale is one of the great opportunities of mobile. However it's not really being utilized or exploited by advertisers.
The other interesting piece of data in the Millennial infographic shows the growth (and decline) of Android OEMs. Samsung is winning and HTC, Motorola (Google) and LG are losing when it comes to Android share.
As I've now argued numerous times Android is increasingly identified with Samsung. Partly this is because Samsung is making compelling devices -- although the LG Nexus 4 is the best Android handset on the market -- but it's equally because Samsung is spending so much money on marketing around the globe.
Just as Android now controls more than 50% of the global smartphone market, Samsung will soon control more than 50% of the Android market.
This morning the IAB reported that Q3 US online ad revenue came in at $9.3 billion. First half digital revenues were $17 billion. It's quite possible that the second half will see $19 or $20 billion total, bringing FY 2012 to $36 or $37 billion in online ad revenue (including mobile). However the IAB didn't provide a detailed breakdown of Q3 revenues by segment.
Two days ago eMarketer revised its mobile ad forecast upward for 2012 from $2.61 billion to just over $4 billion.
The IAB said that mobile advertising revenue was $1.2 billion for the first half. It also said that mobile represented 8% of Q2 2012 revenues, or $661 million. While mobile is the fastest growing digital ad segment it's still small relatively speaking. If mobile continued to represent 8% of digital ad revenue in Q3 that would translate into $744 million.
However if mobile grew as a percentage of overall digital revenue to, say, 10% that would represent $930 million in revenue. That's probably the range that's reasonable to assume: $744 to $930 million. Let's take the midpoint of that: $830 million.
Because of the holiday shopping activity surrounding mobile devices we can assume that mobile ad revenue will grow further in Q4. Accordingly, it's possible that Q4 US mobile ad revenues might reach or slighly exceed $1 billion.
We can probably expect mobile ad revenues to come in for the full year between $2.6 and $3 billion on the high end. It's very unlikely that they will reach $4 billion this year however.
Earlier this week Appcelerator released its quarterly mobile app developer survey. The survey of more than 2,700 global developers found they were primarily focused on the iOS and Android operating systems, with Windows Phones, RIM and others relatively far behind. This reflects the "duopoloy" of iOS and Android (increasingly "Samdroid') sales in the global smartphone market.
The challenges of creating a strong developer ecosystem for Windows is partly what's holding the mobile OS back. Sales are relatively good in isolated EU markets (e.g, Spain, UK) but lackluster on a global basis and in North America in particular, where Windows continues to lose market share.
According to the survey, about 36% of developers indicated interest in building apps for Windows devices. However Windows Phone's modest market share is creating a kind of Catch-22 for the platform.
Without boosting the perception that Windows has app-parity (at least among the most important ones), there won't be more handset sales. Without more handset sales there won't be more consumer usage and without consumer adoption there are few incentives -- except direct payments from Microsoft -- to develop for the platform. The majority of developers, according to the Appcelerator survey, can only focus on two mobile platforms.
Separately, IHS iSuppli released a full-year, 2012 estimate of global smartphone market share. The calculation is based on the untrustworthy "shipments" metric. However, the company shows Nokia dropping to third position, Apple in second and Samsung-Android now leading iOS "decisively":
Samsung and Apple ended 2011 in a neck-and-neck battle for leadership in the smartphone market, with only 1 percentage point of market share separating them. However, entering the 2012 year, Samsung moved ahead decisively ahead of Apple with a wide range of Android smartphone offerings. Samsung made significant gains in both the high end as well as the low-cost market with its Galaxy line of smartphones. This diversified market approach has allowed Samsung to address a larger target audience for its phones than Apple’s limited premium iPhone line.
The Samsung and Apple duopoly represents the dominant force in the smartphone market, with the two companies accounting for 49 percent of shipments in 2012, up from 39 percent in 2011. While Nokia and Canada’s Research in Motion (RIM) also held double-digit shares of the market in 2011, Samsung and Apple remain the only two players that will each command a double-digit portion of the smartphone space in 2012.
As Google-owned Motorola, LG and HTC struggle for consumer attention and handset sales, Samsung becomes more and more identified with Android in the consumer mind. RIM's forthcoming BlackBerry 10 OS is truly the company's "last hope." Nokia too will likely need to do something fairly radical if it is to remain viable (i.e., adopt Android) in the smartphone market.
Global mobile ad network InMobi has released its latest "Insights Report" for the US market. Interestingly it finds Apple devices generating the majority of ad impressions despite their smaller overall hardware market share.
Apple's iOS devices have a 46% share of impressions on the InMobi network, compared with Android's collective 43.6% share. Here are the top five devices that InMobi sees on its network:
While there is almost no Android presence in the top five (Kindle Fire is a quasi-Android device) the network says that Android growth is outpacing that of the iPhone. Compare InMobi's data to other ad networks, which show Android with a greater share of impressions.
Jumptap (July, 2012):
Millennial Media (November, 2012):
The Millennial numbers above correspond almost exactly to comScore's market share data regarding handset penetration (October, 2012):
There are a couple of studies that suggest a substantial percentage -- perhaps as much as 40% -- of mobile display ad clicks are unintended or "bad" in some way. Pontiflex and Trademob are the sources of these findings.
There are a number of ways to address this. One way is changing the billing or business model (moving from CTR to CPA); another is to ensure that clicks are truly intended. For example, mobile ad networks like YP and xAd ask users to confirm that they want to actually contact an advertiser or visit the advertiser's site/landing page.
Below is an example of that approach from the YP mobile ad network:
Now Google is taking steps in its banner ad creative to make sure that clicks are valid. The company said in a blog post that
[M]ost accidental clicks on in-app image ads happen at the outer edge of the ad unit, likely when you’re trying to click or scroll to nearby content. Now if you click on the outer border of the ad, we’ll prompt you to verify that you actually meant to click on the ad to learn more.
Below are screens from the Google post. The company will require users to now click on a specific area of the banner ("visit site"). The entire banner won't be "clickable."
This is smart and together with other, similar efforts it should ensure that clicks and other consumer actions in response to mobile ads are intended and that advertisers are only charged for "valid" clicks and not fat-finger accidents.
In one sense this is a solution to a practical problem but in another it's a symbolic, confidence-building measure for mobile display advertising.
Last week eBay reported that it will realize "more than $10 billion in mobile volume for the year from its mobile apps and PayPal expects to transact more than $10 billion in mobile payment volume." Those are big numbers. If we visit some of the mobile payments forecasts the numbers get much bigger.
Yet consumer surveys in the US and elsewhere reveal consumer ambivalence and even indifference to mobile payments. It does vary by age however, with younger users indicating greater interest than older people.
A survey we fielded in August (n=926 US adults) found that roughly 29% of respondents had varying degrees of interest, whereas 71% were "not at all interested" in mobile payments.
"How interested are you in using your mobile phone to pay for things as a replacement for cash or your credit cards?"
In our survey people under 45 years of age were considerably more interested than people who were older. A new survey from Harris Interactive is more bullish on the outlook for mobile payments however, with smartphone owners reflecting much greater interest in mobile payments:
“How interested are you in being able to use your smartphone to process in-person payments via tapping a special receiver, rather than using cash or payment cards?”
In other words 27% were "Very" or "Somewhat Interested" while 57% were "Not Very" or "Not at All Interested." This was the full sample population. The following were the smartphone-only responses:
Thus "Very" or "Somewhat Interested" came out to be 44%, while "Not Very" or "Not at All Interested" was 47%. Quite a bit more interest accordingly.
Smartphone owners in the 18-47 age range were most interested in mobile payments according to the Harris survey. In addition, 38% of smartphone owners saw mobile payments replacing card-based transactions "for a majority of purchases" within five years.
Mobile advertising is typically quite a bit more effective than comparable ads on the PC. Indeed, the data show that mobile search and display consistently outperform their PC counterparts. Yet mobile ads (especially display and SMS) are viewed with skepticism and distrust and rank near the bottom of all ad categories in consumer surveys.
This is something of a paradox to say the least. For example, Marin Software's Q3 aggregated client data report indicates the following about the relative performance (CTRs) of paid search ads on the PC, smartphones and tablets:
You might be quick to respond that smartphone click-through rates could be attributable to the so-called "fat finger" problem thus distorting their true performance. This problem -- and we can debate the extent of its reality -- doesn't really exist in a paid-search context.
These clicks are from intent-based queries and thus more inclined be "real" and reflective of a buying intent. In a display context an unintended click may be somewhat more likely. However mobile display outperforms PC display advertising across the board and consistently across studies.
According to 2011 Nielsen US consumer advertising-trust survey data (above), personal recommendations and traditional media ads are near the top and mobile ads are the least trusted of all the major ad categories.
A more recent Millward Brown consumer survey (Q3 2012) found much the same thing. Mobile ads were at the bottom of favorability rankings among all ad types. The list below just shows digital categories:
There's no easy way to explain the apparent contradiction between negative consumer attitudes toward mobile ads and their otherwise superior performance to categories more trusted or ranked more highly.
If you're inclined to believe financial analysts then mobile device ownership (smartphones + tablets) will trump PC ownership on a global basis some time next year. At some point in the next 3 to 5 years we may have as many or more tablets than PCs. These are radical changes in the marketplace that are still slow to sink in with publishers and advertisers unfortunatley.
The essential thing to understand is that tablets are PC replacement devices in most usage scenarios. Smartphones are used both at home and on the go. They tend to complement PC or laptop usage generally speaking. To accomodate these users and usage scenarios much in advertising, mobile site design and e-commerce has to change.
The following chart from Pew lays out US device ownership and trends over the past six years.
PC ownership (including laptops) has really peaked in the US at about 61% according to the Pew survey data. Mobile phone penetration is 85% (smartphones at 50%+) and tablets at 25% (after the holidays it will be greater).
So what does this all mean in terms of real numbers? It means that if there are roughly 250 million US adults then there are:
If teens are included there are more than 120 million mobile internet users today in the US. That's just over half the total PC internet population.
A new forecast from Informa Telecoms argues that the mobile phone market will be dominated on a global basis by sub-$150 devices by 2017. Regardless of the accuracy of that prediction, prices are indeed coming down. That means more smartphone penetration and more mobile internet access.
What it also means is that PC-centric publishing, e-commerce and advertising will need to give way to a multi-platform approach and a more nuanced and sophisticated understanding of consumer behavior -- amid an even more challenging attribution environment.