The Wall Street Journal published an interesting overview piece on Facebook founder Mark Zuckerberg's evolution and maturation as a CEO. One of the most amazing aspects of Facebook's post-IPO growth and "turn around" has been mobile. In a little over a year the company has gone from less than $100 million to more than $800 million in mobile ad revenues.
"Taking Facebook public and reshaping it around mobile phones forced him [Zuckerberg] to grow up," assert unnamed sources in the article. The WSJ credits Zuckerberg individually with driving the transformation of Facebook's mobile business though an increasing focus on the bottom line.
In Q2 2012 Facebook reported mobile ad revenue of roughly $69 million against overall ad revenue of more than $990 million. In Q3 2013 (the most recent quarter available), Facebook advertising revenue was $1.8 billion. Mobile delivered 49% of that amount or approximately $882 million.
Facebook said in Q3 it had 728 million daily active users and 1.19 billion monthly active users, up 18 percent. Monthly active mobile users totaled 874 million on a global basis and mobile daily active users came in at 507 million.
When Facebook reports Q4 2013 revenue it's certain that mobile will account for more than 50% of total ad revenue. Overall, in 2013, it's likely that Facebook will have made about $2 billion in mobile ad revenue globally.
For at least a decade analysts and car makers have been discussing, debating and forecasting telematics. Until this point, however, telematics has mostly been about in-dash navigation. More recently, with Microsoft Sync and similar inititives, we've seen a move to integrate speech and smartphone-like app experiences into in-dash "infotainment" systems.
Apple, Microsoft and now Google are trying to expand their reach into the "connected car." This year's CES has featured a number of auto-related announcements. Among them -- and arguably the most significant -- is the Google-led "Open Automotive Alliance" (OAA). With the OAA Google seeks to bring Android into the car in a deep way:
The OAA is aimed at accelerating auto innovation with an approach that offers openness, customization and scale, key tenets that have already made Android a familiar part of millions of people's lives. This open development model and common platform will allow automakers to more easily bring cutting-edge technology to their drivers, and create new opportunities for developers to deliver powerful experiences for drivers and passengers in a safe and scalable way.
One can imagine that if the initiative expands and succeeds it will boost Android generally and become a new channel for Google services (i.e., Gmail, Google Maps, Music, Google Play) and advertising.
Early members of the OAA, which mirrors the earlier Google-led Open Handset Alliance, include Audi, GM, Hyundai and NVIDIA. Microsoft currently works with Ford and Toyota via its Sync system. And in 2012 Apple announced partnerships to bring Siri into the car with a number of car makers, including BMW, GM, Mercedes, Audi, Toyota and Honda, among a few others.
It's not clear to me from a technical standpoint whether auto OEMs can built multiple operating system compatibility into their vehicles or whether they'll have to bet on one. However there's much at stake in this "battle for the dash."
The operating systems that "win the car" will see a boost all around. For example, if Android beats Apple and Microsoft in the car it will help Android more broadly in the market, or vice-versa. As in-dash systems become richer and more complete, people will want their devices and apps to be compatible and accessible in the car.
The "battle for the car" also mirrors the so-called "battle for the living room" among these tech titans. It's really a battle of operating systems and ecosystems across multiple platforms.
It's amazing to think that Pizza Hut has been doing online ordering for 20 years. That would mean Pizza Hut took its first online order in 1994 -- way ahead of the curve. And when it comes to mobile Pizza Hut again appears to be ahead of the market.
Today, according to Pizza-industry publication Pizza Marketplace, roughly 30% of all Pizza Hut orders come from the internet. But half of those are now coming from mobile devices, with momentum favoring mobile (smartphones + tablets) over the PC.
The Pizza Marketplace interview is with Pizza Hut's Kevin Fish, senior e-commerce manager. He sums up the company's attitude toward mobile as follows:
It's important that we're where our customers are and that our experience meets and exceeds their needs. The app offers us the opportunity for a highly engaging and personalized experience. Meeting our consumers at their point of need is become more and more important as technology continues to advance. Our opportunity now was to provide the best experience in the industry with enhancements that meet those consumer demands.
Pizza Hut is using its app to not only deliver services but to engage and cement the loyalty of its users. The company also uses location to deliver specific local promotions and offers that aren't necessarily available in all markets nationally.
I'm not a fan of Pizza Hut pizza but the company really has the right attitude toward multi-channel marketing and engagement -- with its mobile app (and all the personalization it allows) now at the center of its "online ordering" strategy.
According to multiple sources roughly 80% of consumer smartphone time is spent in apps vs. the mobile web. However in the retail segment the story is almost the opposite. Most consumers engage with retailers through the mobile web vs. apps. That means loyalty and mobile engagement are more limited in the category.
The exceptions are Amazon and eBay. According to early December data from comScore Amazon and eBay apps dominate the mobile retail category (Apple's #3 status almost doesn't count here because of its privileged position on the iPhone).
The chart below shows leading retailers' audience reach and time spent by device categorty:
Early on Amazon and eBay invested very aggressively in mobile app development vs. traditional retailers and many other e-tail "pure plays." As a consequence consumers downloaded them "early" and have continued to be loyal to these apps.
What comScore doesn't discuss is that eBay and especially Amazon's apps are often used in retail stores to compare prices and for product reviews content. However, as the metrics firm points out, retailers without apps on consumer smartphones are at a competitive disadvantage.
While retail apps are used for buying sometimes, multi-channel retailers need to start thinking very differently about their apps and see them equally as in-store "assistants" rather than just extensions of PC websites. They will also need to expose and lobby consumers in multiple channels on the benefits of downloading their apps. Apps should be seen along with email as part of a broader, more holistic loyalty and engagement strategy.
Many analyst firms that estimate mobile device market share rely on "shipments" data. Those include IDC, Gartner, NPD and Strategy Analytics, among others. Few of these firms rely on internet traffic and actual usage or sales data to fuel their estimates and forecasts.
The reason for this is simple: shipments data are easier to get than sales and usage data. While these estimates can be "directionally" correct they're often wildly inaccurate as a practical matter. Indeed, they often misrepresent what's really happening "on the ground." Even actual sales data often don't present an accurate picture of the marketplace.
Consumer survey data, such as used by comScore, Nielsen and Kantar for market-share projections, are in most cases better and more reliable than shipments data (and in some cases sales data). Best of all is actual usage or traffic data. A very clear case-in-point is the tablet market.
IDC released an updated tablet-forecast earlier this month. It shows Android tablets with a global market share of 61% and the iPad with a 35% share.
Looking only at these estimates, one gets the clear sense that the iPad has lost momentum and its preeminent place in the tablet market -- in the way that the iPhone ceded market share to Android handsets. The only problem with this shipments-centric forecast is that it bears almost no relationship to the reality "on the ground."
Checking actual tablet-generated traffic on a global basis we see that the iPad has a 74% share vs. 23% for Android. In Europe the story is much the same. In the US the iPad has a 79% share of tablet traffic. Other traffic-data sources show a comparable if slightly lower figure.
The aforementioned numbers are from StatCounter. Net Marketshare data similarly show the Safari browser as the dominant browser (56%) among mobile devices (smartphones + tablets) vs. 25% for Android (or 33% if Chrome is included; however Chrome is used on iOS devices too). Data from ad network Chitika also show that the iPad's share of tablet-based web traffic in North America is around 80%.
What are we to make of the massive discrepancy between the IDC 2013 estimates and these three traffic sources? Perhaps it's not important to try and reconcile these figures. Rather we should be asking which data "matter"? The answer is: usage is what matters.
Usage matters to developers, publishers and marketers trying to allocate budget and resources. What if millions of Kindles were given as gifts but later sat on bedside tablets, used only occasionally or in very limited ways? The simple notion that they're "out there" is irrelevant if they're not being used.
Collectively we should reject device "shipments" (and even sales) as a definitive market-share metric. Instead the industry should look at more concrete metrics such as traffic and other usage-based data that show what's actually happening in the world.
In the end this is what really matters to everyone, including investors. Even reliable consumer survey data about device possession and usage are better than shipments figures. Actual traffic data are less susceptible to misinterpretation (or manipulation).
Usage doesn't work as a forecasting tool for obvious reasons. Here projections will need to be based on some mix of assumptions and sales trends and other data. But the degree that the media and tech industry simply pick up and run with these regular shipments numbers without comparing them to actual traffic or other usage data -- I've been guilty myself -- is sloppy and misleading.
Much like US retailers relentlessly pumping out marketing emails before, during and immediately after Xmas, marketing companies and data vendors didn't rest either. Below I've rounded up some of the recent data they released immediately before and after Xmas.
Chromebooks saw impressive sales gains in 2013 according to NPD Group. The Google OS laptops took a surprising 21% of all US enterprise notebook sales in 2013. NPD reported that overall Windows and Mac sales were down, while Chromebooks and Android tablets were up.
It remains to be seen if these numbers are accurate, based on actual usage data. Regardless, the low cost and nearly disposable nature of Chromebooks is starting to put pressure on Windows at the low end of the market. I wrote about Microsoft getting squeezed from both ends earlier this month on Screenwerk. However I would not have predicted the apparent enterprise success of Chromebooks.
When the smoke clears after January 1 we'll hear that millions of tablet devices were purchased and delivered as gifts in Q4, with iPads being the overall winner despite the higher price tag. StatCounter data show 79% of tablet-based US internet traffic coming from iPads vs. 14% from Android tablets.
Continuing an established pattern, tablets were responsible for more than twice the volume of online sales vs. smartphones. That's according to IBM which also reported that on Xmas day e-commerce sales from "iOS [devices were] more than five times higher than Android."
The company also said that on Xmas mobile devices generated 48% of all US online traffic. That's a massive number and probably where the entire internet is headed by 2015. Currently StatCounter reports that 26% of North American traffic is coming from mobile devices. We should see that number grow to 40% or more a year from now.
Finally, as indicated above, many people were deluged by promotional email on Xmas itself (e.g., "buy something for yourself"). Holiday e-commerce overall was up roughly 10% over last year with a few $1+ billion days. However e-commerce growth and spending were less than anticipated this season and something of a disappointment.
Happy New Year.
Research and data aggregator eMarketer is projecting that US mobile ad spending will be roughly $9.6 billion this year and reach a surprisingly high 22% of digital ad revenues. It's possible, given the surge in mobile in the second half, that we'll see something between $7 and $8 billion in US mobile ad spending this year. However the nearly $10 billion eMarketer prediction is too aggressive for 2013.
More interesting than whether mobile ad spending is $7.5 billion or $9.6 billion is the fact that eMarketer anoints Facebook as the second largest digital ad platform globally (behind Google) because of the rapid growth of the company's mobile revenues. And those mobile revenues will be further accelerated by Facebook's recent video-ads announcement.
Back in very early 2010 we speculated about Facebook's impending entry into mobile advertising:
Let's talk about what may be coming sooner rather than later: Facebook as a mobile ad network and one that offers location (and potentially demographics) as part of that proposition. There are currently no ads on Facebook's apps, mobile websites or SMS. I would almost bet my life that's going to change in the near-to-medium term.
Facebook will be clever and careful about integrating advertising into mobile, mindful of the potential to alienate mobile users. However the mobile ad opportunity may be at least as big for Facebook as it is on the PC.
Emarketer speculates that Facebook will make just over $3 billion in net US ad revenue this year (against global gross ad revenue of nearly $7 billion). By comparision, Google will make $17 billion in net US ad revenue. Google's worldwide gross ad revenue this year is likely to be roughly $50 billion.
Emarketer places local search and directory publisher YP in the third position regarding mobile ad revenue in the US. But because YP basically doesn't sell mobile ads (except at the margins) this once again raises the question: what is a "mobile" ad?
Most of YP's ads are simply distributed in mobile rather than being intended by the small business advertiser for specific mobile exposure. Yet this is equally true of ads that appear on both Twitter and Facebook; and Google now also "bundles" PC and mobile ads as a practical matter -- as a way to boost its mobile ad revenue.
If we define "mobile advertising" as any ad that appears on a mobile device and where simple exposure (e.g., CPM) and/or a subsequent user action (e.g., CTR) triggers a billable event then we're going to see mobile ad revenues grow extremely quickly and put up some pretty big numbers. That's because in this context mobile ad revenue becomes largely function of mobile adoption/usage and how much of that usage is "monetized" through existing ad inventory.
Facebook's new video ad product or YouTube pre-roll ads for that matter are a case in point: these ads can appear on the PC or mobile without being specifically modified or even intended for the medium. Thus simple mobile distribution will grow Facebook revenues attributable to mobile. The most engaged Facebook users are on the smartphone app daily; that's going to boost ad revenues attributed to mobile very quickly.
In essence, mobile ad revenue becomes an accounting issue rather than a technology or ad-creative question. Of course the ad platform itself has to be capable of distributing and rendering those ads appropriately on the device before you can be "platform agnostic."
Mobile merchant sites can already offer "pay with Amazon" as an option beside PayPal or their own checkout flow. However Amazon may now be preparing a bigger push and more direct competition with PayPal, Square and others in the mobile payments arena.
The Wall Street Journal is reporting that "Amazon.com may be nearing a deal to buy payments startup GoPago." GoPago is a JP Morgan Chase backed payments startup aimed at the small business market. The company provides a range of payment services including a free "Square register"-like terminal and POS system.
In the fairly noisy payments market I wouild speculate that GoPago has struggled to gain traction and its investors may be looking for an exit. By the same token it's natural for Amazon to embrace mobile payments more fully.
Amazon has roughly 200 million consumer credit cards on file. While this is quite a bit less than Apple it's more than PayPal. And although I haven't seen any survey data on this question I suspect that Amazon has a more trusted consumer brand than PayPal. Thus Amazon is a logical candidate to enter mobile and smartphone-based payments directly and could be a major player in the segment.
In a move to bolster its own mobile and e-commerce position PayPal acquired Braintree for $800 million in September.
Apple is another very logical candidate for mobile and online payments given its massive database of consumer credit cards. Indeed Apple CEO Tim Cook keeps teasing this idea by repeating the number of consumer accounts and credit cards Apple has, now at or near 600 million.
If Apple were to power app-store payments and mobile transactions for third parties it could both remove friction from mobile commerce -- with Touch ID as the equivalent of Amazon's 1-click buying -- and potentially add meaningful revenues to its bottom line.
Update: PayPal acquires StackMob and gets more serious about being the mobile payments platform of choice for developers.
Users may become annoyed by the insertion of new auto-play video ads into their Facebook news feeds. However brand marketers are going to love the new ad units. And Facebook's investors are going to love the revenue -- especially from mobile.
Facebook is promoting video in the news feed as a potential source of "high quality" ads for users. While that might be true in some cases, it's all about giving brand advertisers new ways to "tell stories" on Facebook -- and Facebook new ways to generate revenue across platforms with TV-style video advertising.
It will work on both the PC and, most importantly, in mobile. Here's how the ads will operate according to Facebook:
Facebook is carefully trying to balance advertiser and user interests here. Most notably there's no sound when the videos start to "auto-play." This is a key decision to minimize user backlash. In addition the "no data-plan impact" of mobile ads is also critical.
These ad units -- assuming that there's no sustained user uproar -- will bring significant new revenue to mobile for Facebook. They'll also give brand advertisers a potentially compelling and simple way to reach mobile users. The genius of these ads is that they automatically work across platforms and marketers won't need to change the creative to address the mobile audience.
The decision to keep the sound off is smart both to minimize the backlash, as I said, but also to indicate true engagement with the video units -- users will have to click to hear the sound. But these units will also likely have a "brand effect" and influence even if the sound is not engaged.
I've argued in the past that video is a key format for mobile ads. If I'm right, Facebook may have just created its "killer" mobile ad unit.
Startup Expect Labs has launched its MindMeld app after months of being in private beta. A crude but quick way to describe it is: Google Now meets Skype. Expect Labs, founded by Tim Tuttle, describes it as a "voice assistant." But that doesn't really do it justice.
Many bloggers and tech sites are reviewing MindMeld. In a way that misses the bigger picture. The app is really a "technology showcase" or demo for something larger and more forward looking. Expect Labs, which charges $4 for the app, doesn't see MindMeld as a money maker and isn't staking its future on the success (or failure) of the app.
First, here's what MindMeld does: it listens to your conversation, with one or several people, and in real time shows you pages and websites that are relevant to the discussion. The sites and data are coming from various APIs and the internet broadly. If you and your friends are talking about going to New York on vacation, for example, it will start showing hotels, restaurants and things to do based on the specifics of your conversation.
The key challenge here is filtering "signal" from "noise" and finding relevant pages and sites. Expect Labs' CEO Tim Tuttle says that the technology has significantly improved over time and the app has changed somewhat from its inception to its launch today. For example, it used to listen to the entire conversation. However now it will pause and users are required to initiate "searching" via an "OK MindMeld" wake up phrase.
The underlying technology seeks to deliver a better search and discovery experience on devices where the keyboard isn't particularly useful or there's no keyboard. There are myriad inputs into "search results" (anticipatory search results): time of day, location and "context" broadly speaking. If you sign in with Facebook it also grabs other information about you as another relevance input.
Expect Labs' technology, while imperfect, is really the fulfillment of the vision behind Google Now: real-time, useful information that dynamically changes based on context. MindMeld is the "1.0" expression of that vision. Speech recognition is from Nuance but the natural language understanding is Expect Labs' own technology.
There are a number of enterprise use cases in development; and one can see this technology being incorporated into a wide range of general and vertical applications. Google Ventures is an investor, as is Intel. Those are two potential buyers of the company.
The technology is impressive and the major practical question for Expect Labs will be where to focus and how to fully express what the technology can do in a commercial context.