Ad Networks

Yelp Moves into Mobile Display Advertising

It has only been a few months since Yelp introduced ads at the top of search results in mobile. Now, according to AdAge, the company is adding mobile display ads to its mobile apps (and probably later its mobile website).

The first advertisers will be InterContinental Hotels (IHG) and Taco Bell. They will apparently have exclusive visibility in their respective categories throughout March. I was unable to find a live screenshot for either advertiser. However the left image below (via AdAge) shows a Taco Bell ad on the business profile page. On the right I've also captured a "search ad" and its presentation in Yelp's iPhone app. 

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What's not clear is whether Yelp advertisers will be exempt from having these new displays ads on their profiles (they are exempt from competing ads online). It will also be interesting to see how these ads perform. Will they be more brand oriented or more direct response (including special offers)? 

While Yelp users in the restaurants category, I'm guessing, are less likely to change their plans and go to Taco Bell hotel category users could well respond to an offer or incentive from IHG as they plan a hotel stay.   

It will also be interesting to see whether Yelp will sell its own ad inventory exclusively or whether the company will take third party mobile display ads. My guess is that Yelp probably would be concerned about the quality and relevance of third party mobile display ads and will be unlikely to take them for at least the near-term (if ever). 

By Ignoring Standards Will Rovio Save Mobile Advertising?

Rovio (formerly known as Relude) was founded by three students in Finland in 2003. In 2009, as Rovio, the company released Angry Birds for the iPhone. To call it phenomenolly successful would be an understatement. 

Most people are aware the Angry Birds games have been downloaded more than a billion times. However many in North America may not recognize that the Espoo-Finland based company is now a global entertainment brand, with "activity parks" in Europe, an Angry Birds cartoon series and a feature film coming in 2016.

The company has expanded into publishing and character licensing. It claims more than 260 million monthly active users. Rovio's YouTube channel has more than a billion views. It also says that its retail products "are now generating a major part" of its revenue. 

Against that backdrop, last month the company annouced a new "Brand Advertising Partnership Team." Rovio hired a number of advertising industry and digital media veterans including Michele Tobin, Betsy Flounders Novak, Matt Pfeffer, Todd Tran and Raphaelle Tripet. Tobin is quoted in press materials saying, “Our new Brand Advertising Partnership Team in the US will enable us to now partner directly with other lifestyle brands." Tobin is the Head of North American Brand Advertising Partnerships. 

Just as Rovio is making a big push into advertising the IAB and MMA are seeking to lock down standardized mobile ad units in the hope that standards will drive more adoption and investment in mobile advertising. That assumption may or may not be correct but the consquences of standardization at this still-early stage may be to "institutionalize" lackluster ad creative.  

On the PC, display ad unit standards were partly responsible for the development of "banner blindness," which in turn led the Online Publishers Association years later to break away and create new, bigger ad units that were more like TV and encouraged deeper audience engagement. 

Rather than standardization what mobile advertising needs is radically improved ad creative. While there are some great case studies and pockets of progressive thinking about mobile, most mobile display is unispired and even perfunctory.

Rovio is taking a very expansive view of digital advertising and may be able to do some highly customized promotions and ad campaigns that are more analogous to TV than to conventional digital display. This was the original imperative behind Apple's iAd efforts.

Rovio plans to work closely with brand advertisers both in creating novel campaigns that it hosts and in lending its characters to third party advertising. The skill and vision of its new brand team should give us hope that the digital and mobile campaigns Rovio creates will operate as models or best practices examples for the broader industry.   

Sorry PC: Tablet Buyers Want Yet More Tablets

Beyond the pure sales numbers -- tablets up, PCs flat or down -- there's a fair amount of anecdotal evidence that people are substituting tablet purchases for PCs. Adding to that, mobile ad network JiWire put out a Q4 report in which it surveyed more than 5,000 mobile consumers in the US and UK on a range of topics.

Among the findings in the report was the intention of existing tablet owners to by a second or additional tablets. The survey found that almost three-fourths of the respondents (existing tablet owners) intended to purchase another tablet.

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It should be pointed out that the JiWire audience is not necessarily representative of the general mobile user population. It tends to be a slightly more "early adopter" profile. However I would imagine this finding is a kind of leading indicator of broader consumer sentiment.

HP's announcement of a $169 7-inch Android tablet earlier this week (putting more price pressure on the entire segment) argues that tablets will become an affordable and mainstream PC alternative for a broad consumer population, not just "affluents." Indeed, this result above suggest that many households will have two, three and even more tablets: one for each family member. 

As I've argued before these devices (and smartphones) will be "primary," while the PC will be used for selected tasks and perhaps become a "secondary" Internet device in the home for large numbers of people. Developing markets may see even more dramatic patterns along these lines, with low-cost tablets simply taking the place of PCs in many instances. 

An interesting, related finding in the JiWire report is the hierarchy of tablet preferences. The findings below reflect the international nature of JiWire's results. The Galaxy tablets have not done as well in the US but have done relatively well in Europe. In the US or North America, Kindle Fire has been the most successful Android device, followed by the Nexus 7.

What's particularly interesting is the position of Windows Surface machines in the third slot, above Kindle Fire. This indicates there's healthy awareness and interest in the device. However, we'll have to see in several months whether this translates into actual sales.

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Waze Picks xAd to Deliver Location-Based Ads to Navigation App

Social navigation app Waze and xAd announced a partnership at Mobile World Congress in Barcelona today. Waze intends to deliver ads to users "along [the] designated navigation path." The company is not the first to try and do this; Mapquest initiated something similar with national advertisers a couple of years ago but in an incomplete way. 

Waze has a very engaged audience and has benefitted from the initial stumbles and challenges of Apple Maps. It was one of the alternative mapping and navigation apps recommended by Apple. Telenav also mixes location-based ads and navigation in an app. 

According to the press release this morning:  

Through the use of xAd’s proprietary technology, ads can be further targeted based on context factors such as past anonymous search behaviors while leveraging the unique functionality of Waze to serve ads at the most relevant time along their route – when the consumer is likely to see and engage with the offer…. at zero speed. 

In addition to its own social data, Waze integrates social and location-specific content from Yelp, Foursquare, Facebook and YP into its app. Users can choose results from any of these sources when they conduct a local search via Waze.

According to the press statement xAd will be the exclusive provider of both search and display ads in Waze. I was unable to find any example ads this morning in the app. I'm sure the integration will be thoughtful however. Waze recognizes the need to preserve the integrity of the user experience. Too many or irrelevant ads would risk alienating its audience.   

How Damaging Would 'Do Not Track' Be to Mobile Advertising?

The digital advertising industry opposes "Do Not Track" (DNT). No surprise there. Indeed, the industry went "ape shit" (to use the vernacular) when Microsoft declared that IE 10 in Windows 8 would be set to DNT by default. Yahoo and the The Digital Advertising Alliance, a trade group comprised of the American Association of Advertising Agencies, the IAB, the DMA, the Association of National Advertisers and the American Advertising Federation, said they would simply "ignore" IE 10's DNT default settings. 

The rationale ostensibly was: "Microsoft is making a decision for the consumer; this isn't the consumer's decision." However another reason was that DNT fundamentally threatens behavioral targeting, profiling and retargeting.

A widely held view in the online advertising industry is that consumers, if they fully understood the benefits of targeting, would willingly accept it in exchange for more relevant ads. There's mixed evidence on this point.

In a Q1 2012 survey of roughly 2,000 US adults the Pew Internet & American Life Project found that 68% of respondents didn't want to be tracked and targeted while 28% were comfortable with it "because it means I see ads and get information about things I'm really interested in." Thus two-thirds of these people were explicitly rejecting the notion of trading privacy for more relevant ads. 

 Online targeted advertising

This morning the US Federal Trade Commission released a report on mobile privacy. It makes a boatload of recommendations to developers, OEMs/platform providers and ad networks. Without listing them out in detail, they mostly focus on education and disclosures. However the FTC also recommends that platforms (iOS, Android, Windows, etc.) adopt a global DNT capability that would block third parties from collecting information about them (including location).

Here's what the FTC says about DNT in the report:

Some consumers may not want companies to track their behavior across apps. Indeed, one survey found that 85% of consumers want to have choices about targeted mobile ads. A DNT mechanism for mobile devices could address this concern.

Accordingly, Commission staff continues to call on stakeholders to develop a DNT mechanism that would prevent an entity from developing profiles about mobile users. A DNT setting placed at the platform level could give consumers who are concerned about this practice a way to control the transmission of information to third parties as consumers are using apps on their mobile devices.

The platforms are in a position to better control the distribution of user data for users who have elected not to be tracked by third parties. Offering this setting or control through the platform will allow consumers to make a one-time selection rather than having to make decisions on an app-by-app basis. Apps that wish to offer services to consumers that are supported by behavioral advertising would remain free to engage potential customers in a dialogue to explain the value of behavioral tracking and obtain consent to engage in such tracking.

Apple has already begun to innovate with a DNT setting on its platform. Apple’s iOS6 allows consumers to exercise some control over advertisers’ tracking activities via the “Limit Ad Tracking” setting. Although the setting could be more prominent, this is a promising development, and we encourage Apple and other platforms to continue moving towards an effective DNT setting on mobile devices that meets the criteria we have previously articulated for an effective DNT system: that it be (1) universal, (2) easy to find and use, (3) persistent, (4) effective and enforceable, and (5) limit collection of data, not just its use to serve advertisements. We will continue to have discussions with stakeholders in the mobile marketplace on this important issue.

If such a platform-level DNT capability was available -- and obvious -- to smartphone and tablet users, I suspect that a majority of them would adopt it, as the Pew data above suggest. Perhaps a meaningful minority percentage of users would accept tracking/profiling as the price of more relevant advertising. But I still believe it would be less than 50%.

Of course one of the things that users don't understand is that they'll get ads regardless -- just lower-quality ads. 

Facebook Delivers Strong Quarter, Mobile Now 23% of Revenues

Facebook delivered the goods this afternoon. The company beat analysts' estimates and reported quarterly revenues of $1.56 billion and $5.09 billion for the year. Advertising revenue for the year was roughly $4.3 billion.

Despite the beat, Facebook shares were down after hours. 

Advertising revenue for Q4 was $1.33 billion, or 84 percent of total revenue. Impressively mobile advertising represented 23% of total ad revenue, which is up from 14% the previous quarter.Even more significantly Facebook said that mobile daily active users exceeded web daily users in Q4 for the first time. CEO Mark Zuckerberg characterized Facebook as "a mobile company" accordingly.

Facebook revenues Q4

MAUs Q4 FB

Mobily only users FB

There were 680 million mobile monthly active users in Q4 (compared with just over 1 billion in total). Of those 157 million were mobile only users.

Yahoo Rebuilding in Mobile: Excerpts from the Q4 Earnings Call

Yesterday Yahoo reported Q4 2012 earnings and full-year results. In several respects company did better than expected in Q4, though display revenue was down 5%. Search revenue was up 14%. Display advertising is the single biggest source of revenue for the company. 

On the earnings call CEO Marissa Mayer discussed the company's strategy. Among other things, Mayer is focused on improving Yahoo's mobile sites, apps and products, branding them consistently and upgrading them in those areas where Yahoo wants to concentrate. Improved Yahoo Mail and Flickr apps were two recent product upgrades for mobile. 

Mayer is very focused on modernizing Yahoo user experiences and generating more usage and engagement accordingly. She believes that will bring more revenue opportunities including in mobile.  

Below are some of her verbatim remarks about mobile from the earnings call transcript:  

Yahoo! is focused on making the world's daily habits inspiring and entertaining . . . Essentially, we need to start a chain reaction . . . To start that chain reaction of growth, we've identified approximately a dozen products to focus on, each a daily digital habit. When taking multiple platforms into consideration for each product, desktops, mobile web, mobile apps and tablets, there's a lot of work to be done . . . 

Focusing more on the pure advertising and monetization standpoint, there's greater opportunity with the big 4: Search, Display, Mobile and Video . . .

In 2012, we saw our Mobile adoption grow to more than 200 million unique monthly users. From a monetization perspective, this is still a very nascent source of revenue for us. With any platform shift, revenue always follows users, and Mobile will be no different . . .

Obviously, we have a large mobile web offering and people tend to use things like Yahoo! Finance, omg! on their mobile browsers on their phone. They also tend to use some of our applications . . .[M]ost of our applications and our mobile web experiences have Yahoo! Search boxes . . .

In terms of having 50% of our engineering workforce on Mobile, I think that this is something that will ultimately happen. I think you start looking many years in the future, it's hard to imagine that there are going to be technology companies where that isn't true. To date, we have started to shift some of our engineering teams to be more focused on Mobile. We need to get to a critical mass on that.

Just a few years ago Yahoo was well ahead of Google in terms of mobile advertising and revenue. Today that's hard to believe. Cleary, however, Mayer "gets it" and is working with her team to address Yahoo's current mobile deficiences. And the 200 million monthly unique users is a very encouraging figure for the company. By constrast Facebook, Yahoo's biggest display rival, has 600 mobile uniques on a global basis. 

Even though Yahoo is building out its mobile assets, I would expect the company to make several mobile acquisitions -- perhaps on the consumer side but also of a mobile ad network or exchange.  In fact, I would be surprised if Yahoo didn't make a meaningful acquisition to bolster its mobile advertising business. 

What You Think You Know about Local-Mobile Advertising May Be Completely Wrong

I keep reading very aggressive projections about local-mobile advertising from BIA and others. Rather than grounded in reality today, these forecasts are built on a set of "optimistic" but simple assumptions about how the market will inevitably develop. For example, one assumption is that national ad dollars from brands and retailers that sell locally will pour into mobile and that their mobile ads will necessarily be geotargeted or localized.

While all forecasts must make assumptions about the future, my belief is that many of the assumptions being made about mobile are crude at best or simply incorrect. I'm a big proponent of location-based marketing and have written extensively about how geotargeted ads and ads with localized creative outperform conventional or "generic" national advertising. There's no question about consumer demand for local information. The question is whether and how advertisers can match or exploit that demand.

There remains a great deal of friction and many challenges to overcome before these big local-mobile forecasts can come true. There are also several "unexpected" things that may change the direction of the marketplace. I go into a few of those things below. In truth the majority of the localized mobile advertising today is happening in search. The platform is mature, the demand and the tools are there. The value is obvious to all involved. That's why Google is making the most money in mobile advertising today. (Facebook is also going to make a lot of money in mobile, some of which will be localized.) By contrast, local-mobile display is in its infancy.

There are two mobile ad networks generating and syndicating a large percentage of the local display inventory that you're likely to encounter: xAd and YP. CityGrid is out there and so are Verve, LSN, Telenav/ThinkNear and a couple of others. Marchex is there too with pay-per-call; however much of that is driving mobile callers to national call centers. Among the major ad networks Millennial, JumpTap and AdMob (Google) all offer local targeting. Often that targeting doesn't extend beyond state or DMA-level precision.

The emerging exchanges and RTB platforms all offer location as part of a laundry list of targeting capabilities. Indeed, location is likely to simply become one of many targeting variables on most networks and exchanges.

The War on Mobile Display Advertising

Many analysts simply assume that mobile advertising will follow the well-worn path of PC advertising, only perhaps in a more accelerated fashion. Thus you get mobile advertising forecasts that show a relatively smooth progression of ad budgets into mobile, with search and display being the two main ad categories (calls fall into both). There's a longer post to be written about these assumptions and why they may not play out as expected -- especially with respect to location-based ads on mobile devices. 

Overall there are relatively few mobile search impressions available outside of Google. So most of the ad inventory being sold today is some form of mobie display. However there's also something a "war on mobile display." That's really about the business model: CPM/CPC vs. CPA. 

It's largely being waged by firms whose business models that are not CPM or CPC based. Companies that use a pay-per-[app]-install or other CPA models have attacked CPM or CPC-based mobile display with the idea of the "fat finger problem."

The argument is that a huge volume of mobile display clicks are simply mistaken or perhaps even fraudulent in some cases

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Source: Trademob (9/12); based on analysis of 6 million mobile ad clicks 

There's also the idea, often discussed, that consumers don't like mobile display advertising and consider it to be just a notch above spam.  

More recently Marchex, which has transformed itself into a call-based advertising platform and network, asserts that the overwhelming majority of mobile display impressions and clicks are nearly worthless. In a study, released in December, involving six major display ad networks Marchex found that it took almost half a million ads to generate one "quality" phone call: 

We examined a set of mobile display ad campaigns across the six largest mobile display networks to investigate the real, measurable performance of these ads. The call to action on all advertisements was a phone call. Performance was based on the number of high-quality calls driven by the media investment. Marchex defines high-quality calls as those that do not include misdials and spam; existing customers looking for support services; and unproductive calls (e.g. too short).

Our advertisers included national, branded businesses in Education, Insurance, Home Services and Entertainment. We conducted the study on major mobile ad networks and employed media tactics ranging from highly targeted to broad buys. Ad spend was distributed across networks and advertisers to ensure statistically valid conversion results on the back end.

Marchex said that in its test it took 494K impressions to generate 2,481 clicks, which in turn generated only one "quality" phone call (as defined above). That single call effectively cost $302 according to the company, because of all the wasted impressions. 

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Source: Marchex (2012) 

I exposed these findings to one mobile ad network, which disputed them and said on its network the ratio of impressions to qualified calls was much smaller: 15:1 rather than 494K:1.

The Marchex argument is that it's simply cheaper to buy calls directly than to buy mobile display impressions. The company's study needs to be replicated before we can conclude that Marchex's findings are valid across networks. There's also the argument about awareness vs. direct response -- most national advertisers currently are just seeking broad awareness and scale.

Regardless Marchex's findings and the other data above collectively fuel pervasive doubts about the value of mobile display advertising. 

Millennial Media's 2012 Highlights: Samdroid Reigns, Top Verticals by Spend

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. 

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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. 

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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. 

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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.  

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IAB: Q3 Online Ad Revenue $9.3 Billion, Mobile Could Reach $3 Billion in 2012

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. 

Despite Android Market Share Lead, iOS Devices Dominate InMobi Network

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:

  • iPhone -- 27.5%
  • iPod -- 11.5%
  • iPad -- 7.0%
  • Amazon Kindle Fire --  2.8%
  • Motorola Razr -- 2.2%

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): 

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Millennial Media (November, 2012): 

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The Millennial numbers above correspond almost exactly to comScore's market share data regarding handset penetration (October, 2012):

  • Google: 53.6%
  • Apple: 34.3%
  • RIM: 7.8%
  • Microsoft: 3.2%
  • Symbian: 0.6%

Google Taking Steps to Address the 'Fat Finger Problem'

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: 

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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." 

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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. 

Despite Better Performance, Mobile Ads Considered Just a Notch Above Spam

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:

  • PCs: 2.35%
  • Tablets: 3.22%
  • Smartphones: 5.07% 

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. 

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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: 

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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.  

Examination of Apps Shows Small Minority Share Location

The US Federal Trade Commission (FTC) today released a study of privacy and mobile apps for kids. The report was a follow up to an earlier study issued in January. Both reports were highly critical of app developers and app stores. Both found that parents weren't given enough information to assess privacy policies and whether or how their kids' information was being used. 

The FTC looked at 400 apps (randomly selected) that were directed toward kids. The agency compared privacy policies and actual practices. It found: 

[The] industry appears to have made little or no progress in improving its disclosures since the first kids’ app survey was conducted . . . most apps failed to provide basic information about what data would be collected from kids, how it would be used, and with whom it would be shared.

In a few cases privacy policies were directy contradicted by actual practices and the FTC called these apps deceptive and potentially illegal.  

The report's findings are interesting and potentially important for the debate over mobile privacy. However the specific finding I want to focus on here has to do with the number of apps that transmitted location information to ad networks. 

Mobile apps (for kids) that share information with developers and ad networks 

 

Source: FTC 

Only 3% of apps that transmitted information back to developers and ad networks shared location data. The iPhone makes that process more explicit than does Android. But when location isn't shared there can't be any location-based ads.

Apps for kids aren't ncessarily representative of the entire universe of apps. Indeed, location may be much less of a factor in apps for kids. But the data may be directionally consistent with the market as a whole, inducating how relatively few apps today offer opportunities to display location-based ad inventory. 

TV Remains King of Time Spent but Mobile More Effective Ad Medium

TV remains the king of all US media channels in terms of time spent -- but it's not necessarily quality time. Our attention is increasingly split; simultaneous media usage is growing. In addition there's considerable reason to believe that TV advertising is now less effective than mobile advertising.

As a real-world case-in-point that is representative of larger trends, my 13 year old never watches TV shows (on Hulu Plus) without a smartphone so that she can check Instagram and text friends at the same time (during commercials).

According to a new Nielsen "State of the Media" report, "The average American consumes nearly 39 hours of content each week on the TV set, on the computer and on mobile." The bulk of that time is with TV but roughly 40% of smartphone and tablet owners are watching TV at least once a day while using other devices (i.e., smartphones, tablets) simultaneously.

Nielsen found that simultaneous tablet and TV use skews older while simultaneous smartphone and TV use skews younger. This "second screen" usage may contribute to the diminishing effectiveness of TV advertising, which has been declining since that advent of the DVR.

Screen Shot 2012-11-19 at 8.21.15 PM

It turns out that mobile video advertising is more effective than TV. A Q2 study from Nielsen and AdColony "measured the brand and ad effectiveness of the exact same 15-second [CPG] video spot in live campaigns across TV, online and mobile." What the research found was that the same ad delivered better results in a mobile context than online or on TV. 

Relatively speaking mobile video ads are dirt cheap by comparison to TV. Below are the study results comparing performance of the same video unit in the three different contexts: 

Mobile video ads:

  • 79% General Recall
  • 58% Brand Recall
  • 45% Message Recall

TV ads: 

  • 49% General Recall
  • 10% Brand Recall
  • 6% Message Recall

Online video ads: 

  • 29% General Recall
  • 12% Brand Recall
  • 8% Message Recall

In the study, the mobile ad dramatically outperformed the other screens across these traditional brand metrics. Some of this is undoubtedly the result of novelty but it's also the way in which mobile commands user attention in ways that TV and the PC internet have lost the power to do.

Report: Restaurants and Retailers Using Mobile to Drive Customers into Stores

This month's Millennial Media "SMART" report takes a closer look at the behavior and goals of mobile advertisers in the restaurants and retail vertical. Apparel retailers and fast food/national restaurant chains are the two largest categories of advertisers on the Millennial network in this segment.

Citing June comScore data Millennial reported that "Females spend nearly twice as much time on mobile Retail & Restaurant apps and mobile websites as men do."

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The main campaign goal of both sets of advertisers was to drive foot traffic into local stores. Accordingly retail and restaurant advertisers were more interested than average in getting people to store locators and maps on landing pages, as well as exposing promotions (coupons). The were also interested in generating mobile commerce. However unless there's a stored credit card on file there will probably be no m-commerce.  

These restaurant and retail advertisers were much less interested than average in driving application downloads. This apparent lack of interest in getting apps onto the smartphones of their customers and prospects reflects a misunderstanding of the role apps can play in stimulating sales and improving retention and customer service.

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Finally Millennial reported that restaurants and retail was the number three category in terms of ad spending on its network -- more than automotive, travel or CPG: 

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Opera: North America Sees 70% of Global Ad Requests

A few years ago Opera bought mobile ad mediator AdMarvel. Today the company released its Q3 State of the Mobile Web report, which focuses on advertising. It features some great data about platforms, revenue categories and CPM rates. All the data are drawn from Opera's global network of publishers and advertisers representing 40 billion ad impressions per month.

One of the major findings is that 70% of mobile ad impressions are happening in North America (mostly the US). Asia is next and then Europe. 

 Distribution of ad impressions globally

Opera also reported eCPM rates by region. The global average eCPM was $1.31, with the US average slightly higher at $1.37 and Europe lower at $1.13:

  • US eCPM -- $1.37
  • EU5 eCPM -- $1.13
  • Rest of World -- $0.73

Opera reported on ad revenue by smart device. The company said that iOS devices generated more revenue and higher eCPM rates than competing devices: 

Once again, this quarter, iOS leads the pack in monetization performance with an average eCPM of $1.64. This outperforms the global average eCPM of $1.31 by over 25%.

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The iPhone and iPad in particular saw higher eCPM rates than other devices. Interestingly, despite the much larger number of Android phones, the iPhone generates roughly 2X Android revenue for Opera. 

The company also pointed out that while RIM/BlackBerry is losing share in global markets its position remains strong in the UK. 

Opera said that the category "Business, Finance & Investing" generates more ad revenue than any other in its network. It also said that 73% of Opera's mobile ad revenue is coming from apps (vs. mobile Web).

You can review the full report here

Yahoo Probably Compelled to Buy a Mobile Ad Network

Yahoo used to be one of the leading mobile ad networks. And it used to be ahead of Google in terms of innovation and mobile ad revenue. But that now feels like a lifetime ago.

While the company still has decent reach and, presumably, mobile revenue it has fallen way behind market leader Google as well as some of the independent mobile ad networks such as Millennial Media and JumpTap. Millennial Media is now a public company with a market cap of $1.15 billion and JumpTap has secured roughly $120 million in multiple investment rounds. The latter is rumored to be contemplating either a sale or an IPO.

Both companies, among a few others, are now Yahoo acquisition candidates.

Yahoo just announced Q3 2012 revenues, which showed about 2% growth. Display revenue was the largest contributor to revenues but basically flat YoY. Search grew 11% (on a non-GAAP basis). Google "owns" mobile search so display represents the greatest area of opportunity for Yahoo in mobile.

Indeed, mobile is one of the cornerstones of new Yahoo CEO Marissa Mayer's strategy. However, the company's mobile capabilities need to be substantially beefed up. On today's earning call Mayer said the following: "At some point in the future, Yahoo will have to become a predominantly mobile company. By that I mean that at least half of our employees will be working on mobile." She added that Yahoo will be doing a great deal of hiring in mobile.

Beyond its own mobile properties and sites, Yahoo needs to be able to deliver ads to third party apps and the mobile web if it's going to see truly meaningful mobile ad revenue. This leads almost inexorably to an acquisition, which could take the form of one of the leading independent mobile networks or a mobile ad exchange, which would mirror its acquisition of the Right Media online ad exchange several years ago. 

Mayer has been busy assembling her leadership team (many former Google executives) and the thought is that she'll announce some sort of major acquisition in the near term. I had previously thought it would be a consumer facing site such as Foursquare. However I think a mobile ad network now is also a good possibility.

If she wants to hit mobile and local at the same time, she could acquire xAd.  

Google: $8 Billion Mobile Run Rate, 75% Probably Ads

Under some pressure to show that it's monetizing mobile, yesterday on its earnings call, Google announced a new "mobile run rate" of $8 billion. That compares with a run rate of $2.5 billion a year ago. The numbers aren't a direct comparison; Google threw everything into the $8 billion figure (ads, Google Play, app sales).  

Here's what CEO Larry Page said in announcing the new run-rate number yesterday: 

This time last year, I announced that our run rate from mobile advertising hit $2.5 billion . . . But now, we’ve built up additional mobile revenue from users paying for content and apps in Google Play . . . I can announce our new run rate for mobile is now over $8 billion. That’s quite a business.

CFO Patrick Pichette added a small amount of additional clarity: 

The new [mobile] run rate is different from the one we gave you a year ago. And more specifically, last year, it included only our gross revenue from mobile ads, but this year, in this number we also added the gross revenue from the mobile sales of Google Play content. And finally, it also includes the consumer spending on the Play apps . . .

[O]f the three categories I gave you, ads continues to be the bulk of it, the vast majority of it. And then on the case of the Google Play, it’s important to note from a modeling perspective that everything’s that’s content, that is whether a book, a movie content is actually booked on our books on a gross basis . . . Everything that is tied to apps is booked on a net basis, but it’s still a huge kind of number in all cases.

Pichette said the "vast majority" of the $8 billion in revenue was comprised of mobile ads. Trying to estimate what percentage of this figure is ads with greater precision than "vast majority" is a bit tricky. 

Google is counting content sales on a gross basis and app sales on a net basis (30% of the total). Despite Android's larger footprint than iOS, Google Play makes less money than the iTunes App Store. 

 

In March, Flurry said that revenues in the Google Play market were 23% of the App Store. However this was limited to app sales and not content (if I'm reading it correctly). Google includes content sales (movie rentals/sales, book sales) on a gross basis.

Apple makes roughly $4 billion annually on App Store sales according to financial analyst estimates. Twenty three percent of that would be $920 million. If we assume that Google Play app sales have increased since Q1 Google night now be seeing a $1 to $1.5 billion app sales run rate on a global basis. 

It's harder to estimate gross content sales; I haven't seen any estimates of Google content sales at all. Google's content sales are nothing like Amazon's. However, let's be extremely generous and say that it's $2 billion (gross) on an annualized basis.

Using these extremely loose estimates, $5 to $6 billion of the $8 billion run rate would be attributable to ad sales and $3 to $3.5 billion to content and app sales. Pichette's language "vast majority" to me implies something around 70% to 75% (or more) of the $8 billion is ad revenue. That would be right between $5 and $6 billion.