Ad Networks

Is Mobile Driving Down the Price of Google CPCs?

Google inadvertently released its Q3 revenues early today. The company reported that consolidated revenues (including Motorola) were $14.1 billion, a 45% increase vs. last year. Google said that Motorola brought in $2.58 billion. However there was an operating loss of $527 million. Indeed it was argulaby the weak link in the Q3 earnings report.

Minus Motorola, Google's revenues were $11.5 billion with 67% of that coming from Google sites vs. its third party network and other revenue sources. Paid search clicks grew roughly 33% vs 2011. However cost per clicks (CPCs) were down about 15% vs. last year. 

While Google has yet to directly address this, the reason for the lower CPCs is likely the growth of mobile search and the shift of some categories of queries to mobile devices from the PC.

Mobile search volumes have grown significantly; however marketers value mobile clicks less than PC search clicks. The main reason is the challenge of proving ROI. Consistently we see that mobile click-through rates (CTR) are higher than on the PC. But "conversions" are much lower. 

Part of the reason may be the infamous "fat finger" problem. But the larger issue is how marketers are defining and tracking conversions. The e-commerce-centric way of thinking about conversions just doesn't work for mobile. Most users don't transact on their smartphones. They go into stores -- where 95% of retail spending happens -- or they follow up on PCs and tablets later to buy. 

Because marketers can't generally track in-store transactions or later PC/tablet conversions they assign a low ROI to smartphone based queries. This in turn causes them to bid less on those keywords.

In the local segment, there's a shift going on from PC map-based queries to smartphones. A Google representative recently said that up to 50% of mobile search queries carry a local intent. And comScore recently documented that trend and argued that map-based search on the PC had peaked and was now in decline: 

In the past six months alone, according to comScore Mobile Metrix, the number of smartphone visitors to Maps websites and apps has jumped 24% to 92 million unique visitors – a monthly penetration of 83% among smartphone users . . .Searches with a Mapping/Navigation intent on the Big 5 Engines are down 34% over the past 15 months, going from 74.8 million to 49.5 million in August. comScore Search Planner shows that search clicks to Map/Navigation sites show an even steeper decline, down 41% to just 55.2 million in August.

We're likely to continue to see a flattening of local search volumes on the PC and a continuing shift to mobile devices (mobile web and apps). Nobody really knows how much local search query volume is flowing through mobile apps. However a January 2012 survey found that half of smartphone owners conducted local search in apps, with Google Maps being the leading app.

Once marketers more fully embrace mobile and get more sophisticated about ROI we should see the price of mobile advertising and mobile CPCs increase. Google of course will be one of the chief beneficiaries of such a development.  

TeleNav Buys Local Ad Platform ThinkNear for $22.5M

TeleNav has been generally in the business of personal navigation devices and smartphone apps. Over the past couple of years the company has also gotten into mobile advertising, taking ads from the YP and xAd networks, in addition to increasingly selling its own ads to brands and franchises. The ads are all location based or geotargeted.

TeleNav decided it wanted to get into local-mobile advertising in earnest and has announced the acquisition of ad network ThinkNear. The price was $22.5 million in cash and stock. The ThinkNear team now joins TeleNav.

ThinkNear offers precise geotargeting and what it calls "situational targeting," which is a mix of context and audience targeting:

ThinkNear helps advertisers reach consumers within 100 meters of any location, which is more precise than the zip code and designated market area (DMA) targeting typically offered by most ad networks. The ThinkNear network reaches tens of millions of customers across more than seven billion impressions per month. The precision and scale of ThinkNear allows advertisers to take advantage of the most distinctive aspects of mobile phones, which more than 85 percent of American adults now own.

ThinkNear's targeting technology also enables Situational Targeting, which takes into account where consumers are, what they are doing, and what is happening around them. For example, a sports memorabilia store can target an NFL fan with an advertisement for a nearby sale on branded jackets, blankets and umbrellas while the fan is tailgating on a cold and rainy day. Hyper-local Situational Targeting provides consumers with ads that are more relevant to their real-time needs and interests as they go about their day.

The company also announced that ThinkNear would become Scout Advertising, which includes search and display inventory. (Scout is TeleNav's smartphone app/consumer navigation brand.) ThinkNear sources some of its inventory from the various mobile "exchanges."

Scout Advertising is essentially a more complete and extensive version of the "hyper-local" ad network Navteq (Nokia) was trying to build. However Navteq appears to no longer be in the business of advertising.

In addition to the usual metrics, Scout Advertising can also tell a marketer whether the consumer actually arrived at his/her destination. Thus business models can be click, impression and arrival-based. TeleNav also says that its CTRs are "well above online and mobile industry averages, and over 40% of customers who click on an ad will ultimately take action to drive to an advertiser's location." 

While most ad networks offer geotargeting, with varying degrees of accuracy (but generally not lat-long), TeleNav/ThinkNear join a short list of ad networks that can deliver much more granular location targeting. Indeed, its current (or perhaps former) partners, YP and xAd, are now its most direct local-mobile competitors.

Teed Up: Mojiva Introduces Dedicated Tablet Ad Network

It's possible that "T-commerce" and "tabvertising" may over time become more important to brands than advertising on smartphones. Mindful of the growing number and importance of tablet devices ad network Mojiva today announced a dedicated tablet network:

The Mojiva ad network reached an estimated three million tablet devices in January 2011, grew to 25 million by January 2012, and reached 40 million tablet devices as of June 2012. The number of tablet ad requests per month on the Mojiva ad network was 119 million in January 2011, increased to 655 million as of January 2012, and reached an impressive 2.13 billion tablet ad requests per month as of August 2012 – a nearly 20-fold increase in 20 months.  

Mojiva's new tablet network will give advertisers and agencies the opportunity to purchase prime inventory and display rich media ad units across highly valuable audience channels, which include luxury goods, entertainment, news, parenting, tech enthusiasts and sports enthusiasts. 

The Mojiva announcement was being touted today as "the industry’s first tablet-only mobile advertising network." However that's not entirely accurate. Google introduced tablet-only targeting in July of last year. 

Data aggregator eMmarketer has forecast that by the end of the year there will be 53 million tablets in the US. However this estimate is probably low. It will probably be closer to 60 million or more, especially with more lower-priced tablets, the forthcoming iPad Mini and a big holiday shopping season in store for tablets. (PCs probably won't be so lucky.)

Third quarter reports from several digital agencies and marketing firms (RKG, Covario, Kenshoo) show that the tablet ad spend is growing and that ad performance outpaces smartphones and rivals the PC. In the chart below, according to Covario, the tablet share of mobile ad spend has grown to 48% from 27% a year ago. That suggests it will exceed 50% by the end of the year.

Tablet Share of Mobile Ad Spend Has Grown

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Source: Covario Q3 2012 Quarterly Global Paid Search Spend Analysis

Mobile devices generated 21% of paid search clicks in Q3. While the numbers vary from firm to firm, paid-click volume on PCs is still significantly greater than mobile devices. Accordingly there's quite a lot of growth ahead for paid clicks on mobile. 

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Source: Kenshoo Global Search Advertising Trends Q3 2012

Despite the fact that Internet traffic is still dominated by the PC, many data sources indicate that tablet CTRs are significantly higher than corresponding CTR rates on the PC. It's also harder to discount or dismiss tablet clicks as "unintended" the way that several firms are now doing with smartphones. Furthermore, RKG's Q3 digital advertising report shows that the revenue per click from ads on tablets is nearly as high as on the PC. 

Mobile vs Desktop: CPCs & Click-Through Rate

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Source: RKG Digital Marketing Report Q3 2012

While some data indicate that the cost per click of tablet ads may be approaching or even exceeding comparable ads on the desktop, most sources still show the cost of tablet ads being lower and a better value than ads on the PC.

Mobile vs. Desktop: Revenue per Click by Device
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Source: RKG Digital Marketing Report Q3 2012

The emerging challenge with tablet advertising, of course, is the varying screen sizes that are starting to take hold in the category. This is especially true with the 7-inch form factor. An equivalent of responsive web design will need to be created for advertising to accommodate the range of screen sizes coming into the market: 4-inch, 5-inch, 7-inch and 10-inch.

Will US Mobile Advertising Really Be $20B by 2015? Really?

This week at the Smarter Mobile Marketing event in New York -- I didn't attend because I was at a competing search marketing event -- Millennial Media CEO Paul Palmieri made the case that mobile ad revenues would inevitably grow to keep pace with consumer time spent on mobile devices. Accordingly he projected, based on a Gartner formula, that by 2015 US mobile ad revenues would be approximately $13.5 billion. 

Palmieri also pointed out that traditional media grab a much larger percentage of ad spend vs. consumer time spent. However, the underlying assumption is that there's a seemingly inexorable or inevitable logic to the notion that ad spend will catch up with time spent. 

In discussing reports that many mobile ad clicks are unintended, Dow Jones newswires cited a very casual projection earlier this year from Mary Meeker -- based on a similar time spent vs. ad spend formula -- that mobile advertising in the US was a $20 billion opportunity. While I don't think Meeker herself assigned a particular time frame for getting to $20 billion Dow Jones stated that would happen by 2015.

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Meeker's slide does point out that time spent and ad spend are now almost at parity when it comes to the Internet. However that has taken essentially a decade to come to pass. And even though the mobile market is developing much more quickly than the Internet did, the notion that US mobile advetising (not all spending on mobile marketing) will be $20 billion or even $13.5 billion in three years is just too aggressive.   

It's much more likely that US mobile advertising will still be below $10 billion in 2015.

Although consumers have embraced mobile in a big way, there are more than 120 million smartphone users in the US today, marketers are moving much more cautiously and seem to be slow to fully understand the implications of what's happening. There are also "mechanical" and organizational barriers to mobile marketing within agencies and corporations. These behind the scenes "politics" and culture issues are often a bigger obstacle than anything in the broader marketplace (such as fragmentation or the general absence of mobile cookies). 

Recently the MMA issued a mobile ROI report that argues 7% of media budgets should be dedicated to mobile -- despite the fact that at least 10% of consumer media time, if not much more, is being spent with mobile. However at the Smarter Mobile Marketing event in New York agencies reportedly said that the 7% figure was too high and suggested that 2% to 3% of budgets was more appropriate. 

Reports like the one from Dow Jones mentioned above and others that suggest mobile ad clicks are the product of consumer mistakes or click fraud merely reinforce complacency among marketers who don't want to have to worry about yet another digital platform. They've already got social media, search and display to deal with, without compounding their problems by bringing additional form factors and behaviors into the mix. And while many marketers have done something in mobile often that effort is weak or perfunctory.

The challenges around mobile tracking and attribution, the challenges of the new multi-platform environment and the cultural-organizational issues I alluded to together suggest to me that mobile ad spending and revenue will grow more slowly than the simple time spent vs. ad spend formula argues. The fact that traditional media have maintained a much larger percentage of ad spend vs. consumer time spent is another indication this will take longer than expected. Marketers understand traditional media more than they understand the much more complex digital landscape. 

Though consumers will increasingly use smartphones and tablets as primary Internet devices, and while startups and innovation will continue to accelerate the mobile segment, brands and agencies won't necessarily keep pace with consumer behavior and technology development. My guess is that it will probably take at least 5 years to as many as 7 or 8 years to get to the kinds of numbers that Millennial's Palmieri and Mary Meeker are projecting. 

WSJ Article on Mobile Ad Tactics Nearly "Content Free"

Far too often in tech journalism and blogging a provocative headline is betrayed by a superficial or "content-free" article. Such is almost the case with a story in the Wall Street Journal that carries a provocative headline Mobile Ads: Here's What Works and What Doesn't.

In a 1,000+ word article with such an intriguing title there's very little light shed on the subject. Here's the substance in the piece: 

  • The article cites the eMarketer 2012 mobile ad forecast ($2.6 billion). Our forecast was $2.3 billion (admittedly now a bit low). The number represents just about 2% of all US ad spending according to the article
  • Mobile ad CPMs average $2.85 (source: Opera/AdMarvel). That's probably high at this point
  • About half of all U.S. mobile ad spending goes toward search ads, more than the roughly 47% of total digital spending going into Web search (source: eMarketer; however the IAB reported that about 48% of all 2011 mobile ad spending was search, nearly identical to PC search ad spending)
  • Local realtor advertising on Zillow is cited as an example of success on mobile devices  
  • Full screen takeovers are used as an example of successful mobile ad units, but not without caveats 
  • Unexpected/in your face ads (ads in unexpected places: i.e., homescreen of Kindle devices) are said to work. However, this is a dubious recommendation 

That's it.

In fact the article doesn't do very much to illuminate (beyond search) what types of ads are truly working on mobile devices. And the big discussion that the piece neglects is ad creative. More than any other variable ad creative is responsible for the success or failure of the campaign.

There's also no discussion about various flavors of ad targeting and local targeting in particular (although that's implied in the Zillow mention). The article also says nothing about the efficacy of deals or offers as a driver of mobile ad response. Consistently deals/coupons/offers are cited by consumers as the category of mobile advertising they're most interested in. 

Finally, mobile loyalty marketing (vs. media/ad buying) and mobile CRM can be extremely effective marketing tools but these too are not mentioned.  

So much for "what works and what doesn't."  

Velti Announces Huge $27M Mobile Marketing Deal

Mobile advertising platform/exchange Velti announced this morning that it closed a two-year $27 million US mobile marketing deal. The client company was unnamed in the announcement; however Velti characterized it as "a major US brand." Velti also described the deal as the "largest ever mobile marketing deal."

Velti said that the focus of the mystery marketer's mobile efforts would be engagement and loyalty: "This program will drive increased engagement with and long-term loyalty of the brands existing customers." It will be interesting to see what sort of "mobile marketing" is involved and how much "advertising" or mobile media buying is actually part of this deal.

Velti's Q2 global revenues were $58.7 million. The US market is generating a majority of Velti's revenues and this deal would make the mystery company one of Velti's largest clients. Indeed, the announcement was aimed primarily at financial markets. And Velti got a roughly 10% "pop" as a result. 

Screen Shot 2012-09-18 at 7.08.48 AM

Mobile CPMs are mostly lower than desktop CPM rates (Facebook is one of several exceptions), although they were much higher a few years ago. The chart above shows "eCPM" figures received by publishers by content category. Education leads with$0.97, up from $0.82 in July. 

Notwithstanding the huge deal announced by Velti, most marketers are still undervaluing mobile today. There's also an oversupply of mobile display inventory: more ad impressions than advertiser demand currently.

 

Amazon's Policy Reversal on Kindle Fire Ads a Smart Move

Last week I wrote Ads to Pollute Lockscreens of Kindle Tablets:

Yesterday it was discovered that all the new Kindle tablet Fire/HD models will feature these Special-Offer ads on the lockscreen. And, according to a statement provided by Amazon to CNET, there's no way to get rid of them. This controversy undermines what was otherwise a very successful launch.

The fact that Amazon won't allow consumers to "buy out" of the ad clutter is terrible and will turn off many people (though not all). It's a horrible policy. It's also one of the factors, it now appears, that allowed Amazon to so aggressively price these devices -- and undercut iPad's pricing so significantly. 

Over the weekend, based on the outcry it appears, Amazon did the right thing and reversed itself. The company will now allow users to pay a one-time fee of $15 to opt-out of lockscreen ads and Special Offers. Amazon provided the following statement to media outlets in announcing the reversal: 

With Kindle Fire HD there will be a special offers opt-out option for $15. We know from our Kindle reader line that customers love our special offers and very few people choose to opt out. We're happy to offer customers the choice.

It's not clear at all that Amazon customers actually "love" Special Offers or whether they simply tolerate or ignore them. However the irony here is that the availability of the opt-out option will likely mean that more people will feel comfortable with the ads, knowing that they can turn them off.

Otherwise the other "option" would have been to not buy one of these devices. Amazon has taken that objection away. 

Ads to Pollute Lockscreens of Kindle Tablets

According to multiple surveys (including one recently run by Opus Research) majorities of people are happy to endure advertising in exchange for free services. Ad-supported smartphone apps, for example, are much more popular than their ad-free paid counterparts.

Yesterday Amazon introduced an aggressive new array of new Kindle tablets. The specs -- and especially the pricing -- are impressive. It turns out, however, that there's a catch: ads ("Special Offers"). 

Screen Shot 2012-09-07 at 11.57.00 AM

Previously Amazon had subsidized the cost of its lowest-priced Kindle eReader with Special Offers on the lockscreen. If it turned out that you didn't like the ads, you could "buy out" of them.

Yesterday it was discovered that all the new Kindle tablet Fire/HD models will feature these Special-Offer ads on the lockscreen. And, according to a statement provided by Amazon to CNET, there's no way to get rid of them. This controversy undermines what was otherwise a very successful launch.

The fact that Amazon won't allow consumers to "buy out" of the ad clutter is terrible and will turn off many people (though not all). It's a horrible policy. It's also one of the factors, it now appears, that allowed Amazon to so aggressively price these devices -- and undercut iPad's pricing so significantly. 

Let's hope that Amazon is shamed by negative PR into allowing consumers to opt-out or buy out of receiving these ads. Alternatively let's hope that the marketplace speaks and that consumers stay away. 

Competing Narratives: Mobile Ads Outperform PC vs. Mobile Clicks Are Bogus

There are now competing mobile advertising narratives that directly contradict each other. First, there's the widely supported meme: "mobile ads perform better than PC." Accordingly, there are numerous data sources showing higher CTRs and conversions from mobile vs. PC-based advertising.

Most recently data from the xAd-Telmetrics-Nielsen “Mobile Path to Purchase” study documented very high conversion rates in several verticals -- around 50% or higher in restaurants, autos and travel as the graphic below illustrates. 

Source: xAd-Telmetrics-Nielsen (8/12), n=1,500 US adults

On the other hand there are now a few surveys or studies that argue a substantial number of mobile ad clicks are unintended. For example, in January 2011, Harris Interactive (on behalf of Pontiflex) issued survey findings arguing that nearly 50% of mobile clicks were unintended: "47% of mobile app users say they click/tap on mobile ads more often by mistake than they do on purpose." 

Earlier this week came in some ways a more startling claim, based on an analysis of 6 million mobile ad clicks across 10 mobile ad networks by app marketing company Trademob. The company argued 40% of mobile ad clicks were entirely wasted: either accidental or fraudulent. The company's methodology and conclusions are detailed in a white paper (via registration).

Screen Shot 2012-09-06 at 1.59.41 PM

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

If one assumes that the Pontiflex survey and Trademob analysis can be generalized, together they argue that nearly half of all mobile ad clicks are completely wasted or worse. Trademob doesn't really discuss the other 60% of clicks that are supposedly not accidental or fraudulent. Are those converting? Are they not wasted?

A 60% conversion rate would be dramatically better than anything happening online. I'm sure, however, the remaining 60% of clicks do not represent conversions in the Trademob study. They're simply presented as "regular" clicks, with no data about conversions. 

How is it possible to reconcile the two competing narratives and sets of data? The weight of data support the idea that mobile clicks and conversions are greater than on the PC. However that might still be reconciled with the mistaken/accidental CTR argument.

The real problem with the Trademob study, however, is that it may reinforce complacency.

Most marketers are well behind consumers when it comes to mobile adoption and usage. Some CMO reading coverage of the Trademob study might well conclude that -- just as he suspected -- mobile isn't quite "ready for prime time." That would create further delay and discourage mobile investment, resulting in lost opportunity for the company. 

There are myriad ways to control for and protect against false or accidental clicks. Advertisers can protect themselves by paying on a CPA or PPCall basis for mobile leads or conversions. But they can also do call tracking and use other methods to minimize false clicks. 

Regardless, it would be a serious mistake to take this Trademob survey as definitive or reflective of all mobile ad campaigns. 

PayPal Does Distribution Deal with Discover for Massive Reach

PayPal today announced a deal with Discover Card that will potentially bring its mobile payments services to more business locations than any of its rivals, including Square. The potential reach is reportedly seven million merchants.

The new in-store payments capability should be live by Q2 of next year. Consumers will be able to pay by swiping a PayPal card, that in turn backs onto a credit card or checking account or PayPal account balance. In that instance PayPal is no different than using a conventional credit or debit card. However for some subset of merchants (but still perhaps millions) consumers will be able to enter a mobile phone number and a security PIN on the retailer POS terminal (as in the Home Depot implementation). 

That mobile + PIN scenario is potentially faster and more secure than a card swipe. Today there are roughly 16 major retailers that have implemented PayPal in stores. However number is expected to grow by the end of the year in advance of the Discover rollout. 

Yet PayPal/eBay will need to educate and aggressively market the service to consumers if it hopes to drive adoption. There will also need to be incentives and rewards to get consumers to try the system. Even though the mobile + PIN approach is more secure than a card swipe consumers often express security concerns about mobile payments. There's a perception they're less secure.  

The deal with Discover now vaults PayPal back to a leadership position in mobile payments. However mobile payments isn't a zero-sum game. There won't be a single winner. Several major competitors can operate and succeed. Beyond PayPal and Square the question is: who will be the other winners?

See related posts:  

Mobile Ad Survey: Coupons Still King, Brands Mostly Missing the Boat

Mobile ad network HipCricket released its latest mobile advertising survey. The poll of 650 US mobile phone owners asked a range of questions about mobile advertising and device ownership. Among the survey respondents, 73% said they owned smartphones while 43% reported owning tablets.

These percentages are higher than US national averages, which are closer to 50% and 30% respectively. Among smartphone owners, the HipCricket survey was comprised of 43% iPhones, 38% Android handsets and 16% BlackBerry devices. 

The survey found that those with higher incomes were the most engaged with mobile advertising: 

  • 55% of those who have clicked on a mobile advertisement have an annual income of more than $75,000.
  • 29% of those who have clicked on a mobile advertisement have an income of more than $100,000.
  • 45% of those with an income of more than $75,000 have made a purchase as the result of a mobile ad.

Younger users (25-34) were also more engaged with mobile ads than the overall group. Among this group, 70% "have made a purchase as a direct result of a mobile ad." In addition 48% of these users "think more positively about their favorite brands after interacting with them via their mobile device," which was "significantly more than any other age group."

Below are a selection of the charts from the survey. The first one indicates the most frequently encountered mobile ad categories. SMS ads come in at a surprising number two, just above ads in mobile apps:  

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Just under a third of these users had redeemed a mobile coupon, although a substantial number hand "never engaged" with a mobile ad.

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The principal reason survey respondents did not click on or otherwise engage with mobile ads was due to a lack of perceived "relevance." Interestingly there were also several security related fears associated with mobile ads (spam, source uncertainty). This is an education problem for the industry. 

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Consistent with many past surveys, offers and coupons were a major incentive for consumers to respond to mobile ads. While many brands and agencies don't want mobile advertising to be "just about coupons," it's clear that offers drive engagement. 

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HipCricket also found that most respondents' "favorite brands" were not advertising in mobile. This is clearly a missed opportunity for the brands. 

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Finally, the survey found that a large majority of respondents had made a purchase after viewing a mobile ad. 

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While self-reported data must always be "taken with a grain of salt," these survey findings reinforce a considerable body of other data in the market showing that for younger, more educated and more affluent users mobile is now a critical medium. Yet brands and major advertisers continue to miss out on a significant opportunity to reach these audiences through their failure to aggressively pursue mobile. 

New Millennial Media Effort Tracks Ads to the Point of Sale

Auntie Anne’s Pretzels, the Coca-Cola Company, mobile ad network Millennial Media and Sparkfly have teamed up to test mobile advertising with tracking to the point of sale. Here's how it works:

  1. Millennial Media will serve a targeted ad with a deal
  2. Consumer clicks on the ad and is taken to a landing page with an offer to be redeemed at Auntie Anne’s (the landing page/offer has a unique code)
  3. Consumer clicks “Redeem Now” or saves the offer (offers involve food items and Coke beverages)
  4. In the Auntie Anne’s store consumer shows the 4-digit code to the person operating the register
  5. Cashier enters the code into the system and the results are reported back to Auntie Anne's and Coke

Sparkfly is integrated with multiple POS systems and enables the purchase/redemption to be reported accordingly. That gets combined with Millennial’s analytics and the client gets a "cradle to grave" view of what happened with the campaign.

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This methodolgy isn't new; offers with tracking codes have been used ocassionally in PC-based ad campaigns for some time (search, display). And tracking to the POS or check-in is going on now in mobile. But this trial may establish a model for others to emulate.

Millennial said in its press release that the campaign will run in Atlanta and will feature a range of different ads to test messaging and creative:

The mobile ad campaign will be running during the heart of Back-to-School shopping season. The mobile ad creative will test different combinations of Auntie Anne’s and Coke items for purchase at ten Atlanta-area Auntie Anne’s locations, and each ad unit will contain a unique redemption code from Sparkfly that enables the item-level tracking of individual consumer sales and the revenue impact of the promotion.

If this kind of methodology and approach becomes more standard in mobile campaigns it will not only give marketers a much better sense of "what works" they'll get more accurate data about conversions. Currently smartphone "conversions" are perceived to be much lower than tablets and PCs. That's generally because offline conversions aren't being tracked.

Widespread adoption of offline tracking might also usher in more CPA billing models as well. 

EU Request for Google Mobile Changes May Go to Heart of Jelly Bean Innovations

One of the chief innovations Google is bringing to its "Jelly Bean" Android update involves local search and related functionality through Google Now. I've written fairly extensively already about these new features on my Screenwerk blog and Search Engine Land. In short, the new Android OS offers information "cards" (structured data) in response to a range of query types, especially local.

This is at once an evolution of the Google search experience for mobile devices and an effort to better compete with Apple's Siri. The information (search result) is more attractively presented and substitutes for the traditional page of search results, which still can be found by scrolling to the bottom. In addition to the image above right, below are a few example screenshots:

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This new presentation is more consistent with what mobile users want ("answers") and offers a better experience overall than a conventional page of "blue links." The potential problem for Google is that this approach goes much further in the direction of substituting "Google's own content" for third party information, which is at the center of Europe's antitrust dispute with Google.

The issue of of Google showing its "own content" at the top of search results or in a preferential position is one of four "concerns" raised by the EU in May along with an invitation to settle. Because it goes to the heart of Google's control over the search results page and the company's ability to experiment and innovate with new content presentations, it's one of the most potentially challenging issues for Google to negotiate with the EU. 

Google has been trying to avoid a formal antitrust action by European regulators. But just as it was negotiating to settle the case, EU Competition Commissioner Joaquin Almunia, last week, asked Google to make "broad changes" to its mobile services. While it's not clear specifically what he is asking for, the path adopted by Jelly Bean -- which completely marginalizes third party content in a range of cases -- exacerbates one of the EU's fundamental "concerns" about Google.

Google is not going to want to be locked into any specific search results page in mobile. It will demand the ability to change the look and feel of the page and to innovate around the way it presents content. But to the extent any such innovations don't involve equal exposure of third party information the Europeans will probably have strong objections.

The next couple of weeks should determine whether Google will be able to negotiate a settlement or whether the company will face a formal antitrust action (and potentially billions in fines) from the EU. 

Deals Once Again Most Desired Form of Mobile Advertising

Ad network Mojiva released some data last week about usage of mobile devices during the auto-shopping process. For example the ad network said, "More than two thirds (69%) of consumers are interested in using their mobile phone to research buying or leasing a vehicle." This was based on a small survey of just over 200 US consumers.

What was most interesting to me about the data is this chart: 

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Question: "What information would you find most valuable in a mobile ad?" The answer: "deals and offers."

This is something of a "generic answer" for consumers. Deals and coupons are typically the preferred form of mobile advertising when consumers are surveyed according to Opus data, and data from InsightExpress and Luth Research among others. Deals are the most common reason consumers "Like" brands on Facebook (Nielsen, October 2011). The slide above simply reinforces the other findings.  

In the real world consumer attitudes and behavior often diverge -- so the ads most clicked on or investigated by consumers may not always be offer or coupon oriented ads. But the data above reinforce and illustrate consumer interests and motivations. 

Mobile CPMs Just a Fraction of PC Display Costs

Former Wall Street analyst Mary Meeker just did one of her famous data dumps at the D10 conference. The 100+ slide deck is a discussion of "Internet trends." However I just want to focus on three slides.

The first shows that mobile Internet traffic in India just this month has surpassed PC Internet traffic. This is a trend that will replicate itself in markets all over the globe as time goes on. It will take longer for this to happen in developed countries than developing markets but it will happen. 

Marketers are going to be shocked by this as in market after market the PC Internet will become subordinate to mobile.  

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The second slide shows that CPM rates in mobile are much less than on the PC. This is bad news for everyone except advertisers as more users migrate to mobile devices for much of their Internet usage. 

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However compare our recent ad network test, which showed that the local networks (xAd, LSN) were able to command a much higher CPM. 

This shows us that premium or highly targeted mobile inventory will be able to deliver PC-like, or potentially higher, CPMs. 

The final Meeker slide I wanted to discuss is one of those familiar monetization vs. time spent slides. Flurry Analytics has a good one as well. Meeker points out a potentially $20 billion digital advertising opportunity over time, as PC usage migrates and ad spending catches up to consumer usage. 

Screen shot 2012-05-30 at 12.04.16 PM

The "X variable" is time, however. The logic is sound but the timeframe is less certain.

It took many years for the PC Internet to start to equalize time spent and digital ad spend. Mobile is evolving faster than the PC Internet but it may well be several years before mobile advertising begins to approach user engagement/time spent levels. 

Clearly what's going on right now is that advertisers are not valuing mobile impressions as much as PC impressions. In fact mobile impressions are much more valuable than PC impressions -- for both awareness and direct response.

As mobile becomes the primary Internet access vehicle for many more people marketers will be compelled to wake up, and competition should intensify for mobile ad impressions, especially well targeted impressions. In the interim it's a buying opportunity for smart marketers who right now can get high quality eye balls at a fraction of the cost of the PC Internet. 

AdAge: Amazon in Talks to Buy Mobile Ad Network Jumptap

Yesterday AdAge reported that Amazon was in talks to buy mobile ad network Jumptap. However the report was speculative and the deal might just as easily not take place. Based in Boston, Jumptap holds 25 mobile advertising patents.

Beyond Jumptap's intrinsic appeal as leading ad network, the IP portfolio represents an added incentive to buy the company vs. one of its rivals. Yet the Jumptap overture appears to be part of a larger effort that Amazon is making to evaluate multiple ad networks for acquisition:

Amazon has kicked the tires on a few mobile-ad companies, including mobile-ad network Jumptap, according to two people familiar with the talks. Amazon and Jumptap declined to comment. 

Amazon has also hired a former Microsoft executive (Jamie Wells) to build a mobile ad sales team, according to the AdAge article. 

Jumptap began life as a mobile search company intended to provide white-label services to carriers and others that wanted to compete with Google. However the company was forced to "pivot" a few years later as that business proved limited at best. It has since found much more success as a display ad network. 

In the recent ad network comparison we did for the report Finding the “L” Spot: The Importance of Localization to Mobile Ad Performance, I was surprised to see that Jumptap had much greater reach (in the three test cities) than the other networks, including Millennial and AdMob.

Even if it's not Jumptap, it's quite likely that Amazon will acquire an ad network, given its burgeoning mobile business -- though Kindle Fire sales have slowed dramatically.

I have also speculated that Facebook is another one that is likely to acquire a mobile ad network. However if the company does wind up buying Opera it would get the benefit of Opera's earlier acquisition of "ad mediator" AdMarvel. 

In January I predicted that Amazon would buy a mobile ad network. Jumptap was one of the potential companies. 

Here's a selection of our previous coverage of Jumptap: 

Payments Land Grab Continues: PayPal Annouces More Retailers, Groupon Preps Service

It absolutely makes sense for Groupon to launch a Square-like payments platform for its merchants -- part of its effort to diversify more holistically into local commerce. A payments tool for merchants (first reported by VentureBeat) would also support and complement its recently expanded Groupon Rewards loyalty program.

According to VentureBeat Groupon would seek to gain rapid merchant adoption by undercutting the fees on similar services from Square, PayPal, Intuit and the recently launched Sail. Reportedly there would be a 1.8% transaction fee and $0.15 transaction charge, which are lower than any of the fees from other, competing services. Groupon's payment platform would utilize the iPad and iPhone in a way similar to Square.

In this "race to the bottom," where merchant card fees are concerned, we're seeing the rapid commoditization of payment processing especially at the SMB store level. I was told that companies like First Data are very concerned about this development and are trying to "get closer to the consumer" as a result. 

Meanwhile PayPal yesterday morning announced an expansion of its in-store payments program. Previously it had a single retailer, HomeDepot, now there are 15 more national retail chains:

Abercrombie & Fitch, Advance Auto Parts, Aéropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Jamba Juice, JC Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct and Toys “R” Us. 

I have yet to use the system but it will need to provide substantial efficiency and convenience and/or "value adds" (e.g., loyalty rewards) to consumers to get them to use it vs. traditional payment cards. PayPal ultimately has to "back onto" either a bank account or a credit card. 

My informal understanding is that the HomeDepot trial wasn't entirely successful because of low consumer awareness and low usage accordingly. This broader roll out should help awareness greatly.

Through these retailer relationships PayPal will glean enormously valuable consumer data and purchase history information that it can use potentially as inputs into its PayPal media network targeting capabilities. This data mining hasn't been confirmed to me but I suspect that consumers who use PayPal in stores will have that transaction data factored into future ad targeting if they're using any of the eBay/PayPal properties. 

Just as with the commoditization of merchant payment services, services such as PayPal are creating a potential intermediary or "gateway" relationship between consumers and their credit card companies. Card companies will ultimately be forced to respond -- Amex is ahead of the curve -- with amp'd up loyalty and deal programs themselves. 

We're in an acclearating "land grab" phase of mobile payments. Multiple providers can and will exist but all the coverage, announcements and general "noise" in the market right now has the paradoxical effect of both raising consumer awareness but also delaying adoption of any individual solution.

Millennial: iOS Gains Share, Feature Phones Decline in Device Mix Report

Millennial Media puts out regular data about activity on its large ad network. However that data typically lacks historical context. It's a snapshot or a moment in time. It's more interesting to examine movement and trends over time. 

This morning the Q1 Mobile Mix report came out. I've gone back to the equivalent report a year ago to compare metrics. In one instance the current report does compare smartphone and tablet penetration vs. a year ago. The most striking thing is that feature phone share on Millennial's network has declined from 23% to 7% since last year. By Q3 or Q4 it's likely to be below 5%. 

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In terms of operating system share, iOS and Windows have gained share relative to their positions a year ago. Apple's operating system is bolstered by the iPad. In Q1 2011 the top two tablets were the iPad and the Samsung Galaxy Tab. In Q1 2012 the top three tablets are the iPad, Galaxy Tab and Kindle Fire. Unfortunately, however, the report doesn't indicate volume of impressions by tablet. 

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Top app categories haven't changed that much in a year. Weather has fallen somewhat and Travel has appeared in the top 10.

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Finally (though it may be hard to read) the list of Millennial's top 20 devices is pretty similar to last year. The iPhone is the top device and the rest are mostly Android devices. However, very surprisingly, several more RIM devices appear in the 2012 list vs. the one from last year. Given the continued delcine in RIM's sales there's no clear explanation for why RIM has gained positions.

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Despite growing to 3% of Millennial's network overall impression share, no Windows Phones appear on the 2012 list. 

How Will Facebook Monetize Mobile?

This morning Facebook is trading below its $38 offering price. This reflects investor skepticism about the long-term outlook for the company. Indeed, there are many challenges ahead for Facebook -- one of which is mobile monetization.

This weekend the company bought yet another mobile site, Karma. Karma provides a streamlined way to deliver physical gifts to people through their smartphones, using the Facebook infrastructure. While this latest acquisition is undoubtedly about getting access to the team it is also about the business model and new ways to generate revenue from mobile devices. 

I have argued one reason (clearly not the only one) that increasing numbers of people use smartphones to access Facebook is avoiding the clutter of the PC site and ads in particular. While Facebook has started to show Sponsored Stories in mobile users' newsfeeds it cannot simply duplicate the ad environment online in its mobile apps. Too many ads would alienate users. 

So how does Facebook make money off mobile usage in a way that doesn't make users abandon its apps? Here are a few ideas:

  • Local/contextual ads on apps: contextually and locally relevant display ads (if well targeted) could generate meaningful revenue because of the sheer scale of Facebook's mobile usage. But Facebook needs to be judicious in its use of these ads. 
  • Offers: coupons in display ads or in the news feed could be quite successful as well. Mobile offers have been in place for some time but it's a free service. Facebook might create a special area or "wallet" for mobile offers that resides within the app but doesn't interrupt usage
  • Mobile loyalty: This notion is tied to offers as well. For SMBs Facebook could create a subscription based program where loyalty incentives are distributed online and in mobile: "After three visits, XYZ is free." This would represent formalizing tools and capabilities that are now free
  • Facebook credits: Turning Facebook credits into a real (loyalty) currency that can be used for e-commerce online or perhaps in the offline world at stores and restaurants. (More likely it would be earn offline points and use them online.)
  • Facebook Wallet: Facebook could try and become a full-blown payments platform like PayPal or Google Wallet. This is more ambitious but it could be accelerated though purchase of a payments startup
  • Build an ad network: I believe Facebook will buy a mobile ad network -- its own version AdMob --  to enable monetization via third party sites and apps. All users signed in through Facebook Connect could be targeted as on the PC. I think this "FaceSense" will also come to the PC. 
  • E-commerce transaction fees: Karma is an e-commerce app. And there's a great deal of potential for Facebook to get into e-commerce more directly. However, past e-commerce experiments by third parties on Facebook have largely been unsuccessful (except for Zynga). 

Some or many of these ideas could come to pass. Regardless, Facebook will need a range of approaches and revenue streams in place to truly deliver the kind of mobile revenue performance that investors will want and will become imperative as more users access Facebook primarily via mobile devices.

Marchex: Directories Deliver Highest % of New Customers, Mobile Display Lowest

Last year survey data were released that asserted "47% of mobile app users . . . click/tap on mobile ads more often by mistake than they do on purpose." In the subsequent write-ups that often turned into the broader claim that "half of all mobile ad clicks are unintended." 

With all the touchscreen smartphones out there a high level of accidental clicks isn't hard to imagine.

Now comes a kind of parallel but stronger finding from Marchex that argues 76% of all calls coming from mobile display ads are bad calls: pocket dials or otherwise accidental. The data aren't based on survey information but an analysis of more than 200,000 calls on the company's network. These calls were part of advertising campaigns to company runs for clients. 

Marchex also analyzed the percentage of new and existing customer calls by channel. Below is a chart the company generated to illustrate these findings: 

Screen shot 2012-05-21 at 9.41.17 AM

Online and mobile directory sites generated the highest percentage of new leads/customers. Marchex added that directory sites work best for advertisers with physical stores or business locations (perhaps an obvious point). Mobile display, according to the report, generated the lowest percentage of new customers and had the highest percentage of non-qualified calls, as previously indicated.

Search engines had the lowest percentage of spam but the highest percentage of existing customer calls. This suggests people repeatedly use mobile search to find phone numbers for businesses they already know.

Marchex's report also best practices advice for (national-local) marketers. One of the recommendations is that marketers look more deeply at whether calls have generated desired outcomes (e.g. sales) to determine their true ROI, and not simply rely on the top-level data: 

  1. Give consumers a variety of connection options to suit their intent, such as app downloads, QR codes, form fills and click to call
  2. Test different consumer flows for mobile calls, such as the ability to call from an ad or call from a landing page
  3. Take advantage of the fragmented media landscape with placements across a range of mobile webpages, search engines and applications
  4. Test and analyze the performance of ad campaigns across different calls to action, formats and media
  5. If possible, analyze the types of calls you are getting from ad campaigns and connect with the call center to determine whether those calls convert to sales.

Monica Ho of xAd confirmed that when call buttons are in top-level display ad creative the number of accidental calls is high. However she said that calls coming from mobile landing pages are "98-99% valid and of very high quality."