Google Earnings Call Mobile Comments

Google reported Q2 earnings ($5.52 billion) on Thursday. Here are the mobile-related comments made during the earnings call from the Seeking Alpha transcript: 

Google CEO Eric Schmidt: 

In mobile and android, another area of innovation in new businesses, mobile devices are becoming an extension of the Internet. We all know this. And more and more Google searches are coming from mobile phones of all kinds. So we are focusing to innovate in this space. So for example, we’ve done great news with Android, with somewhere between 18 and 20 Android powered phones on the market by the end of the year, which is phenomenal.

Product SVP Jonathan Rosenberg:

We also run product development by encouraging teams to make big product bets on key technical insights. We believe that our most innovative products historically, if you consider say search, maps, Gmail, news and Chrome, all of them are based on technical breakthroughs, or BETS. Recently we’ve become bullish on a new emerging standard called HTML 5 and it’s helping to make the web the platform for very powerful and rich applications. It’s especially important in mobile where the high-end phones with very rich browsers are becoming the norm.

And this quarter, we launched mobile versions of Gmail and mobile web maps that run in the browser using HTML 5. Their performance really is remarkable.

We believe that the runway to innovate due to the power of computers on these mobile devices is nearly unbounded at the moment. We are also making another technical bet with Google Chrome OS. A whole new generation of web-based apps demand a much better, faster user experience and once you have all your stuff online, you ought to be able to just open up your computer and get there in a matter of seconds.

We are also innovating and driving monetization with mobile and YouTube as well. Mobile monetization picked up a good bit of momentum as search traffic grew, again driven mostly by the smartphones. And we’re seeing that users on these high-end phones are very active and engaged beyond search, so display advertising on those phones is actually emerging as an interesting mechanism.

From the Q&A portion of the call: 

Schmidt (on mobile ads): 

On the mobile search side, one of the key things we’ve done in the last few months is we’ve started to show the desktop ads. It turns out that the separate mobile ads have their own formats. Typically there wasn’t enough demand, there weren’t enough kind of creatives and so forth. So we started showing the desktop ads on the mobile browsers of high quality and these of course include the iPhone and the Android phone and anything that’s a web-kit inspired browser.

All of a sudden we started seeing a tremendous number of searches and also very good click through rates. So they monetize at a similar level, if they are desktop-based because of course they are in the same auction.

It makes sense over time that those ads should perform better than on PCs because on a mobile device, we know more about the person and we could have an even more targeted ad but we don’t do that today.

Rosenberg (on mobile cannibalizing PC search traffic):

I don’t think there really is a cannibalization dynamic. We see that mobile searches tend to complement desktop volume. Mobile goes up when people are away from their desk, so weekend tends to be higher for mobile traffic. And of course, the reverse is true for the desk top.

Millennial Media June Scorecard: Entertainment Top Ad Spender, iPhone Top Device

Mobile ad network Millennial Media's May scorecard showed the Samsung Instinct as the top device on the company's network, which I found strange. The June report shows that the iPhone has overtaken it as the top device, which brings this data more in line with other sources in the market (e.g., AdMob).

In addition the data reflect that the entertainment vertical, especially movie studies promoting their films, is the top advertiser segment by ad spend.

Here's the company's chart of mobile ad campaign averages and stats:

Most marketers doing business with Millennial are using mobile landing pages, as opposed to simply directing people to a company site. This stands in contrast with Google's mobile display strategy and approach, where ads send users to PC sites under the assumption that the browser (iPhone, Android) will provide a good experience. 

Survey: 1 out of 7 Minutes of Media Consumption on Mobiles

According to a new joint Universal McCann-AOL study one out of every seven minutes of media consumption time is happening on mobile devices. The study was written up in AdWeek. Here are the findings:

80% of smartphone users expressed satisfaction about the quality of the Internet on their mobile devices

Why/where they use mobile:

• 95% of respondents said they used mobile media to fill downtime
• 82% use it at work
• 81% while shopping
• 80% at home
• 65% while commuting to work

Content/activities:

• 73% use maps and directions
• 55% said they participated in social networking or sought out restaurant and movie listings or reviews
• 44% read/consume national news and information

The cross platform platform:

• 77% said they use mobile and TV at the same time (does this replace the laptop?)
• 55% of mobile users follow brands across multiple media 
• 56% said they have been driven to mobile from other media
• 42% said they have been driven from mobile to other media

Acceptance of advertising: 

• 38% of respondents said they had taken action based on mobile ads
• Just under 30% said mobile ads had led them to share information
• 22% said mobile ads had influenced a purchase decision

These findings are based on a US consumer survey conducted in Q4 08 and Q1 09 among 1,800 US mobile subscribers.

What this and other studies show is that mobile is a more versatile platform and vehicle for consumers and marketers. And for smartphone users it's becoming a kind of "everything" media device. 

Who's Got a Mobile Phone?

In the world of data and forecasting the "base" one uses is important. For example I've said, given our consumer research, that "27% of mobile users access the Internet on their phones." But what is that 27% in real terms; 27% of what larger number? 

Assuming one can extrapolate from that data point or any piece of data to all mobile users in the US, the numbers are huge -- because there are so many mobile phone owners. The CTIA wireless trade association says there are 270 million mobile phone subscribers in the US. The total population of the United States is just over 304 million according to the US Census Bureau. 

If the CTIA numbers are correct it means that about 89% of the US population owns a mobile phone. For comparison purposes only about 63% of the US is on the Internet (per comScore's data). The following, recently released Marist Poll data basically support the accuacy of the CTIA figure but also add some color based on age, income, regional differences and employment status:

Those under 45, making more than $50,000 in the Northeast and the South are the categories with the highest penetration of mobile phone ownership. I don't have access to the raw data but it would be interesting to see handset ownership by type (smartphone vs. feature phones), data plan subscriptions and mobie Internet access. Data plan subscriptions are correlated with handsets and income (but generally skew older). 

The Marist Poll (n=1,128 US adults over 18) was conducted by telephone in March, 2009. It claims to be representative of the population in each region.

Survey: Non-Smartphone Owners Confused by Options

Best Buy Mobile commissioned GfK Roper to conduct a telephone survey (n=1,000) about Americans' mobile usage behavior and buying intentions surrounding smartphones. Poll respondents were equally split among men and women. All were over 18. Here are some of the data:

• 20% of respondents said they own a smartphone (higher than the general population)
• "A sizable segment of those in their 20’s and 30’s in particular consider it a purchase they plan to make in the year ahead." 
• Among non-smartphone owners, 47% report being confused by the options and prices (cost of ownership)

Other reasons inhibiting smartphone purchases among the survey respondents: 

• 39% do not own a smartphone because they hate shopping for electronics products, with 45% of women in particular expressing this concern.
• 52% of women and 42% of men are confused about which model smartphone to buy, and more than half (53%) of adults over 50 express this confusion.
• 64% of Americans say they do not own a smartphone because they believe the devices are too expensive. This sentiment is particularly felt in the South.
• 49% of Americans without smartphones now believe that people who use smartphones are too connected to their jobs at all times, particularly the older generations who tend to view smartphones as more functional than fun. Only 30% of adults 18-24 feel this way versus 60% of adults 35-49.

Comment: there were no brands or models mentioned in the press release. My guess is that there's lots of brand recognition around the iPhone and maybe BlackBerry and the confusion starts thereafter. I suspect those data are somewhere in the mix but just not among what was publicly released.

This is the significant finding among those above: 64% of Americans say they do not own a smartphone because they believe the devices are too expensive. This is what we've repeatedly seen in our data. 

Additional findings, among smartphone owners:

• 58% feel it is important to be able to listen to music on their mobile phone
• 41% feel it is important to be able to engage in social networking such as Facebook, MySpace or Twitter
• 36% said being able to play games is important

SMS attitudes and usage:

• 62% [of mobile phone owners] say they use text messaging
• 37% say they use texting to avoid long or tough conversations, and over one-quarter (27%) say they use it because they dislike talking on the phone.

Gender differences:

• 71% of women said sending text messages is “very important” vs. 46% of men.
• Taking digital photos with a phone was also “very important” to 55% of women compared to 30% of men. Women also shared that listening to music on their mobile device is “very important” (44%) compared to only 25% of men.
• Men surveyed were more likely than women (46% versus 39%) to say that it is very important that their phones have calendar applications that link back to their computers. But in nearly all instances, women considered features and applications - including video games - “very important” more than men did. Fourteen percent of women ranked playing games as very important compared to 9% of men. Men were also clearly less interested than women in reading books on their phone: all of the 8% of respondents that were very interested in this application were women.
• Women were also more likely than men to use their mobile phone’s GPS system: 51% of women, compared to 33% of men, considered getting directions on their phone “very important.”

In our most recent consumer survey data report we found that 20% of respondents who did not own smartphones were intending to buy one within the next 12 months.

Jackson Death Drives Search on Mobile Devices

I'm sure at this point you've read how reports of Michael Jackson's death drove huge traffic to places like Yahoo! News; and how Google initially thought the search volumes focused on Jackson were part of some automated attack:

The spike in searches related to Michael Jackson was so big that Google News initially mistook it for an automated attack. As a result, for about 25 minutes yesterday, when some people searched Google News they saw a "We're sorry" page before finding the articles they were looking for.

Google also said that the company saw large mobile search volumes:

People who weren’t near a computer yesterday turned to their mobile phones to check on breaking news. We saw one of the largest mobile search spikes we’ve ever seen, with 5 of the top 20 searches about the Moonwalker.

SMS-based search provider kgb reportedly saw big volumes of queries too according to the NY Times:

A spokesman for kgb said that since the first reports of Mr. Jackson’s hospitalization and death, the paid service — available by texting kgbkgb (or 542542) — has fielded more than 10,000 questions.

Each submitted question represents $.99 in revenue for the premium SMS service. Ad-supported voice/SMS mobile search service ChaCha apparently also saw considerable Jackson-related queries. 

Survey: Mobile Data Not Seen as 'Must Have'

Many consumer surveys reveal the essential value that consumers place on their mobile phones -- Pew found that consumers would give up the PC Internet before their handsets. However, mobile data/Internet doesn't enjoy that same level of importance in consumers' minds, according to a new survey from Strategy Analytics. At least that's true in the context of financial pressure and the hypothetical need to reduce household expenses.

The firm conducted a survey of 1,110 US "household decision makers regarding their multiplay spending intentions over the next year, the impact of the economy on household entertainment purchases, and the relative importance of each component of the so-called multiplay 'bundle' (broadband, digital television, fixed voice, mobile voice and mobile data)."

Here's the question:

Imagine that, due to household budgetary constraints, you have to reduce home entertainment /communications services expenses. How would this affect your spending on:

In other words, almost 50% said that given the need to reduce expenses they would drop mobile data services entirely. That compares with just 10% saying they'd drop the PC Internet.

What would be interesting to discover is whether there were any smarphone/iPhone users here and how their results compared with the averages. My guess is that you'd see more of them reluctant to drop mobile data. 

In addition if you surveyed a broader age group -- household decision makers are parents/older adults -- you'd also probably find younger users willing to drop mobile voice before their SMS/data plans because they text a great deal more than they talk on mobile phones. 

Opera's State of the Mobile Web for May

Opera Software released its "State of the Mobile Web" report for May. The report places an emphasis on trends in Southeast Asia: "Growth rates in Southeast Asia remain high: Vietnam leads the top 9 countries with 412.9% growth in users this year, followed by the Philippines (353.6% growth) and Malaysia (249.6% growth)." However it also presents data for the range of coutries in North America and Europe that have Opera users.

Remember this is not the entire mobile Internet, nor does it represent a true view of smartphone users (other than perhaps on BlackBerry, which has a poor browser currently). Rather these data are from handsets where users have downloaded and installed the Opera browser. They offer a view of a different segment of mobile users than we're used to hearing about, given the industry's focus on smartphones -- which remain in the minority. 

Here are some of the data for the US and UK:

Note the "average number of search portal page-views" in the data: 35.7 for the US, 21.4 for the UK. This is not necessarily eqivalent to query volume per user but it's probably directionally eqivalent. These numbers are much higher than 2008 "official" averages (per Nielsen) of 8 searches per user. Our data also show much higher volumes, though not quite as high as the Opera numbers suggest.

MSFT: Mobile Will Be 5-10% of Global Ad Spend in 5 Years

Speaking in Cannes, France Scott Howe, VP of the Advertiser and Publisher Solutions Group at Microsoft, said that he believed mobile advertising "will account for 5-10 percent of global media ad spending within five years." That's quite a bullish prediction but we like it. 

Microsoft also recently announced that Hyatt is the inaugural client for its mobile partnership with Verizon. Here's a screen showing one of the Hyatt ads:

Here are some Bing-Verizon screens (Bing is now the default search provider on Verizon). This is mobile Web.

Yellowpages.com (AT&T), as Microsoft's partner, is a huge beneficiary of the deal and is the sole (current) provider of local ads:

We're waiting for a rebranded and updated version of the Live Search client, which was very useful and effective but under-appreciated. This time around it will likely get more attention, given that Bing is having some initial consumer success and as part of the multi-million dollar Bing ad campaign. It will also probably offer an improved user interface/experience as well.  

Survey: Security Fears a Barrier to Mobile Transactions

There have been a flurry of announcements and activity surrounding mobile payments recently (i.e., Boku, Zong, Obopay, Visa + NeuStar, etc.). It's a segment that's gaining steam in the US and EU and already fairly well established in certain developing countries. Yet a recent online poll (n=1,800) conducted in May by Harris Interactive for messaging security firm Cloudmark found that a solid majority of Americans (2/3) are concerned about security on their mobile devices -- and these fears are potentially inhibiting them from conducting certain kinds of activities, namely financial transactions.

In addition, the poll found, "mobile spam is impacting a significant portion of wireless customers, with 44 percent of owners reporting that they have received mobile spam." Among the 44% of survey respondents who say they've received spam on their phones, this is what they report about it:

• 45% received messages from a known/unknown vendor asking them to call another number
• 42% received messages from a known/unknown vendor containing a link to another Website
• 29% received messages from a known/unknown vendor encouraging them to disclose personal information
• 26% received messages from a known/unknown vendor containing inappropriate content
• 24% received messages from a person/entity posing as a trusted contact/source

As text-based spam grows it poses a threat to the efficacy of SMS marketing. Here are some of the data from the rest of the survey about security fears:

On the flip side there are a healthy number of people who've "ever sent confidential information" through their phones. And one might also argue that this is like the early days of e-commerce, where people expressed (and still express) some of these same security concerns. However for most people those fears have been overcome. Therefore, of the two issues explored in the survey, spam and security, spam is the bigger issue and long-term threat, in my view. 

___

Related: GSMA launches mobile money exchange community.

NPD: Many Consumers Not Happy with Netbooks

A survey of 600 US netbook owners by NPD in April and May found very mixed reactions and satisfaction levels. According to the survey:

• "58% of consumers who bought a netbook instead of a notebook said they were very satisfied with their purchase, compared to 70% of consumers who planned on buying a netbook from the start."
• Among those 18-24, "65% said they bought their netbooks expecting better performance, and only 27% said their netbooks performed better than expected." 
• The chief feature of netbooks, mobility, is apparently not being used by most people who buy them. NPD found that 60% of netbook owners never took the devices from the house.  

People are primarily responding to the lower pricing of netbooks, it would appear, rather than their portability. The now widespread presence of netbooks places the entire PC OEM industry in something of a difficult spot. If these findings are representative of the larger population, sales may slow -- netbooks have been a bright spot in PC hardware sales -- but consumers won't want to "go back" to paying considerably more for conventional laptops.

It appears to be a matter however of setting the right expectations of consumers, who largely seem to be believe they're getting full notebook memory and functionality in simply a smaller (and cheaper) package.

In our recent consumer survey, we asked people in the abstract if they would rather have a smartphone or netbook if the costs were equal:

“If the costs were the same, would you rather have a smartphone or a netbook as your mobile Internet device?”

LMS/Opus (question n=352; survey n=611)

Millennial Mobile Advertising Scorecard for May: Instinct No. 1?

Having spent some time with it, I can tell you that the Samsung Instinct is a vastly inferior phone to the iPhone. However, according to Millennial Media's Mobile Advertising Scorecard for May, "the Instinct replaced the iPhone as #1 on the list of the Top 20 Mobile Phones across our network."

This created something of a mystery in my mind because it's inconsistent with most other data in the market. 

The following chart shows the hierarcy of devices across the Millenial network: 

The traffic above doesn't include iPod Touch devices. Although the Instinct has sold reasonably well for Sprint, it has not sold numbers that approach the iPhone. How then do we explain this result? 

Like all mobile platforms and providers putting metrics into the marketplace, these data are based on activity on Millennial's own network. AdMob's data are based on traffic it sees on its network and Opera's data are drawn from the Opera Mobile and Mini browsers. While they may be reflective of trends across the mobile Internet, they're not an "objective" view of the marketplace.

The answer to how the Samsung Instinct beats the iPhone lies in a closer examination of Millennial's network itself, which over-represents Sprint traffic vs. AT&T and other carriers relative to their actual shares in the US market. 

If there are 270 million wireless subscribers in the US this is how the numbers break out on a percentage basis (numbers are approximate):

1. Verizon: 30%
2. AT&T: 28%
3. Sprint: 18%
4. T-Mobile: 12%
5. Other: 10% 

However the traffic distribution on Millennial's network's is as follows:

In terms of the mobile Internet, until the Palm Pre the Instinct was the most user friendly Sprint device and the one driving the highest engagement among Sprint users. But as you can see from the comparison, AT&T is considerably under-represented (not counting WiFi) and Sprint is somewhat over-represented on Millennial's network.

It's likely that Sprint users who want a smartphone and wish to remain with Sprint will opt for the Pre, which supersedes the Instinct in almost every respect. 

Another Ad Forecast: Mobile Advertising Revenues $1.5 billion in 2013

Parks Associates released its mobile ad forecast, which predicts that mobile advertising revenues will reach $1.5 billion in the US and Canada by 2013. Those dollars are mostly going to be US based because of the relatively small size of the Canadian market. The IAB recently said that in 2007 Canadian mobile ad revenues were $2.7 million.

The Parks forecast reportedly includes apps, SMS, search, display and video. Our previous mobile ad forecast, which is being substantially refined, predicted ad revenues of $2.3 billion in North America by 2012.

Parks also estimated that there were 62 million smartphone users in North America in 2008, with user penetration to reach 239 million in 2013. If the combined mobile user population of the US and Canada is roughly 290 million, 62 million smartphones would represent just over 21% of the current market. That number is about 7 points too high. Smartphones are selling well and represent a key growth driver of mobile Internet adoption, but the number is closer to 14% of the market. 

Study: 40% of iPhone Users Online via Mobile More Than PC

AdMob and comScore just put out results of a study (n=7,300 US mobile users over 13) that contains a lot of interesting demographic and behavioral data about the similarities and differences between iPod Touch and iPhone users. However, by far the most important finding of the study -- consistent with what we've been arguing around here -- is that 40% of those users are going online more often on those mobile devices than through a PC (see graphic below). 

While this is self-reported data, it points toward a near-term future when growing numbers people use their smartphones as primary and their PCs as secondary ways to access the Internet. (See also, here and here for more confirmation of this.) This phenomenon is already true in many developing nations, where mobile phones are outstripping PCs for Internet access -- and where search volumes on mobile devices are approaching or exceeding the PC accordingly.

That single 40% data point alone is the answer to the "why" question of mobile marketing -- not the "4 billion phones vs. 1 billion PCs" statement that one often hears in the first couple slides of a presentation. Another striking finding: "5 in 10 consumers on both iPhone and iPod touch devices use the mobile Web more frequently than they read printed newspapers." Indeed, we just posted "Smartphones are the new print."

Below are slides showing the percentage of iPhone/iPod Touch users who use mobile more than the identified medium:

One could argue that the smartphone is the everything media device: a newspaper, magazine, TV, radio, PC rolled into one. But wait, there's more . . .

And now for the demographic information (verbatim from the release):

• iPhone users are generally older. 69 percent of iPod touch users are between 13-24 years of age, while this same age segment represents just 26 percent of iPhone users. 31 percent of iPhone users are 35-49 years old, while only 12 percent of iPod touch users fall in this age segment.
• In total, 74 percent of iPhone users are over the age of 25, compared to 31 percent of iPod touch users.
• More than 70 percent of users on both the iPhone and iPod touch are male.
• In line with the older demographic composition of iPhone users, they also have higher incomes. 78 percent of iPhone users have an annual household income of at least $25,000, compared to only 66 percent of iPod touch users.
• iPhone users are more likely to have children than iPod touch users, most likely due to the age difference in the two groups. 46 percent of iPhone users have children, compared to only 28 percent of iPod touch users.
• In the next six months, iPhone users plan to purchase clothing (57 percent), entertainment (47 percent), and travel (45 percent), while iPod touch users plan to purchase clothing (61 percent), entertainment (53 percent), and cell phones (36 percent).

Nielsen: iPhone Users Older, Richer than General Mobile Demo

The conventional belief about mobile phone and Internet users is that they're younger. Perhaps true as a broad generalization, it's not true for BlackBerry and the iPhone where data plans are costly and/or the devices come through the company or are used for work. Older demographics abound.

Indeed at our Internet2Go event earlier this year, the Yahoo!-Cramer-Krasselt keynote discussed how Porsche was able to reach more difficult-to-reach business types (prospects) through mobile, BlackBerry especially.

 Here's how the campaign performed online and in mobile (better across all metrics):

Source: Cramer-Krasselt

Nielsen does some demographic and behavioral analysis of iPhone users in the US and finds: 

• 40% have household incomes of $100K or more – twice the ratio among all subscribers (19%)

• 98% of iPhone users use the data features of their phone

• 88% use the [mobile] Internet (making them 4x as likely as the typical subscriber)

• 75% download apps (5x as likely as the typical subscriber)

• 72% used location based services (7x as likely as the typical subscriber)

Furthermore, 53% of the iPhone user base in the US is older than 35:

BlackBerry is going to show very similar demographics in terms of age and income distribution. 

____

Related: Forrester has similar (but somewhat contradictory) data about iPhone users:

Phone More Important than Wallet?

The answer appears to be yes for a significant minority according to a new survey by Mformation. According to the survey, which polled 4,000 people in the US and UK:

In addition to telephone numbers:

• 65% of survey respondents had address and other contact information on their phones
• 83% have digital photos
• 51% have videos
• 48% have calendar information
• 40% have music

In terms of loss or theft:

• 82% of people fear that if their phones were lost or stolen there would be identity theft
• 90% of those questioned are worried about the loss of their personal data; 72% said that personal information would be difficult to replace
• 40% of respondents even said that losing a mobile would be worse than losing their wallet

That last data point now partly reflects that people have confidence credit cards and other information in wallets can be replaced with comparative ease. But it also shows how "personal" mobile phones have become, especially smartphones:

Source: Pew Internet Project (12/07), n=2,054

MMA: Mobile Ad Spending to Grow to $2.16B Next Year

Coming out of its conference last week the MMA offered estimates that mobile ad spending would grow from roughly "$1.7 billion this year to $2.16 billion in 2010," according to coverage of the event in MediaPost. The MMA simultaneously released a survey in which it found that 50% of brands and agencies were doing some advertising or marketing in mobile:

• 66% were doing some form of SMS advertising/marketing
• 53% had mobile websites
• 33% said they were doing "mobile email marketing." (It's not entirely clear to me what that is unless it's through th carriers and/or email marketing opened/received on a mobile device and optimized accordingly.)

Brands have reportedly embraced mobile more than agencies, half of which still view the medium as "experimental" according to the survey findings. However, despite very strong ROI metrics in the market, most respondents said they were only having "average" success with the medium according to the MediaPost coverage.

Perceptions of "average" success represent generally bad news for mobile, which has to sell itself either as a superior medium or perhaps more realistically as a way to extend other advertising and/or reach tough-to-reach audiences.

__

A related story coming out of the conference was this one about the need for more than clicks (or calls) to define ROI in mobile: Brands need to reinvent ROI metrics for mobile: MMF panel.

The danger in mobile is that because the click or CTR is the currency of online marketing (and so familiar and accepted by marketers) it will creep over into mobile -- it already has. But the click is generally a myopic measure of the success of a campaign and should only be used to define ROI in purely direct response contexts. 

Nielsen: Top Mobile Sites in Canada

Nielsen put out findings on mobile usage in the Canadian market:

21% of Canadian mobile subscribers use their cell phones to browse the Internet. This is up from Q4 2008 with the top sites including portals, e-mail, weather, news & current events and search. Overall, Mobile internet penetration increased from 16 percent in Q4 2008 to 21.3 percent in Q1 2009.

Here's the chart on top sites for Canadian mobile users:

Canada is a similar market to the US but smaller. Live email as the most popular site validates the popularity of email for mobile users (our data show email as the most popular mobile category as well).