Many of the Q4 reports released by the ad networks and major agencies showed the growth of tablet-related ad spending. That's a trend that will further accelerate under Google's new "Enhanced Campaigns" regime in which tablets are grouped with PCs for paid-search advertising purposes. In other words, marketers cannot separate PC and tablet paid-search campaigns.
Last week Adobe reported that tablets had passed smartphones for share of global traffic.
In many ways tablets are the new PCs, taking their place for many at home use cases. Tablet owners tend to behave more like PC shoppers, including displaying a greater willingness to covert online. By contrast, smartphone owners typically don't convert on the small screen making ROI harder to track for marketers targeting those devices.
Because online conversions are more likely and prevalent for tablet users, the "danger" is that marketers will neglect smartphones or that smartphones will be "ghettoized" and considered good for only a limited number of purposes. In fact mobile/smartphone advertising is great for both DR and branding purposes.
Mobile DSP Adfonic now offers data that show, across most categories, tablet advertising appears to outperform smartphone ads in terms of CTRs (though ultimate influence on conversions isn't measured).
As the chart above reflects, "tablets achieve especially strong CTRs for advertisers in the Style & Fashion, Lifestyle & Health, Entertainment & Media, and Travel verticals." Smartphones are stronger in other categories such as retail and automotive. People tend to use tablets in the evenings and on the weekends.
Over time marketers will determine which devices are better suited to which types of advertising. However companies need to have a comprehensive strategy that recognizes the "multi-screen" consumer, who will move from device to device before converting.
Although Kindle Fire and Nexus 7 are gaining, Apple tablets continue to dominate web traffic. The following chart shows North American traffic over the past three months, comparing the top-three devices on Chitika's ad network.
According to Adobe's marketing group tablet growth is outpacing that of smartphones. This trend also showed up in several Q4 reports from other online marketing firms such as Marin Software.
Adobe says that on a global basis, mobile devices (smartphones + tablets) generated 15% of all internet traffic. Of that 15%, tablets edged smartphones with 8% of traffic. The company also says that tablet users spend much more time and are much more engaged than smartphone users: "on average internet users view 70% more pages per visit when browsing with a tablet compared to a smartphone."
Among the countries measured, the UK is seeing the highest share of internet traffic from tablets followed by the US and Canada.
ComScore previously reported that about 36% of total US internet time is being spent on mobile devices, even though they're generating less than that in terms of overall traffic. Part of the reason for such a discrepancy may be apps, which are often not measured but where "9 out of 10" mobile minutes are spent.
While 6 and 7-inch tablets exist somewhere between a smartphone and a full-sized tablet (i.e., iPad Classic), tablets are increasingly replacement devices for PCs. PCs still have the largest installed base and a home in the enterprise, among business users and for more selected purposes in the home. But the centrality of the PC as the gateway to the internet is over.
Using Gartner data, USAToday chronicled the decline of PC sales (which aren't coming back):
The "problem" with tablets is that many marketers treat them like PCs (including Google AdWords) and don't give them special attention. A study released in Q4 last year found, for example, that only 7% of retailers' websites were tablet friendly.
Yet tablet-app mobile ad creative can be very effective. In general tablet ads (in apps) are much more engaging than smartphone ads right now.
As tablets continue to gain momentum as PC replacements we may see a very odd situation develop. That is: smartphones might be given perfunctory treatment as an ad platform or otherwise neglected in favor of tablets with their larger "canvas." However, as suggested, the bulk of marketers may treat tablets like PCs and not address them with specialized ad units.
Accordingly, as mobile devices take more and more consumer time and engagement "online advertising" could become considerably weaker than it is today.
This morning mobile ad network xAd released its year in review report. The document contains a range of information and data about the company's offerings, including the performance of ad campaigns on its network. The focus of the report is on national advertisers (rather than SMBs). And it presents a picture of marketers getting a great deal more sophisticated about local ad targeting on mobile devices.
As laid out in the report, xAd is now offering a range of local targeting flavors on mobile: behavioral, place-based, POI and event targeting.
In the graphic above you can see that from Q1 to Q4 the number of national advertisers using more sophisticated forms of geotargeting increased dramatically from 27% to 81%. In other words only 13% of xAd's national advertiser campaigns in Q4 were using "standard geo," (zip, city, DMA). The remaining 81% were using one of the other more complex targeting methods (all involving location) such as behavioral.
Of the 81% using a more precise form of location targeting, here's the breakdown:
In the report xAd offers performance metrics for these approaches compared to industry averages. The company says that its targeting methods provide a substantial performance improvement over traditional (non-location targeted) mobile search and display advertising.
In particular on the display side xAd breaks down how each of its more elaborate forms of location targeting perform. Behaviorial does the best, followed by place-based targeting.
Finally the following are the top consumer search categories for all of 2012 and the top advertiser categories on the xAd network. The latter are national advertisers and don't include small businesses. There's a general alignment across both columns but it's obviously not 1:1.
The company's advertisers tend to be more sophisticated about location and more inclined to experiment with it. It would be great if these advertisers were representative of the entire industry. However they're not. A recent CMO Council survey showed how many agencies and national advertisers still don't "get" location.
The CMO Council survey explored national advertiser "localization" tactics. The overwhelming majority of survey respondents (over 80%) didn’t make the connection between mobile and local:
Source: CMO Council/Balihoo (n=296 national marketers/agencies)
Perhaps once more national advertisers become aware of the performance lift and case studies associated with location targeting they'll wake up to its potential. In the interim those national advertisers using more sophisticated local-mobile targeting are "conquesting" their competition.
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.
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).
Move over TV, your time at the top of the media hierarchy is coming to and end -- at least outside the US. Last week ad network InMobi released its Q4 "insights" report. The document is based on survey data drawn from more than 14,000 respondents in multiple countries around the world. However many questions don't include answers from US and UK mobile users.
The "big finding" is that around the world (US, UK excluded) time with mobile has surpassed TV. In fact time with mobile beats all other media channels. The chart below reflects aggregate findings from 12 countries, though not the US and UK.
The survey also discovered that 62% of respondents "engage in mobile activity" during TV watching. Accordingly TV ads in general see diminished attention because of mobile (beyond ad skipping). However this also represents an opportunity for marketers to use mobile devices to measure their TV ads' effectiveness or to generate concrete actions in response to TV ads.
Another "big" finding is that internet users are now going online through mobile devices in numbers equal to the PC internet or primarily use mobile to go online. This phenomenon is most pronounced in developing markets, as one might imagine. But it's also true in the US according to the InMobi data.
According to the survey 38% of US respondents "mostly" use mobile to go online. This finding (and others) may well be biased because the survey respondents were found through the InMobi ad network: "Recruited via InMobi global mobile ad network between August and November 2012." This is therefore going to tend to be a more mobile-centric audience than the US internet population as a whole.
Another interesting result, this respondent pool says that it rarely clicks ads unintentionally. In contrast to some of the estimates and data floating around in the market (e.g., 40% of mobile ad clicks are "inadvertent") only a small minority said that mobile ad clicks were mistaken more than 10% of the time.
Though these findings may not be entirely representative of internet users or perhaps even US mobile users as a whole they're still striking in multiple ways.
Back to the TV vs. mobile time spent: most marketers' ad spending and behavior fails to recognize the profound shifts in the market captured by and reflected in these data. The idea that mobile now dominates TV in terms of time spent or that mobile captures attention from TV even during TV time will be unsettling -- if not shocking -- to most brand marketers.
And most right now will have no idea what to do about it.
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.
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.
Location-based ad network Verve Mobile announced a Series C investment this morning of $15 million led by Nokia Growth Partners. This brings to more than $21 million the funding raised to date by Verve.
The company is one of several location-based mobile ad networks. An incomplete list of others includes xAd, YP, LSN Mobile, Telenav/ThinkNear, Marchex. In addition, all the major mobile ad networks offer varying flavors of geotargeting.
While local-mobile advertising holds enormous promise, most mobile display revenue forecasts associated with the segment are overblown for many reasons. They often contain overly simplistic assumptions or fail to recognize the complexity of the space and challenges that must be first overcome to realize its potential.
In addition to local "infrastructure" challenges and the difficulty of proving ROI from mostly offline conversions, a major challenge facing local-mobile advertising is poor or sloppy mobile ad creative. Weak mobile creative is a problem with mobile advertising in general but it's especially true in the local space. The following are a few examples of the "current state of the art."
Beyond the fact that there's no call to action on the Tiffany's banner above, the landing page showcases various types of jewelry for e-commerce sales. However it's highly unlikely that a consumer would click on the ad and then buy a necklace or other jewelry item within the ad. People might go to the Tiffany's site later and buy there.
However, what's much more likely is that someone would peruse the jewelry online but buy later in a local store. Unfortunately the store locator is yet another page down and generally buried. It should be much more prominently displayed on the landing page and connected to maps and directions.
The ad above was presented on the AP news app. One problem is that the ad copy is small and challenging to read. However, what's more problematic is the way that the ad dumps users into an HTML5 version of Google Maps without any context, branding or additional information.
It's a map to lead you to a dealer (one infers) but you don't actually know what you're looking at or how it connects to the ad clicked on.
Immediately above is a Radio Shack ad that appeared in a local newspaper app. Like the Tiffany's ad it's really promoting e-commerce. Radio Shack has hundreds of local stores but nowhere -- not anywhere -- in the ad is there an obvious store locator. Again, the majority of users are unlikely to buy directly through the ad. The lack of a store finder is a missed opportunity.
These are just three recent examples among many others of the many problems with mobile display and local-mobile display advertising in particular.
Google today introduced some major changes to AdWords to both make it easier to manage campaigns across multiple screens and to enabled more "nuanced" bidding and targeting. There's a very complete discussion at Search Engine Land.
A cynic or skeptic would argue the changes are directed primarily at bringing more advertisers into mobile and bringing mobile revenues up for Google (although advertisers can effectively still opt out of mobile).
One of the major changes is that advertisers can now make mutiple bids ("bid adjustments") for a single ad based on variables such as device, location and time of day. Mobile bids will be set at desktop/PC levels -- mobile CPCs are lower than desktop CPCs -- and advertisers will have to actively reduce them if they want to bid less for mobile clicks.
Some may see this as "strong arm tactics" by Google to raise mobile search revenues. However the company believes it's simply adapting AdWords capabilities for a new multi-screen environment.
Below are some of the main bullets (slightly edited) from the Google Inside AdWords blog explaining the new features:
Bid adjustments: With bid adjustments, you can manage bids for your ads across devices, locations, time of day and more — all from a single campaign.
Example: A breakfast cafe wants to reach people nearby searching for "coffee" or "breakfast" on a smartphone. Using bid adjustments, with three simple entries, they can bid 25% higher for people searching a half-mile away, 20% lower for searches after 11am, and 50% higher for searches on smartphones. These bid adjustments can apply to all ads and all keywords in one single campaign.
Dynamic creative: People on the go or near your store may be looking for different things than someone sitting at their desk. With enhanced campaigns, you’ll show ads across devices with the right ad text, sitelink, app or extension, without having to edit each campaign for every possible combination of devices, location and time of day.
Example: A national retailer with both physical locations and a website can show ads with click-to-call and location extensions for people searching on their smartphones, while showing an ad for their e-commerce website to people searching on a PC — all within a single campaign.
New conversion metrics: Potential customers may see your ad and download your app, or they may call you. It’s been hard for marketers to easily measure and compare these interactions. To help you measure the full value of your campaigns, enhanced campaigns enables you to easily count calls and app downloads as conversions in your AdWords reports.
Example: You can count phone calls of 60 seconds or longer that result from a click-to-call ad as a conversion in your AdWords reports, and compare them to other conversions like leads, sales and downloads.
All of these enhancements are designed to make search advertising both easier and more effective for marketers in a larger, more fragmented device universe. By the same token Google is trying to generate more money from its mobile advertisers and clicks, something it has struggled somewhat to do.
In its last quarterly earnings Google reported that average CPCs decreased 6 percent vs. Q4 2011 (attributable almost exclusively to mobile).
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.
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 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.
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.
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.
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.
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.
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.
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.
Yesterday afternoon Google announced Q4 2012 earnings. In almost every respect it was a spectacular holiday quarter for the company. Consolidated revenues (which include Motorola) were $14.42 billion, an increase of 36% over 2011.
Google made $50.2 billion for the full year, crossing that revenue threshold for the first time. That compares with $37.9 billion the company made in 2011.
However the average price that avertisers paid Google per click (CPCs) decreased 6 percent vs. Q4 2011. That was a smaller decline than in the past, which could be seen as a positive.
The CPC YoY drop is because more clicks are now coming from mobile devices and advertisers are paying less for those clicks. According to a report released yesterday from marketing firm The Search Agency, CPC prices for paid-search ads appearing on smartphones are well below comparable ads appearing on tablets and PCs (see graphic below).
In Q4 mobile search clicks were worth less than 50% of what marketers paid for PC search clicks according to the data. Why are marketers paying much less for mobile clicks when mobile consumers are often much better prospects and customers than PC users?
There's less competition currently for mobile clicks than there is for PC search clicks. Because Google's ad system is an auction that necessarily affects pricing. But more than that many advertisers are unwilling to pay more for mobile clicks because they don't trust them and/or can't calculate a mobile ROI.
Source: The Search Agency
Many search marketers, especially brands and large advertisers, rely on automated systems that calculate paid-search ROI based on some pre-defined conversion event. Those conversions can be a variety of things but frequently they're e-commerce transactions or, in some cases, phone calls.
PC ROI calculations are generally flawed because they usually don't or can't capture online-influenced offline buying. Accordingly the system and the marketer only see online events but not the far larger collection of offline purchases and activities (e.g., store visits) that are driven by online and paid search advertising. The problem is even more pronouced for mobile, however.
Because there are relatively few mobile commerce transactions -- though there are plenty of phone calls from mobile devices -- marketers simply don't see the "latent" conversions that happen in the real world or later on another screen, such as in the case where someone does research on a mobile device and later buys on a PC or tablet.
As a result of this varied, multi-screen consumer behavior marketers aren't able to correctly perceive or attribute ROI and accordingly value mobile clicks. While this represents a "buying opportunity" for advertisers that know the true value of mobile the majority of advertisers are undervaluing mobile clicks. And that's reflected in the average CPC declines that Google has been reporting.
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.
There are a couple of studies that suggest a substantial percentage -- perhaps as much as 40% -- of mobile display ad clicks are unintended or "bad" in some way. Pontiflex and Trademob are the sources of these findings.
There are a number of ways to address this. One way is changing the billing or business model (moving from CTR to CPA); another is to ensure that clicks are truly intended. For example, mobile ad networks like YP and xAd ask users to confirm that they want to actually contact an advertiser or visit the advertiser's site/landing page.
Below is an example of that approach from the YP mobile ad network:
Now Google is taking steps in its banner ad creative to make sure that clicks are valid. The company said in a blog post that
[M]ost accidental clicks on in-app image ads happen at the outer edge of the ad unit, likely when you’re trying to click or scroll to nearby content. Now if you click on the outer border of the ad, we’ll prompt you to verify that you actually meant to click on the ad to learn more.
Below are screens from the Google post. The company will require users to now click on a specific area of the banner ("visit site"). The entire banner won't be "clickable."
This is smart and together with other, similar efforts it should ensure that clicks and other consumer actions in response to mobile ads are intended and that advertisers are only charged for "valid" clicks and not fat-finger accidents.
In one sense this is a solution to a practical problem but in another it's a symbolic, confidence-building measure for mobile display advertising.
Mobile advertising is typically quite a bit more effective than comparable ads on the PC. Indeed, the data show that mobile search and display consistently outperform their PC counterparts. Yet mobile ads (especially display and SMS) are viewed with skepticism and distrust and rank near the bottom of all ad categories in consumer surveys.
This is something of a paradox to say the least. For example, Marin Software's Q3 aggregated client data report indicates the following about the relative performance (CTRs) of paid search ads on the PC, smartphones and tablets:
You might be quick to respond that smartphone click-through rates could be attributable to the so-called "fat finger" problem thus distorting their true performance. This problem -- and we can debate the extent of its reality -- doesn't really exist in a paid-search context.
These clicks are from intent-based queries and thus more inclined be "real" and reflective of a buying intent. In a display context an unintended click may be somewhat more likely. However mobile display outperforms PC display advertising across the board and consistently across studies.
According to 2011 Nielsen US consumer advertising-trust survey data (above), personal recommendations and traditional media ads are near the top and mobile ads are the least trusted of all the major ad categories.
A more recent Millward Brown consumer survey (Q3 2012) found much the same thing. Mobile ads were at the bottom of favorability rankings among all ad types. The list below just shows digital categories:
There's no easy way to explain the apparent contradiction between negative consumer attitudes toward mobile ads and their otherwise superior performance to categories more trusted or ranked more highly.
Flurry Analytics has been chronicling the rise of the app ecosystem and the growth of app usage by consumers for several years. In January of this year the company released data arguing that daily time spent with mobile apps had surpassed the PC internet: 94 minutes vs. 72 minutes per day. And earlier today Flurry released an analysis of US consumer time spent with mobile apps vs. television.
Ad network InMobile asserted earlier this year that consumers are now spending more time on a daily basis with mobile media than they do with TV:
[M]obile ranks first in media consumption among Americans with 2.4 hours of the 9 hours spent consuming media on mobile devices—this is more than a quarter of time spent on mobile, outpacing TV (2.35 hours), PCs (1.6 hours) and any other channel.
However according to the data compiled by Flurry, consumers are spending 127 minutes per day with mobile apps compared to 168 minutes per day with TV. TV time is basically flat, or slighly down according to Nielsen, while app-time is gaining according to Flurry.
Nielsen itself says that people in the US spend roughly 4 hours and 18 minutes per day on average with conventional TV (vs. 168 minutes [2.8 hours] in the Flurry graph). That would be about 2X of the time spent with mobile apps, using the Flurry figures.
The question of whether time spent with mobile already exceeds TV time or closing in on it is largely symbolic. The larger point is that consumers are highly engaged with mobile devices and the mobile internet. That trend will only continue to grow and gain in the next several years. Mobile ad spending, however, is nowhere near commensurate with the kind of time and attention that consumers are spending with mobile media. The chart below (also courtsey of Flurry) illustrates the huge disparity between the two.
Mary Meeker has argued that, based in part on this familiar time-spent formula, mobile advertising is basically a $20 billion opportunity in the US. That may be the case eventually -- though advertisers and their agencies aren't totally "rational." But in the near term are many barriers to the free flow of ad dollars into mobile right now: organizational politics and culture, lack of advertiser education, lack of budget and perhaps most of all lack of "clear ROI."
It took a very long time for online advertising to attract the kind of ad dollars that were more or less consistent with consumer time spent online. It won't take quite as long for mobile to ramp. But it could still be a number of years before mobile marketing and advertising are significant budget items for the majority of advertisers.
For their part consumers are mostly indifferent to whether or how soon companies embrace mobile marketing and advertising. While they prefer mobile friendly sites and user-experiences they don't particularly care if marketers are fully exploiting mobile ad opportunities.
However, if marketers do not as the Thanksgiving holiday weekend has already proven, it will be their missed opportunity.
Former Morgan Stanley financial analyst, now KPCB partner, Mary Meeker did one of her patented blizzard of stats/data dump presentations at Stanford University the other evening. The slides (available here) are essentially an updated version of a presentation given earlier this year.
You know most of the material by now. However, below are the most interesting slides I culled from a much longer set. They go to device adoption and mobile ad revenue projections.
The noteworthy thing about the above chart is that it argues there are 172 million smartphone subscribers in the US. If that's true it would mean a smartphone share of something like 68% or 73% depending on the base used. This is undoubtedly high. But it's not unreasonable to argue that there may be 60% smartphone penetration by the end of Q4 in the US (or early Q1).
From the chart below: there may not in fact be 5 billion individual mobile phone users around the world. There are "only" 7 billion people on the planet. It's probably more accurate to assert there are something like 5 billion subscriptions/SIM cards (there are some dual subscriptions). Still the global smartphone growth opportunity is massive.
The following chart is based on Pew survey data, showing that 29% (as of earlier this year) of US adults owned a tablet or eReader. Tablets are going to be the number one electronics gift item this year. We could be looking at 80 million total tablets in the US in Q1 2013.
What's most interesting about the slide below is that it projects tablet ownership to pass PC ownership by the end of next year; in other words: more tablets than PCs. This may be a aggressive forecast but it's not out of the question.
The final slide is about mobile advertising and app revenue. There are many sources behind this projection. It envisions a $20 billion global market by the end of the year, with mobile advertising around $6 or so billion.
US mobile advertising was worth roughly $1.2 in the first half and is on track to be somewhere between $2.6 and $2.8 billion for the full year 2012. Globally mobile ad revenues will probably reach between $5.5 and $6 billion by the end of Q4 this year.