Mobile Advertising

Yahoo Probably Compelled to Buy a Mobile Ad Network

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

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

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

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

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

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

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

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

Revisiting My 2012 Mobile Predictions

For several reasons I had occasion to look back at some of the mobile predictions I made in January. At the risk of sounding self-important or boastful many of them have come to pass. In fact I was somewhat surprised by the number, which is why I'm posting about it now.

For review, here are the original predictions from January:

  1. 2012 ends with 65% smartphone penetration in the US
  2. Android reaches 60%+ smartphone penetration by the end of 2012
  3. Voice search: Siri expands its reach to many more third party services; Google and Microsoft beef up their competitive voice offerings
  4. Apple launches its own mapping service for iOS
  5. RIM’s co-CEOs resign in 1H 2012
  6. Windows Phones see modest but not huge success in North America, greater success in Europe/Asia
  7. Major smartphone security (hacking/virus) event happens this year (most likely on Android handsets)
  8. Mobile payments see continued growth but 2012 isn’t the “breakthrough” year
  9. Tablets galore: 100 million tablets in market by the end of 2012 (globally). The iPad represents 65% of the market
  10. Google announces mobile ads “run rate” of $4 billion (in Q4)
  11. Facebook launches mobile advertising in 1H 2012
  12. Amazon buys a mobile ad network (Millennial or Jumptap)

Here are my comments and updates on each item:

  1. The smartphone penetration number (per Nielsen) right now is 55%; we'll probably end the year close to 60%
  2. Android smartphone market share in the US is 53% now (per comScore), probably going to 55% - 57% by the end of Q4 2012
  3. Siri has been beefed up and its structured data sources expanded. Google has answered to some degree with "Google Now" and related voice assistant; however Microsoft hasn't done anything significant in this arena beyond its core voice search. 
  4. Apple Maps launched of course
  5. RIM’s co-CEOs both resigned in the first half
  6. Windows Phones have continued to lose share in the US market (per comScore) but have seen some modest success in other markets
  7. Android malware has dramatically increased but there has been no single cataclysmic event 
  8. Mobile payments and wallets continue to make incremental gains (see Apple Passbook) but 2012 isn't the "breakthrough year" 
  9. The iPad's market share is about 68% on a global basis today. Roughly 84 million iPads have been sold to date and many millions of other non-iOS tablets. I suspect the 100 million threshold will be crossed by the end of Q4 if it hasn't been already
  10. Google announced a mobile run rate of $8 billion, with probably 70% to 75% of it being ad revenue. 
  11. Facebook did launch mobile advertising 
  12. Amazon has not (yet) bought a mobile ad network

Not bad . . .

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

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

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

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

CFO Patrick Pichette added a small amount of additional clarity: 

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

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

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

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

 

Revenue Comparison   iOS vs Amzn vs Android updated resized 600

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

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

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

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

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.

Mobile Ad Revenues $1.2B for the First Half, Heading toward $2.5B for the Year

The IAB released its half yearly digital ad revenue report for the US market earlier today. Total "online" revenues were approximately $17 billion, compared with $14.9 billion a year ago. Search was the single largest revenue category and has been for some time. It accounted for 48% of total digital ad revenue in 1H 2012 or $8.1 billion (vs. $6.8 billion in 2011).

Mobile revenue for the first half was $1.2 billion or 7% of total digital ad revenue. That compares to $636 million for the same period in 2011. Ironically the MMA is recommending that brands and marketers devote 7% of their ad budgets to mobile. 

As might be expected, the IAB said that mobile was the fastest growing of the various digital ad categories it was tracking.  Screen Shot 2012-10-11 at 4.32.50 PM

Screen Shot 2012-10-11 at 4.31.54 PM

If we extrapolate from the numbers in the report we can project that full-year US mobile ad revenues will come in between $2.4 and $2.6 billion depending on how good Q4 is this year. 

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.

Screen shot 2012-05-30 at 12.04.16 PM 

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. 

Geofencing Gets New Push With Urban Airship 'Location Messaging'

In-app messaging provider Urban Airship has just introduced a very interesting new product: Location Messaging. This is the fruit of the company's acquisition of SimpleGeo last year.

Geofencing (Placecast) and ad geotargeting (xAd, YP) have existed for some time. However Urban Airship's new product offers very precise location targeted messaging -- with the ability to mix in other audience segmentation data as well:  

  • Preferences: tags based on user-stated characteristics
  • In-app behavior: tags you’ve defined based on explicit and implicit actions users have taken
  • Location history: where they are now and where they’ve been

As a result publishers/developers are able target specific types of users by location. There's a wide array of possibilities in terms of the way this can be deployed, for loyalty or yield management purposes or to stimulate new sales. There are two qualifications: users must have the publisher's app installed and s/he must have opted in to receive push notifications.

Screen Shot 2012-10-01 at 10.54.26 AM

Urban Airship has created 2.5 million "pre-defined geofences" for publishers. However they can also define (or exclude) their own custom geofences. These can be as wide as a metro area (or larger I suppose) or as precise as a park or city block. 

There's lots of hand-wringing going on about publishers being unable to sufficiently monetize mobile. However, mobile push notifications offer a terrific opportunity for brands and offline businesses to drive increased sales -- if used judiciously. Accordingly the company shared some performance data with me. It was impressive. 

Urban Airship said it beta-tested Location Messaging this summer during the Olympics. The company reported on its blog that "The Official London 2012 app . . . utilized Urban Airship Location Messaging to send more than 10 million location-based push messages to people in . . . Olympic venues." In addition, "Nearly 60% of app users had location-sharing enabled and location-based pushes achieved clickthrough rates of around 60 percent."

Urban Airship CMO Brent Heiggelke pointed out that despite the potential effectiveness of Location Messaging brands and marketers must be extremely careful about the content of messages they send and their frequency or risk having their notifications shut off or apps uninstalled by end users.

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.

 

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. 

Time Spent with Mobile Exceeds 10% Yet MMA Calls for Only 7% of Ad Budgets

The Mobile Marketing Association has conducted a study about mobile ROI whose chief recommendation appears to be that advertisers should spend 7% of their ad budgets on mobile. Currently average spending on mobile advertising is about 1% of budgets.

That's all fine, except that time spent with mobile (if that's the guide) is already in excess of 10% of all time spent with media. Perhaps the MMA didn't want to be too aggressive and call for 10% of ad budgets. 

The following chart from Mary Meeker indicates a 1% ad spent and 10% time spent with mobile media.

The next chart is from Flurry Analytics and relies on some of the same Mary Meeker data, but also Flurry's own app analytics and other third party data. It argues that consumers now spend 23% of their media time with mobile. 

Mobile Ad Spending vs. Time Spent per Media

Finally ad network InMobi argues that 27% of daily consumer media time is spent with mobile -- more than TV (which is doubtful). 

Accordingly, if one accepts these data as accurate, 10% is the floor and 27% the ceiling in terms of media time spent with mobile. According to most sources mobile media time now surpasses everything else except TV (and the PC Internet in some studies).

In that context it appears that asking for 7% of ad budgets seems like a very timid request. 

Millennial: Tickets Third Most Popular M-Commerce Category

Millennial Media is out with another vertical report. Last time it was travel; this morning the ad network released a report on Entertainment. It was generated in conjunction with comScore. From my perspective, there were two pieces of interesting data in the document -- although the case studies in the report are also interesting.

One was about mobile purchase categories. The other was Millennial's "post click" campaign data for the Entertainment category. This data reflects the objectives advertisers are trying to accomplish with their campaigns. 

Screen Shot 2012-08-30 at 7.24.10 AM

The report said that "convenience" was the chief motivation for buying something on a mobile device (vs. online or in-person). Roughly two-thirds (63%) of smartphone owners cited this as the rationale for m-commerce. Convenience (vs. price) is typically the major reason for buying online as well.

Between 20% and 35% of US smartphone owners have ever made a mobile purchase according to several studies released in 2011 and 2012. Paralleling the data in the chart above, digital content (books, movies, apps, music) leads m-commerce overall. However we will see a broader range of e-commerce transfer over to mobile over time. 

The problem of entering credit card information is a major barrier to mobile commerce today. Those vendors that have stored credit cards (in other words direct relationships with consumers [i.e., Amazon]) will see much more volume than those asking consumers to enter 16 digits. A majority of mobile e-commerce efforts will need to find some third party solution (e.g., working with PayPal, Amazon or solutions such as Card.io) if they want to generate sales from smartphones. Tablets are a different matter; entering credit card information is not as much of a barrier on those devices. 

Screen Shot 2012-08-30 at 7.26.28 AM

The chart above reflects campaign objectives, comparing entertainment companies (including movie producers and theaters) with Millennial's overall customer base. As might be expected, driving to a video view (e.g., movie preview) is the most common campaign objective. 

Video (assuming a decent WiFi or network connection) is a very effective ad format in mobile. This is especially true for movie previews, which are regarded as content and not ads by most consumers. 

In addition to video views, the other two most common campaign objectives were: driving to a social media page/site and "m-commerce" (buying tickets). Those consumers that have movie ticket apps installed (e.g., Fandango), with a stored credit card, are going to be increasingly likely to buy tickets via smartphones over other methods. 

Nokia and Others Form 'In-Location Alliance' to Promote Indoor Positioning

Nokia is spearheading what's being called "The In-Location Alliance." The purpose of the new quasi-trade group is to "drive innovation and market adoption of high accuracy indoor positioning and related services." The assumption is that more accurate indoor positioning will create new markets and new revenue opportunities.

According to the press release out this morning: "The Alliance will focus on creating solutions offering high accuracy, low power consumption, mobility, implementability and usability. It will create an ecosystem that stimulates innovation, enhances service delivery, and accelerates the adoption of solutions and technologies that optimize the mobile experience."

There are 22 companies listed as founding members: Broadcom, CSR, Dialog Semiconductor, Eptisa, Geomobile, Genasys, Indra, Insiteo, Nokia, Nomadic Solutions, Nordic Semiconductor, Nordic Technology Group, NowOn, Primax Electronics, Qualcomm, RapidBlue Solutions, Samsung Electronics, Seolane Innovation, Sony Mobile Communications, TamperSeal AB, Team Action Zone and Visioglobe.

The release also indicates the alliance will promote open standards and systems to allow for broad participation by non-member vendors and third parties.

There are a number of companies already operating in the indoor positioning segment, including Google, Microsoft, Wifarer, Point Inside, Aisle411 and others. Interestingly none of them are on the list above. No carrier is part of this inagural group either. However, the alliance is inviting any and all interested parties to join. 

Notwithstanding the promise of new business models, that's one of the central questions: how will some of these companies make money? The superficial response is "deals and advertising." Privacy is also another major issue. However I suspect that can be addressed with an opt-in approach, much in the way that Apple does with iPhone apps requesting to use location. 

Report: iPhone Owners Most Receptive to Mobile Ads

The Online Publishers Association has published some new survey data (n=2,450 US Internet users) which mostly duplicate pre-existing smartphone survey research: size of user population, activities, attitudes and so on.

While the data are generally consistent with prior research, a few of the findings appear to contradict or argue with earlier findings. For example, the OPA found that its respondents spent more time "accessing content" via the mobile Web vs. apps. Comscore, by contrast, has reported that more than 80% of consumer time spent on the "mobile Internet" is in mobile apps and only 20% of time spent is with the mobile web.  

Beyond this there are a considerable number of findings in the study. Because they are largely duplicative of earlier work, they're not terrifically interesting to me. You can download the entire slide presentation from the OPA site. However I'll pull out a few items that are worth highlighting. 

The first is that more than half of survey respondents said they preferred using a smartphone for certain types of content or online activities to PCs and tablets. The question was, "When doing the following activities, which type of device do you most prefer to use?" 

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The OPA found that smartphone users downloaded an average of 36 apps over the past year. The study also found that 56% of respondents used at least half of the apps they had downloaded on a regular basis. Only 14% of those apps were paid, however. 

The survey also found that 70% of iPhone "content consumers" bought paid apps but only 34% of Android users paid for content-related apps. That smartphone content-buying population is more receptive to mobile advertising and more likely to take action in response according to the OPA findings. 

Owners of the iPhone were the most positive about mobile ads and most likely to act in response:

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At the highest level the findings underscore that there's a very large audience out there that in some cases is more interested in content on smartphones. While there were no earthshattering discoveries in the study, it adds to the growing body of research that reflects the importance of mobile distribution for both publishers and advertisers -- and the missed opportunity for those not currently participating in mobile. 

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. 

Facebook Phone Smart or Destined to Fail?

Just like Amazon, Facebook is building a phone. This rumor has been around perhaps for two years but Bloomberg seems to confirm it. The hardware maker is said to be the struggling HTC. Previously HTC released the ChaCha (pictured at right), with a dedicated Facebook button. 

The ChaCha was a failure. Will a dedicated "Facebook phone" equally bomb? The chances are very good that it would see limited demand. 

From Facebook's perspective the logic of its own device is understandable: 

  • Mobile is increasingly important to Facebook's future
  • It doesn't control a mobile platform or OS
  • By controlling the OS (or the presentation layer on top of the core Android OS) Facebook could do a great deal with apps and ads
  • A mobile phone would allow for the integration and extension of its online app store into mobile 
  • Facebook would have more mobile advertising options on its own mobile platform
  • The company could integrate users' networks with the dialer, as well as doing interesting things with chat and mobile video

The problem is that iPhone and Android devices have dedicated Facebook apps. This will be sufficient for all but the most dedicated Facebook users.

The additional integrations and "cool things" that Facebook could do with its own version of Android won't be enough incentive for most people to buy the device. Younger users and first-time buyers making the switch from feature phones to smartphones might be enticed to buy such a device if the price were right. 

The other major issue is privacy and data-mining. I'm making a bunch of assumptions when I say that a Facebook phone would likely collect even more data about individuals and their behavior (calls with contacts, sites visited, apps used, physical movements) than the existing mobile apps or online experience do. Thus concern that "your phone is watching/tracking you" would cause many to stay away and could even lead to regulatory investigations -- depending on how aggressive Facebook wanted to be with tracking/monitoring. 

However I know that Facebook is more cautious about privacy these days and so it might be more restrained. 

Although the rumors have been around for a long time, Facebook probably saw Amazon's success with Kindle and Kindle Fire and decided there was little or nothing to lose in making its own device. I just don't think many people will be very interested. 

Update: On the Facebook Q2 earnings call this afternoon CEO Mark Zuckerberg said that it didn't make a lot of sense for Facebook to create its own phone. But we'll see early next year. 

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. 

Marketers and Publishers Better Quickly Get Used to 7-Inch Tablets

The early success of Google's Nexus 7 tablet sales, on the heels of Kindle Fire's success in Q4 last year, establishes that the 7-inch tablet category is here to stay. Before Kindle Fire there were no successful Android tablets of any size. Kindle Fire's combination of rock-bottom pricing ($199) and Amazon content helped drive several million in unit sales. Now Google's new device is off to a blazing start.

The company just released its first TV commercial for the tablet (a very Apple-like spot). 

As I previously discussed, the new Google tablet (starting at $199) is vastly superior to Kindle Fire. It now puts enormous pressure on Amazon to pull a rabbit out of the hat with its "2.0" release. Yet Amazon wants to release "five or six" new mobile devices (mostly tablets) of various sizes.

Apple is rumored to be releasing a smaller, lower cost tablet later this year. This is a defensive move for to prevent the iPad from being under-cut by lower-priced, almost-as-good products. A 7-inch iPad (or larger iPod Touch), combined with the Nexus 7, will likely dampen Amazon mobile device sales unless quality is dramatically improved. 

Regardless, the rise of the 7-inch tablet category now creates additional options for consumers and additional complexity for advertisers and to some degree publishers. I suppose it's an argument for "responsive web design."

With Kindle Fire 2, Nexus 7 and the coming Apple 7-inch tablet (and the accompanying low price of these devices) we should see 7-inch tablets sell millions of units. Many people will now have smartphones, small tablets for travel and "on the go," and 10-inch tablets for home. PCs will largely be used for "work" or become secondary devices for most consumers. 

Indeed, the device market is moving much faster than publishers and marketers. Publisher content and ads generally don't look particularly good on the 7-inch form factor. Tiny mobile banners are barely noticeable and landing pages look awkward filling only part of the screen. In addition, right now there are only a few apps optimized for 7-inch tablets. Smartphone apps look OK but often appear stretched or out-of-proportion.

All this will have to change -- and relatively quickly.

The PC market, where the attention of most publishers and marketers is still largely concentrated, is not going to grow. And by Q1 of 2013 there will be millions more tablets in people's hands. In fact, I believe that there will be 100 million tablets in the US market much more quickly than anyone is predicting: by the end of 2014.

With sales driven by competitive prices many of these will be 7-inchers, which don't play well with ads and content designed for smaller smartphones and which can't render apps, content or ads created for 10-inch tablets.

Marketers Confused about Mobile, but Increasingly Building Sites and Apps

Despite all the promises of digital marketing, data and analytics most marketers remain confused about how to manage the increasing complexity of digital channels, devices and tactics -- let along integrate them coherently. In particular, two recent surveys from email marketing services provider StrongMail and IBM show that marketers and CMOs conceptually embrace mobile marketing but are generally stumped by tactics.

The IBM survey was conducted in 2012 and had a sample size of roughly 350 "marketing practitioners." The StrongMail survey was conducted in Q1 and had 802 respondents, described as "business leaders." Just under half (46%) of the StrongMail respondents technically qualify as small businesses, with fewer than 100 employees. The IBM survey was more representative of enterprises and had respondents from multiple countries.

Among StrongMail survey respondents, only 55% had an existing mobile presence or were engaged in any form of mobile marketing. And 57% said they'd been doing it for only a year or less. Although 43% of those without a mobile presence or strategy planned to implement one within the next year. 

What did they plan to do? In roughly equal numbers the StrongMail respondents planned to build mobile sites (30%) and mobile apps (26%), followed by SMS/MMS marketing (15%). Impressively, 70% of StrongMail survey respondents planned to increase their mobile budgets in the next 12 months. But there's a difference between "talk" and action. 

For those still not doing anything, the top three answers to the question "Why aren't you leveraging mobile marketing?" were the following:

  • We see value in mobile but haven't yet determined the right strategy: 37%
  • Lack of resources/staff: 22%
  • Lack of funding/budget: 12%

Confusion over strategy and tactics similarly plagues the marketers at the larger organizations surveyed by IBM. In answer to the question, "Which three of the following market factors will be the biggest challenge for your organization over the next 3 to 5 years?" they responded that the proliferation of channels and devices was the biggest challenge: 

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Like the marketers in the StrongMail survey, the emphasis in the IBM survey was on mobile sites and apps. In response to the question, "Which of the following mobile marketing tactics is your company using or planning to use?" they said: 

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In this case, however, mobile email, SMS and local ad targeting were also being (at least conceptually) embraced. In the StrongMail survey the top current marketing methods reported were the following:

  • Mobile websites: 70%
  • Mobile apps: 55%
  • QR codes: 49%
  • SMS/MMS: 40% 

Interestingly only 13% of the mostly small business respondents in the StrongMail survey said they were using "location-based mobile marketing." And among those not currently doing any mobile marketing, only 3% indicated they were planning to implement it. 

By contrast the larger companies represented in the IBM survey were more interested and bullish about location. This is almost the opposite of what you might expect. SMBs could be expected to be more interested in location-based mobile marketing while one would anticipate that enterprises would be more skeptical. But the opposite appears to be true, drawing inferences from the data in these two surveys.