Mobile Advertising

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. 

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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).

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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. 

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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. 

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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?" 

Screen Shot 2012-08-20 at 12.16.52 PM

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:

Screen Shot 2012-08-20 at 12.33.15 PM

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. 

Screen Shot 2012-07-31 at 7.48.22 AM

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. 

Screen Shot 2012-07-31 at 7.48.31 AM

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

Screen Shot 2012-07-31 at 7.48.50 AM

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

Screen Shot 2012-07-31 at 7.47.33 AM

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. 

IAB: Global Mobile Ad Spend in 2011 Was $5.3B, Paid Search the Largest Chunk

This morning the IAB released estimates of mobile advertising spending in 2011 on a global basis. Previously the trade group said that US mobile advertising was worth $1.6 billion in 2011.

According to the IAB mobile search advertising made up the largest component of US and international mobile advertising -- much like PC ad spending. It constituted 62% of global mobile ad spending in 2011 according to the IAB. That compares with roughly 46% of total ad spending (if memory serves me) on the PC. Almost all this money goes to Google. 

Below is the IAB chart showing the breakdown by region and ad unit category. 

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We had previously forecast that combined North American and European mobile advertising revenue would be worth just over $5 billion in 2012. Assuming these IAB numbers are based on some sort of actual empirical evidence and not simply vague estimates the combined North American and European mobile ad markets were worth $2.3 billion last year. Our estimate for 2011 was $3.1 billion, about $800 million too optimistic. 

Still not bad. 

I suspect by this time next year we'll see some impressive revenue growth, making our 2012 numbers pretty close to actuals. Again, Google is the biggest single beneficiary of all this mobile spending on a global basis.

Mobile CPMs Just a Fraction of PC Display Costs

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

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

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

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

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

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

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

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

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

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

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

How Will Facebook Monetize Mobile?

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

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

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

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

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

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

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

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

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

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

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

Screen shot 2012-05-21 at 9.41.17 AM

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

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

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

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

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

Study: Localization Best Way to Make Mobile Ads Relevant to Users

The IAB has released a fascinating report on mobile shopping and user attitudes. The study wasn't a simply survey. Instead the research involved 260 US adults who agreed to participate in a two-week "mobile diary" project. It thus got an in-depth look at their behavior. Below are some of the findings that I found most interesting and noteworthy.

One finding that illustrates simple assumptions about mobile behavior cannot be made was the fact that most "mobile commerce" activity happened at home:

  • At home: 47%
  • Out and about: 29%
  • At work: 10%

Specifically the study also found that most product searching happened at home and not "out and about." Store location searching did happen mostly on the go. But these findings suggest that behavior many marketers assume is happening on the go is actually taking place at home. 

Screen shot 2012-05-17 at 8.33.03 AM

In a majority of cases "mobile commerce" (shopping) activity was stimulated by the presence of other media. This fact is relatively well known but still needs to be pointed out. Too many marketers think about mobile in a vacuum. Specifically 46% of these users were watching TV or on their computers when they used their smartphones to look up information. 

Screen shot 2012-05-17 at 8.46.52 AM

What stimulated their mobile commerce (shopping) activity? The largest group said that mobile was the "easiest way" to accomplish the particular task. In other words, it was easier for them to do a mobile lookup than it was to go on a PC. Beyond this, mobile advertising was a major "stimulant" of subsequent research or mobile shopping behavior.
Screen shot 2012-05-17 at 8.33.22 AM

One of the most interesting findings, which is an outlier compared to other data in the market, is the overwhelmingly favorable perception of mobile ads, which were viewed by 70% of these study participants as "a personal invitation." That's an incredibly positive finding for mobile advertising. 

Screen shot 2012-05-17 at 8.15.30 AM

Another very interesting finding is that mobile users who click on ads are mostly not immediately interested in buying. They want to learn more about a product or service. Many also want to see related products or services (presumably to see what their options are). 

All this suggests that mobile (display) advertising exists somewhere between pure awareness and direct response. Most people -- at least in this sample -- are not prepared to buy immediately in response to mobile display ads. Search is a different matter because of the directed nature of the consumer behavior vs. display. 

Screen shot 2012-05-17 at 8.15.51 AM

Finally the study indicates that the best way to make mobile ads relevant to users is to localize and personalize them. Personalization is OK, according to the study, with permission (hard to execute for marketers). But localization can more easily be done without capturing personal or behavioral data. 

Screen shot 2012-05-17 at 8.16.17 AM

Are Facebook Users Fleeing to Mobile to Escape Ads?

Facebook has again updated its S-1. There are a few reasons for this, including the awarding of additional stock to employees. However there's a very interesting discussion of mobile in the revised document (pointed out by TechCrunch). On page 14 of the document Facebook reiterates uncertainty around its ability to make money off mobile users:

We had 488 million MAUs who used Facebook mobile products in March 2012. While most of our mobile users also access Facebook through personal computers, we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile usage of Facebook.

We have historically not shown ads to users accessing Facebook through mobile apps or our mobile website. In March 2012, we began to include sponsored stories in users’ mobile News Feeds. However, we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.

(emphasis added.)

The only mobile ad unit currently used by Facebook is Sponsored Stores, which put brand and advertiser messages in the user news feed. These units have proven to be successful on the PC but could become annoying to users on mobile devices. I have not yet seen any of these ads myself. 

One reason why mobile usage is growing so rapidly for Facebook is a result of general smartphone adoption among Americans. There are also things about the user experience in mobile that are superior to the PC: the ability to take and immediately upload pictures, for example. 

There may be another reason why usage is migrating to mobile: ad avoidance. People may be choosing the mobile version of Facebook over the PC site precisely because there are fewer ads; it's a "cleaner" experience. If my theory is correct then Facebook has a major problem on its hands. As Facebook puts more ads in mobile to make money it risks alienating users if the company is not very careful and thoughtful. 

Mobile ads on Facebook will have to add value, be compelling (offers) or highly relevant (local) in order to work. For this reason I expect Facebook to make a major mobile ad-network acquisition. This would be for the "infrastructure," the expertise and the inventory. It would be analogous to what Google did with AdMob.

Mobile Search Clicks Higher, Prices Generally Lower than Online Ads

During the past two or three weeks a trio of reports came out about paid search trends, with considerable information about mobile. Agencies Marin Software, IgnitionOne and Performics each put out "Q1" reports. What they uniformly show is that mobile keeps gaining and that CTRs are better than for comparable ads online.

Performics says it's not seeing any cannibalization by mobile of PC search, which it says is still growing. The agency says people are simply searching more: PC at their desks, smartphones on the go and iPads at night on the couch. And none of this reflects or counts in-app search as an alternative to the mobile browser. 

First from Marin (top) and IgnitionOne (second) the following two graphics offer a comparison of paid search clicks on the PC, tablets and smartphones. Marin and IgnitionOne are very consistent with each other (based on aggregated client data):

Screen shot 2012-05-03 at 9.13.04 AMScreen shot 2012-05-03 at 9.12.47 AM

Given that there are scores of clients and hundreds of campaigns reflected in the two charts above we can take these metrics as definitive (for now) regarding the relative CTRs on each of these device platforms.

Performics argues that the present is a buying opportunity in mobile search (and display) because prices are lower than for PC campaigns, even as performance is superior to the PC. The graphic below shows the relative cost of paid search clicks for smartphones and tablets indexed against comparable PC campaign costs. 

Screen shot 2012-05-03 at 9.21.11 AM

Survey: 45% of Those Who Saw Ads in Apps Clicked

Mobile advertising platform Tapjoy released survey data about mobile user attitudes and behaviors surrounding engagement with in-app advertising. The online survey had 2,000 US adult respondents who owned smartphones and/or tablets and used apps. The major finding was that users respond best to ads in apps that offer rewards of some kind. 

Respondents were grouped in age and psychographic categories and profiled accordingly. The survey discovered that adults in the 25-34 age group "are more likely to value the influence of advertisements, they generally recall seeing more ads while using mobile apps." In addition during each app session people in this group recalled a larger number of ads vs. the total population.

These individuals had more paid apps on their devices than other age groups. In addition, once they saw an ad "50% choose to click on it, compared to only 45% of typical app users." These numbers are huge: half of those who noticed an ad clicked on it.

Here are some of the other top-level findings: 

  • App users are more likely to remember brands that offer unique rewards
  • 58% of users tried an app after downloading it to earn a reward
  • Respondents estimate that half of the apps they use are ad-­supported; 64% of users reported having seen an advertisement within a mobile app.
  • 45% of these consumers reported clicking on one of the ads
  • 42% of users download an app because their friends and family suggested they do so
  • 24% of users will tell friends and family about [an app they like] and convince them to get it

Stepping back, none of this comes as a surprise. (There's also lots of discussion of virtual currency in the survey.) Mobile users tend to respond to ads more than PC users and in-app users perhaps more significantly than users of the mobile web. It also makes sense that ads containing some sort of incentive, deal/discount or call to action would see higher response than in the absence of those things.

We've written previously about how many -- indeed a majority -- of mobile ads suffer from bland or perfunctory ad creative and copy and are merely shrunk-down versions of PC campaigns rather than created specifically for mobile audiences. When mobile ads are well conceived they can be enormously effective.