The Outlook for (Monetizing) Wearables

Before we can truly discuss the outlook for wearables we need to see Apple's iWatch and how much it costs. There are already a dozen or so smartwatches in the market, chief among them the Pebble and Samsung devices. Most of them have already failed.

The Pebble is a qualified success. However, there is really only one truly desirable smartwatch coming to market so far -- and we don't yet know the pricing. That's the Moto 360. 

The Samsung and LG watches ($199 and $229 respectively) shown off at the Google developer conference this week seem like decent but not great devices. As fashion items they leave much to be desired. I haven't yet used them so I can't comment on the experience. I have the Samsung Galaxy Gear Live (Android Wear). 

Nielsen reported yesterday that it tracked a "surge" in wearables adoption (fitness trackers and smartwatches) and usage between September 2013 and February 2014. The company added that "these wearable owners used their devices an average of 14 times during the month." The measurement firm also observed that smartwatch owners log a lot of time monthly accessing the internet and content on those wrist devices: 

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There's a question about whether the time is additive to existing mobile device usage or whether it cannibalizes some of that time. Regardless, the data above are very interesting, suggesting that with the right devices (mix of fashion + function + price) wearables could become a mainstream reality with fairly high engagement and diverse use cases.

The next obvious question about wearables surrounds marketing and monetization. Ad exchange TapSense announced earlier this week that it would be supporting delivery of ads to smartwatches. Those ads will likely follow the same pattern as early mobile display advertising: lackluster or perfunctory ad creative and weak or awkward overall experiences.

Most companies won't build anything like landing pages optimized for wearables. And most of these early ads will probably be for other app downloads. 

More likely to be effective are app-based notifications. For a long time SMS marketing held promise as a loyalty and location-based notifications tool. Today that promise has largely faded. However wearables may offer another go at that opportunity.

Consumers could, for example, opt-in to receive location-based notifications -- including indoor alerts -- that might contain marketing content (awareness or DR calls to action). This approach is probably going to be more effective and less awkward than ads within tiny apps on your wrist.

Paradoxically apps with ads that are too small to be noticed won't be effective and ads that are too large are likely to annoy. As "personal" as the smartphone is a watch is going to be even more personal in some respects -- and thus people may be less tolerant of conventional advertising on these devices.

Search content/ads may be an exception. Still you can't show many ads on a 2.5 inch screen.