With Its $12 Billion Marketing Budget, Samsung Now 'Owns' Android

I've written here and elsewhere about the fact that Samsung is increasingly the dominant global Android OEM. Samsung has ridden the Android wave to huge profits and near-global domination of the smartphone market. However the company is ambivalent about Android.

As Benedict Evans points out Samsung isn't promoting the Android brand and doesn't really mention Android in its multi-billion dollar "Next Big Thing" marketing campaign. Accordingly Evans contends that Samsung's Galaxy brand has greater recognition than Android itself. This conclusion is based on Google Trends search data, which may or may not be accurate as a reflection of actual brand recognition or demand.

There's plenty of other evidence in the market to support Evans' argument, however, including the above Android OEM comparison chart from ad network Millennial Media. Another data set from AppBrian also supports the same conclusion: 

With the possible exception of Huawei all the other Android OEMs are in decline (re market share) including and especially HTC, which is shifting its strategy to focus on emerging markets because it can no longer compete effectively in North America and Europe. 

What happens when Samsung so totally dominates the Android landscape that it can start using that leverage against Google or creating its own "forked" version of Android independent of Google (as Amazon has done with Kindle Fire)? That's presumably why Google is working on the "X-phone" through Motorola -- to try and create a viable rival to the Galaxy. But will Google be willing to go toe-to-toe with "partner" Samsung in terms of marketing dollars? 

No is the short answer. Samsung reportedly spends roughly $12 billion annually on marketing its mobile devices. That fact alone makes it hard for any other Android OEM, even Google-Motorola, to compete. Only Apple is really in a position to compete with Samsung. 

Study: Low Awareness of Digital Wallets Other than PayPal

Online measurement firm comScore released data from a new survey about digital wallet awareness and acceptance among US consumers. The survey was conducted in November 2012. It underscores familiar themes in the existing coversation about digital wallets: most consumers are largely unaware of the offerings, but those that are have security concerns.

In the context of this research "digital wallet" means online and mobile. To that end, the survey data showed that PayPal and Google Wallet were the only two payments products that enjoyed meaningful consumer awareness. In terms of usage, only PayPal has seen any real adoption -- largely because of its long established online history. 

Echoing many other surveys the comScore data found that security was a concern for many users. Like almost every one before it, the study concludes that consumers need to be educated about the overall benefits of digital wallets and the features that make them more secure than conventional credit card payments.

In a Q3 2012 survey we found very limited interest in mobile payments. 

How interested are you in using your mobile phone to pay for things, and replace cash or your credit cards?

Source: Opus Research (August, 2012; n=1,501 US adults)

From a demographic standpoint, people under 45 were considerably more interested in mobile payments than people who were older. Similarly, a recent survey (n=1,155 US adults) by the Raddon Financial Group found that that younger adults (Gen Y) are most likely to be interested and most likely to see value in mobile wallets.

Source: Raddon Financial Group (2012)

A recent survey from Harris Interactive is more bullish on the outlook for mobile payments than was ours:

“How interested are you in being able to use your smartphone to process in-person payments via tapping a special receiver, rather than using cash or payment cards?” 

• Very interested in using my smartphone instead of cash or cards: 8%
• Somewhat interested in using my smartphone instead of cash or cards: 19%
• Not very interested in using my smartphone instead of cash or cards: 12%
• Not at all interested in using my smartphone instead of cash or cards: 43% 

This was the full mobile-user population. The following were the smartphone-only responses: 

• Very interested in using my smartphone instead of cash or cards: 16%
• Somewhat interested in using my smartphone instead of cash or cards: 28%
• Not very interested in using my smartphone instead of cash or cards: 16%
• Not at all interested in using my smartphone instead of cash or cards: 30% 

While the benefits of "horizontal" wallets and mobile payments solutions (e.g., Google Wallet) are often unknown or ambiguous to consumers, what will drive (and is now driving) mobile payments adoption are "point solutions" that are highly specific. In these scenarios the benefits are concrete and self evident: 

• Coaster Another 'Point Solution' That Will Drive Mobile Payments Adoption 
• Siri-Fandango Tie-in Will Drive More Mobile Movie Ticket Sales 
• Starbucks-Square and How "Point Solutions" Will Drive Mobile Payments
• Point Solutions Like Parking Apps Will Drive Mobile Payments Adoption 

Apple the OEM Now Driving Most Mobile Internet Traffic Globally and in US

Amid all the hand wringing over Apple's "impending decline," it's interesting to note new traffic metrics from StatCounter that show Apple driving more mobile Internet traffic than any of its rivals. This is partly a product of the iPhone 5's success during the holiday quarter. 

The StatCounter data reflect mobile OEM market share based on actual Internet traffic. This stands in marked contrast to most smartphone and tablet market share estimates (from IDC, Gartner, comScore and others) that are based on shipments or consumer surveys. There are a few actual traffic measurements out there (e.g., Chitika) but not many.

That's why StatCounter's data (as a reflection of actual user behavior) are so interesting. Shipments is an inherently flawed metric that may or may not correspond to actual sales to end users. 

The "headline" being used along with this new StatCounter OEM data is that Apple has overtaken Nokia as the company driving the most Web traffic on a global basis. Samsung is third. In the US Apple is much farther ahead of rivals, including Samsung. Nokia by comparison drives just over 3% of mobile Web traffic in the US market.

Top 10 Mobile Vendors (Global)

Top 10 Mobile Vendors (US)

It's interesting to compare the above numbers to "mobile OS" and mobile browser figures from StatCounter. The vendor and OS numbers are essentially identical in Apple's case, as they should be. The browser numbers are not. They suggest that roughly 10% of iOS users in the US market are using browsers other than Safari. 

Top 10 Mobile Operating Systems (US)

Top 10 Mobile Browsers (US)

On a global basis the Android OS has a greater share of traffic in the aggregate than iOS: 37% to Apple's 26%. 

Top 10 Mobile Operating Systems (Global)

It's not clear to me whether StatCounter captures and includes apps in its traffic estimates -- I believe it's just conventional Web traffic. Regardless, traffic is a much better metric to discuss than handset or device shipments in terms of the influence and importance of the competing mobile platforms.

Super Bowl Advertisers' Missed Mobile Opportunity

While a few ads shown during yesterday's Super Bowl were noteworthy most were a bust -- and largely a waste of the nearly $4 million it reportedly cost to buy airtime during the game. Matt McGee at Marketing Land did a nice job of tracking and reporting on social media mentions or "calls to action" on most of the ads (Twitter and hashtags were most common).

Oreo is emerging as one of the big winners, with its fast reaction to the game's 30+ minute power outage.

Yet for all the energy put into associating ads with hashtags and social media, there was an almost total absence of explicit mentions or references to mobile. The only mobile app mention that I was aware of came on a quickly shown credits screen during an ad for the forthcoming Star Trek sequel (upper right image). Exact Target confirmed my own informal sense of that yesterday. 

A large percentage of people watching the game in the US were smartphone owners. As you already know, and as Nielsen and others have confirmed, there's a very high level of "second screen" behavior among smartphone owners. These Super Bowl ads were a huge opportunity to drive app downloads for brands. And other than the Star Trek mention, which raced by in less than a second, nobody talked about apps at all. 

One might have expected real estate company Century 21 to mention its mobile site or app in its several mediocre commercials given that so many people use mobile during their house hunting. But they did not. I could go on with numerous other examples. 

Perhaps the assumption among the agencies that produced these commercials was that people would be using Twitter or Facebook on their smartphones or tablets and the mobile call to action was thus implied. Yet it's more likely that marketers didn't really know what to do with mobile specifically and so were simply silent on the subject. 

How Damaging Would 'Do Not Track' Be to Mobile Advertising?

The digital advertising industry opposes "Do Not Track" (DNT). No surprise there. Indeed, the industry went "ape shit" (to use the vernacular) when Microsoft declared that IE 10 in Windows 8 would be set to DNT by default. Yahoo and the The Digital Advertising Alliance, a trade group comprised of the American Association of Advertising Agencies, the IAB, the DMA, the Association of National Advertisers and the American Advertising Federation, said they would simply "ignore" IE 10's DNT default settings. 

The rationale ostensibly was: "Microsoft is making a decision for the consumer; this isn't the consumer's decision." However another reason was that DNT fundamentally threatens behavioral targeting, profiling and retargeting.

A widely held view in the online advertising industry is that consumers, if they fully understood the benefits of targeting, would willingly accept it in exchange for more relevant ads. There's mixed evidence on this point.

In a Q1 2012 survey of roughly 2,000 US adults the Pew Internet & American Life Project found that 68% of respondents didn't want to be tracked and targeted while 28% were comfortable with it "because it means I see ads and get information about things I'm really interested in." Thus two-thirds of these people were explicitly rejecting the notion of trading privacy for more relevant ads. 

This morning the US Federal Trade Commission released a report on mobile privacy. It makes a boatload of recommendations to developers, OEMs/platform providers and ad networks. Without listing them out in detail, they mostly focus on education and disclosures. However the FTC also recommends that platforms (iOS, Android, Windows, etc.) adopt a global DNT capability that would block third parties from collecting information about them (including location).

Here's what the FTC says about DNT in the report:

Some consumers may not want companies to track their behavior across apps. Indeed, one survey found that 85% of consumers want to have choices about targeted mobile ads. A DNT mechanism for mobile devices could address this concern.

Accordingly, Commission staff continues to call on stakeholders to develop a DNT mechanism that would prevent an entity from developing profiles about mobile users. A DNT setting placed at the platform level could give consumers who are concerned about this practice a way to control the transmission of information to third parties as consumers are using apps on their mobile devices.

The platforms are in a position to better control the distribution of user data for users who have elected not to be tracked by third parties. Offering this setting or control through the platform will allow consumers to make a one-time selection rather than having to make decisions on an app-by-app basis. Apps that wish to offer services to consumers that are supported by behavioral advertising would remain free to engage potential customers in a dialogue to explain the value of behavioral tracking and obtain consent to engage in such tracking.

Apple has already begun to innovate with a DNT setting on its platform. Apple’s iOS6 allows consumers to exercise some control over advertisers’ tracking activities via the “Limit Ad Tracking” setting. Although the setting could be more prominent, this is a promising development, and we encourage Apple and other platforms to continue moving towards an effective DNT setting on mobile devices that meets the criteria we have previously articulated for an effective DNT system: that it be (1) universal, (2) easy to find and use, (3) persistent, (4) effective and enforceable, and (5) limit collection of data, not just its use to serve advertisements. We will continue to have discussions with stakeholders in the mobile marketplace on this important issue.

If such a platform-level DNT capability was available -- and obvious -- to smartphone and tablet users, I suspect that a majority of them would adopt it, as the Pew data above suggest. Perhaps a meaningful minority percentage of users would accept tracking/profiling as the price of more relevant advertising. But I still believe it would be less than 50%.

Of course one of the things that users don't understand is that they'll get ads regardless -- just lower-quality ads. 

Survey: Half of Mobile Showroomers Changed Their Minds about Buying

A new Pew survey (n=1,003 US adults) found that 58% of all mobile phone owners (feature + smartphones) used their handsets as part of in-store shopping during holiday 2012. More specifically, 72% of smartphone owners did so. Google research and InsightExpress have found even higher smartphone numbers: 82% to 90%+.

What kinds of things did these mobile phone owners do in stores? Mostly they called other people, but they also checked prices and product reviews.

Pew says 46% of all mobile users called others to get input on a purchase; 28% looked at product reviews and 27% compared prices on their phones (presumably there was some overlap among the categories). Of those who conducted price comparisons, roughly 48% didn't buy in the store, while 46% did make a purchase:

• 46 percent purchased the product at that particular store
• 30 percent decided to not purchase the product at all
• 12 percent purchased the product online
• 6 percent purchased the product at a different store

Interpreting these data is tricky. That's because we don't really know the mindset of these people when they entered the store. Accordingly we don't know the full impact of the pricing information they discovered. 

We can make the assumption that 64% of these respondents (of the 27%) had some level of existing purchase intent when they went to the store -- because they ultimately did make a purchase. As mentioned, 46% percent bought at the store and 18% bought elsewhere (another store, online).

Another way to interpret these data is to say that 48% of the the people who did in-store mobile price checks decided not to buy there (my headline). It's probably safe to infer that at least 18% of these people were negatively swayed by the price data they saw on their phones -- they bought online or at another store -- although the actual number may be quite a bit higher and include some or all of the 30% who decided not to buy at all. 

We don't have any sense of how this price-check group compares with the larger survey population. Did the larger group buy at higher or lower rates than the price checkers? We don't know.

One can see what one wants in these data. Without a sense of what people were thinking ahead of time we can really only guess at the full impact of in-store mobile phone usage. Yet it's clear from the totality of available information that "showrooming" is a real thing and that retailers need to aggressively address it. 

Related: Spaaza ‘MyPrice’: A New Response to Showrooming

Facebook Delivers Strong Quarter, Mobile Now 23% of Revenues

Facebook delivered the goods this afternoon. The company beat analysts' estimates and reported quarterly revenues of $1.56 billion and $5.09 billion for the year. Advertising revenue for the year was roughly $4.3 billion.

Despite the beat, Facebook shares were down after hours. 

Advertising revenue for Q4 was $1.33 billion, or 84 percent of total revenue. Impressively mobile advertising represented 23% of total ad revenue, which is up from 14% the previous quarter.Even more significantly Facebook said that mobile daily active users exceeded web daily users in Q4 for the first time. CEO Mark Zuckerberg characterized Facebook as "a mobile company" accordingly.

There were 680 million mobile monthly active users in Q4 (compared with just over 1 billion in total). Of those 157 million were mobile only users.

Siri-Fandango Tie-in Will Drive More Mobile Movie Ticket Sales

For users who updated their iOS devices to 6.1 yesterday Fandango is now the commerce partner for movie ticket sales via Siri. If you look up movies using Siri you get the Rotten Tomatoes powered list with an option to buy using Fandango. If you don't have the Fandango app on your device you'll be prompted to install it to complete the transaction. 

Fandango has reported that mobile now accounts for more than 30% of ticket sales. That will undoubtedly increase with Siri and iOS integration.

There are many Siri critics out there but the process of looking up a movie and (now) buying a ticket is pretty compelling. In fact this may well become the primary way that many iOS users buy movie tickets in the future. Once a credit card is on file with Fandango it's going to be faster and easier than conducting the same transaction even on the PC.

In addition, there's Apple Passbook integration post purchase. 

This is yet another "mobile payments" point solution (it's really e-commerce on a mobile device) that will get people comfortable with the idea of using their phones to conduct transactions and pay for things. The convenience and value here are obvious to consumers.  

Yahoo Rebuilding in Mobile: Excerpts from the Q4 Earnings Call

Yesterday Yahoo reported Q4 2012 earnings and full-year results. In several respects company did better than expected in Q4, though display revenue was down 5%. Search revenue was up 14%. Display advertising is the single biggest source of revenue for the company. 

On the earnings call CEO Marissa Mayer discussed the company's strategy. Among other things, Mayer is focused on improving Yahoo's mobile sites, apps and products, branding them consistently and upgrading them in those areas where Yahoo wants to concentrate. Improved Yahoo Mail and Flickr apps were two recent product upgrades for mobile. 

Mayer is very focused on modernizing Yahoo user experiences and generating more usage and engagement accordingly. She believes that will bring more revenue opportunities including in mobile.  

Below are some of her verbatim remarks about mobile from the earnings call transcript:  

Yahoo! is focused on making the world's daily habits inspiring and entertaining . . . Essentially, we need to start a chain reaction . . . To start that chain reaction of growth, we've identified approximately a dozen products to focus on, each a daily digital habit. When taking multiple platforms into consideration for each product, desktops, mobile web, mobile apps and tablets, there's a lot of work to be done . . . 

Focusing more on the pure advertising and monetization standpoint, there's greater opportunity with the big 4: Search, Display, Mobile and Video . . .

In 2012, we saw our Mobile adoption grow to more than 200 million unique monthly users. From a monetization perspective, this is still a very nascent source of revenue for us. With any platform shift, revenue always follows users, and Mobile will be no different . . .

Obviously, we have a large mobile web offering and people tend to use things like Yahoo! Finance, omg! on their mobile browsers on their phone. They also tend to use some of our applications . . .[M]ost of our applications and our mobile web experiences have Yahoo! Search boxes . . .

In terms of having 50% of our engineering workforce on Mobile, I think that this is something that will ultimately happen. I think you start looking many years in the future, it's hard to imagine that there are going to be technology companies where that isn't true. To date, we have started to shift some of our engineering teams to be more focused on Mobile. We need to get to a critical mass on that.

Just a few years ago Yahoo was well ahead of Google in terms of mobile advertising and revenue. Today that's hard to believe. Cleary, however, Mayer "gets it" and is working with her team to address Yahoo's current mobile deficiences. And the 200 million monthly unique users is a very encouraging figure for the company. By constrast Facebook, Yahoo's biggest display rival, has 600 mobile uniques on a global basis. 

Even though Yahoo is building out its mobile assets, I would expect the company to make several mobile acquisitions -- perhaps on the consumer side but also of a mobile ad network or exchange.  In fact, I would be surprised if Yahoo didn't make a meaningful acquisition to bolster its mobile advertising business. 

What You Think You Know about Local-Mobile Advertising May Be Completely Wrong

I keep reading very aggressive projections about local-mobile advertising from BIA and others. Rather than grounded in reality today, these forecasts are built on a set of "optimistic" but simple assumptions about how the market will inevitably develop. For example, one assumption is that national ad dollars from brands and retailers that sell locally will pour into mobile and that their mobile ads will necessarily be geotargeted or localized.

While all forecasts must make assumptions about the future, my belief is that many of the assumptions being made about mobile are crude at best or simply incorrect. I'm a big proponent of location-based marketing and have written extensively about how geotargeted ads and ads with localized creative outperform conventional or "generic" national advertising. There's no question about consumer demand for local information. The question is whether and how advertisers can match or exploit that demand.

There remains a great deal of friction and many challenges to overcome before these big local-mobile forecasts can come true. There are also several "unexpected" things that may change the direction of the marketplace. I go into a few of those things below. In truth the majority of the localized mobile advertising today is happening in search. The platform is mature, the demand and the tools are there. The value is obvious to all involved. That's why Google is making the most money in mobile advertising today. (Facebook is also going to make a lot of money in mobile, some of which will be localized.) By contrast, local-mobile display is in its infancy.

There are two mobile ad networks generating and syndicating a large percentage of the local display inventory that you're likely to encounter: xAd and YP. CityGrid is out there and so are Verve, LSN, Telenav/ThinkNear and a couple of others. Marchex is there too with pay-per-call; however much of that is driving mobile callers to national call centers. Among the major ad networks Millennial, JumpTap and AdMob (Google) all offer local targeting. Often that targeting doesn't extend beyond state or DMA-level precision.

The emerging exchanges and RTB platforms all offer location as part of a laundry list of targeting capabilities. Indeed, location is likely to simply become one of many targeting variables on most networks and exchanges.

Coaster Another 'Point Solution' That Will Drive Mobile Payments Adoption

Some people have described the competition for business owners in the mobile payments segment as a "race to the bottom" in terms of credit card processing fees. Indeed, there are now at least 10 mobile payments or POS vendors targeting small businesses that are undercutting traditional credit card processing fees. The include LevelUp, Groupon, Square, PayPal Here, GoPago and others. 

Just yesterday Coaster introduced an iPad POS app that charges bar owners zero credit card fees -- zero. It makes money off charging consumers a small amount for the "premium service." 

Clearly this is not the company's long-term strategy. It's trying to create more bar "inventory" for consumers in the hope of driving app adoption and expanding beyond San Francisco, it's only current market. However the zero credit-card processing fee is a major incentive for bars to sign up and use the system. 

Coaster is another example of something I've written about multiple times: vertical or point solutions that offer self-evident value to consumers and will drive adoption of mobile payments. My favorite example is mobile parking payments but Coaster is a pretty good example.

By using Coaster smartphone owners can order, pay and tip at bars without giving over their credit cards directly or waiting in line. I've not yet used the app myself. However Coaster offers concrete and obvious value for bar patrons (and bar owners).

These kinds of vertical scenarios or "point solutions" will educate consumers and get them comfortable with mobile payments, paving the way for broader adoption of "horizontal" solutions such as Google Wallet. Exposure to a positive veritcal payments experience will tend to accelerate broader payments adoption. 

By contrast people often don't see the reason or need for "mobile wallets" in the abstract. 

How interested are you in using your mobile phone to pay for things, and replace cash or your credit cards?

Source: Opus Research (August, 2012; n=1,501 US adults)

Yandex Launches Voice-Powered 'Wonder' Search App, Amazon Buys Its Siri

Russian-based search engine Yandex this morning released a new mobile app called "Wonder." It's currently only available for the US market and right now only on iOS. It uses speech recognition from Nuance and social data from Facebook, Instagram, Foursquare and Twitter to provide search results refracted through social networks.

The kinds of queries Wonder envisions are those such as "tech news stories liked by my friends" or "restaurants near me visited by my friends." The app can only be used in landscape mode. It offers a visually polished UI but generally poor search and user experience (it would be better on the iPad). Unless there are some dramatic changes it won't be widely adopted by consumers. 

Indeed, Wonder is no substitute for Google or Yelp or Facebook's new local and general search capabilities. What's interesting and significant is that it does illustrate broader adoption of social data as a filter and mechanism to personalize search results. The app is also consistent with the embrace of voice as a primary UI and capability.

Wonder offers a hint of a personality there but it's not a full blown "assistant" like Siri or Speaktoit. However Amazon's acquisition of text-to-speech specialist Ivona is a move to bring a Siri-like assistant feature to Amazon's Kindle tablet devices. (Amazon previously purchased speech provider Yap.)

Amazon already had text-to-speech for Kindle but Ivona offers a smoother, human-sounding voice capability that can be deployed for a range of purposes and use cases. And like Wonder it reflects the degree to which speech has become a critical "must-have" function on mobile devices.

By itself, however, speech is not enough. Increasingly there must also be a "personality" (assistant) to go along with the raw speech-processing capability. This is the impact of Siri on the broader marketplace. 

My colleague Dan Miller brings a different perspective to the Ivona acquisition. He sees it in the larger context of speech-industry consolidation.

Update: TechCrunch says that Facebook has blocked Wonder's access to its user data while the companies negotiate about access. 

Facebook Beats Google Maps to Become Top App of 2012

Yesterday comScore reported that Facebook had the number one US mobile app of 2012. It beat out perennial leader Google Maps for the top spot. As an aside, Google Maps now has more usage in mobile than on the PC according to comScore.

There's nothing necessarily surprising or remarkable in Facebook's rise to the top position. It has long been one of the most popular apps and the app with the greatest monthly engagement (time spent). 

What may be most significant here is the way in which Facebook's victory over Google operates as a kind of "metaphor" for the differences between PC and mobile usage. Search is not the center of the mobile experience as it is on the PC -- although local search, represented by Google Maps, is a critical and hugely popular function. Of course Facebook Nearby is a local search tool and has significant potential if Facebook invests further and continues to develop it.

Notwithstanding Facebook's win, Google still dominates the top 10 in comScore's chart above. 

As widely discussed Facebook's challenge is to fully "monetize" all this mobile traffic/engagement without negatively impacting or "corrupting" the user experience. Search will help the company do that as would a mobile ad network for third party publisher sites that used Facebook user data. (There are some privacy issues and potential challenges there and it's on hold.) 

Facebook has "display" ad units for mobile that are helping to quickly ramp its mobile revenues. The company allows mobile-only targeting as well as combined or cross-platform targeting for PC and mobile, thereby simplifying the mobile ad buy for marketers. 

The War on Mobile Display Advertising

Many analysts simply assume that mobile advertising will follow the well-worn path of PC advertising, only perhaps in a more accelerated fashion. Thus you get mobile advertising forecasts that show a relatively smooth progression of ad budgets into mobile, with search and display being the two main ad categories (calls fall into both). There's a longer post to be written about these assumptions and why they may not play out as expected -- especially with respect to location-based ads on mobile devices. 

Overall there are relatively few mobile search impressions available outside of Google. So most of the ad inventory being sold today is some form of mobie display. However there's also something a "war on mobile display." That's really about the business model: CPM/CPC vs. CPA. 

It's largely being waged by firms whose business models that are not CPM or CPC based. Companies that use a pay-per-[app]-install or other CPA models have attacked CPM or CPC-based mobile display with the idea of the "fat finger problem."

The argument is that a huge volume of mobile display clicks are simply mistaken or perhaps even fraudulent in some cases. 

Source: Trademob (9/12); based on analysis of 6 million mobile ad clicks 

There's also the idea, often discussed, that consumers don't like mobile display advertising and consider it to be just a notch above spam.  

More recently Marchex, which has transformed itself into a call-based advertising platform and network, asserts that the overwhelming majority of mobile display impressions and clicks are nearly worthless. In a study, released in December, involving six major display ad networks Marchex found that it took almost half a million ads to generate one "quality" phone call: 

We examined a set of mobile display ad campaigns across the six largest mobile display networks to investigate the real, measurable performance of these ads. The call to action on all advertisements was a phone call. Performance was based on the number of high-quality calls driven by the media investment. Marchex defines high-quality calls as those that do not include misdials and spam; existing customers looking for support services; and unproductive calls (e.g. too short).

Our advertisers included national, branded businesses in Education, Insurance, Home Services and Entertainment. We conducted the study on major mobile ad networks and employed media tactics ranging from highly targeted to broad buys. Ad spend was distributed across networks and advertisers to ensure statistically valid conversion results on the back end.

Marchex said that in its test it took 494K impressions to generate 2,481 clicks, which in turn generated only one "quality" phone call (as defined above). That single call effectively cost $302 according to the company, because of all the wasted impressions. 

Source: Marchex (2012) 

I exposed these findings to one mobile ad network, which disputed them and said on its network the ratio of impressions to qualified calls was much smaller: 15:1 rather than 494K:1.

The Marchex argument is that it's simply cheaper to buy calls directly than to buy mobile display impressions. The company's study needs to be replicated before we can conclude that Marchex's findings are valid across networks. There's also the argument about awareness vs. direct response -- most national advertisers currently are just seeking broad awareness and scale.

Regardless Marchex's findings and the other data above collectively fuel pervasive doubts about the value of mobile display advertising. 

Failure to Properly Value Mobile Clicks Leads to Google CPC Decline

Yesterday afternoon Google announced Q4 2012 earnings. In almost every respect it was a spectacular holiday quarter for the company. Consolidated revenues (which include Motorola) were $14.42 billion, an increase of 36% over 2011.

Google made $50.2 billion for the full year, crossing that revenue threshold for the first time. That compares with $37.9 billion the company made in 2011. 

However the average price that avertisers paid Google per click (CPCs) decreased 6 percent vs. Q4 2011. That was a smaller decline than in the past, which could be seen as a positive.

The CPC YoY drop is because more clicks are now coming from mobile devices and advertisers are paying less for those clicks. According to a report released yesterday from marketing firm The Search Agency, CPC prices for paid-search ads appearing on smartphones are well below comparable ads appearing on tablets and PCs (see graphic below).

In Q4 mobile search clicks were worth less than 50% of what marketers paid for PC search clicks according to the data. Why are marketers paying much less for mobile clicks when mobile consumers are often much better prospects and customers than PC users? 

There's less competition currently for mobile clicks than there is for PC search clicks. Because Google's ad system is an auction that necessarily affects pricing. But more than that many advertisers are unwilling to pay more for mobile clicks because they don't trust them and/or can't calculate a mobile ROI.  

Source: The Search Agency 

Many search marketers, especially brands and large advertisers, rely on automated systems that calculate paid-search ROI based on some pre-defined conversion event. Those conversions can be a variety of things but frequently they're e-commerce transactions or, in some cases, phone calls. 

PC ROI calculations are generally flawed because they usually don't or can't capture online-influenced offline buying. Accordingly the system and the marketer only see online events but not the far larger collection of offline purchases and activities (e.g., store visits) that are driven by online and paid search advertising. The problem is even more pronouced for mobile, however. 

Because there are relatively few mobile commerce transactions -- though there are plenty of phone calls from mobile devices -- marketers simply don't see the "latent" conversions that happen in the real world or later on another screen, such as in the case where someone does research on a mobile device and later buys on a PC or tablet. 

As a result of this varied, multi-screen consumer behavior marketers aren't able to correctly perceive or attribute ROI and accordingly value mobile clicks. While this represents a "buying opportunity" for advertisers that know the true value of mobile the majority of advertisers are undervaluing mobile clicks. And that's reflected in the average CPC declines that Google has been reporting. 

Nokia Shows Momentum but Needs Android More than Ever

Yesterday Nokia announced "better than expected" Lumia sales. Overall the company said (in these preliminary results) that it sold just over 86 million mobile devices. Among them were 16 million smartphones, including 4.4 million Lumia handsets. The remainder were legacy Symbian devices and new lower-end Asha devices. 

Asha phones are somewhere between a feature phone and a true smartphone. They're designed to be low cost and intended for emerging markets such as India. They would see little or no success in developed markets like North America or Europe. Indeed, they're not directed toward those markets. 

In Q2 and Q3 2012 Nokia sold a combined total of 6.9 million Lumia handsets. The troubled-company's stock was up yesterday and this morning, having seemingly beaten a very grim Q4 forecast. And some financial analysts are hailing the results as the beginning of Nokia's long-hoped-for turnaround. 

Any celebrations are premature however. According to Kantar Worldpanel Comtech research demand for Windows Phones is uneven and limited. 

In the US Windows Phones continue to lose share and have failed to capture consumer interest. The story is somewhat different in Europe, however, in part because of the legacy of Nokia's strong brand. In the five major EU countries Windows saw aggregate growth of 1.7%. 

The markets where Windows Phone gains have been meaningful are Italy, Spain and the UK, according to the Kantar data. In Italy, for example, Windows Phones gained almost 8 points and now have an 11.7 percent share of the smartphone market.

While there may continue to be modest growth for Nokia with Windows Phones, it's fairly clear that they are unlikey to power a full recovery. What Nokia really needs to ignite growth is to add Android devices to its lineup.

Remarks earlier this week by Nokia CEO Stephen Elop suggested that the company could be open to using Android: 

In the current ecosystem wars we are using Windows Phone as our weapon. But we are always thinking about what's coming next, what will be the role of HTML 5, Android... HTML5 could make the platform itself -- being Android, Windows Phone or any other -- irrelevant in the future, but it's still too soon [to tell]. Today we are committed and satisfied with Microsoft, but anything is possible. 

Contractual agreements with Microsoft probably would make Android "diversification" unlikely in the near term unless Windows Phones sales fell below a certain threshold. Given the modest momentum around Microsoft's OS Nokia will probably stick with Windows. 

Yet if the company were to offer both Android and Windows devices it would see its fortunes improve more rapidly -- much more rapidly. 

Survey: A Majority Use Smartphone 'Personal Assistants' Daily

Nuance Communications, which provides speech recognition services for enterprises (and increasingly consumers, including the Swype keyboard) released a “mobile assistant” survey in connection with CES. The survey of roughly 1,000 US adults found that 75% of respondents had their mobile devices (presumably smartphones) “always on them” or “at hand.”

Among the 90% of survey respondents that reported they had some sort of assistant capability on their phones (not defined in the survey results), a majority (60%) said they used that assistant daily. The following were the most common use cases:

• Driving directions: 84%
• Weather: 72%
• Restaurant lookups/recommendations: 61%

This survey implies satisfaction is relatively high with these assistants. More than 80% of respondents indicated if they could they’d want the “same mobile personal assistant” with them at all times, across all devices and use cases: phones, tablets, PCs, cars, TVs, apps and so on. Accordingly the survey was partly intended to support Nuances "cross-device persona project" called Wintermute, which the company is showcasing at CES.

Using your unique voice print, the system remembers who you are and "follows you from one device to the next, remembering what you like, what you’ve been doing, and where you’ve been." This is in a way a voice-version of what Google is trying to do in asking people to sign in to the Chrome browser so that it can monitor them across devices. In Google's case it's for the purpose of personalizing search results, serving better ads and collecting data on user behavior. Nuance seems to be focused more directly on improving the user experience. 

Interestingly the survey also found that respondents had emotional connections (to varying degrees) to their assistants:

More than half of all respondents cited a personal connection with their mobile personal assistant. Women actually name their mobile personal assistant more than men, with 71% compared to a close 66% of men . . . 73% of men feel comfortable asking their mobile personal assistant for directions but 79% of women ask for help more often.

The materials I received don’t provide detail on whether the assistants in question are Nuance products (i.e., DragonGo) or Apple’s Siri or Google Voice Search/Now. It's not clear how specifically the "personal assistant" idea was defined in the survey instrument. 

The concept of the personal virtual assistant has been around for quite a long time, using a range of technologies and approaches. Yet crystallized in the public mind with the advent of Siri. Nuance, which provides speech recognition for Siri, recently introduced Nina -- a white label Siri-like assistant for enterprise customer service applications. 

My colleague Dan Miller recently issued an expansive new report on personal virtual assistants and their adoption in the enterprise and on consumer devices.

Update: Nuance has reportedly acquired VirtuOZ, which is a provider of virtual-assistant enterprise customer care solutions with a PC focus. The VirtuOZ online assistant will be enhanced and improved by Nuance's speech recognition capabilities and Nuance's Nina offering will help expand its reach into online customer care. 

Tablets Predicted to Outship Laptops This Year

Mobile handsets already outnumber PCs across the globe. However, in terms of internet access (including apps) PCs could fall into third place after smartphones and tablets. That would represent a radical change from today, where PCs still represent the most common way that consumers in most developed countries access the internet. 

Hardware monitor NPD Group is predicting that this year tablet shipments globablly will exceed notebooks (laptops). Here's the projection:

NPD also takes a stab at forecasting penetration of tablets by screen size. However this is somewhat less important than the fact of tablet adoption. 

Rather than the cornucopia of screens displayed in the graphic above, we're likely to see standardization around three primary tablet screen sizes:

• 5-6 inches (including the so-called "phablets" phone + tablet hybrids)
• 7 inches (Apple iPad Mini, Nexus 7)
• 9-10 inches (iPad, Nexus 10)  

The general publisher response to the rise of tablets is probably going to be responsive web design, which has limitations. However tablets will further reinforce app usage among consumers, though surveys and behavioral studies show more mobile web usage on tablets vs. smartphones. 

Tablet adoption also ends the reign of Microsoft as the most important company in the PC universe. Windows 8 and Surface adoption to date has been quite tepid. And the inevitable availability of Office for tablets removes yet another incentive to buy a PC.  

The "big takeaway" here is the simple fact of more tablets than new PCs. PCs will remain prominent in the workplace and among business users. However for consumers they will see less and less "face time." Tablets and smartphones will become primary internet access points in the home, with PCs being used for more limited and specific things.