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Why Mobile Display Advertising Doesn’t Work

17 Sep

It seems that the fate of the major advertising-driven consumer Internet companies will be determined by the success of mobile advertising. As people spend more time on smartphones and less time on PC’s, a healthy mobile advertising market is needed to monetize the great free applications and Internet services that we all enjoy. For FaceBook, in particular, mobile advertising metrics seem to be closely linked to enterprise valuation.

But here is the big problem: mobile display advertising doesn’t work. This is why mobile ads sell for as little as 20% of their web display peers and at a small fraction of the per-impression cost of more traditional media.

How can such a promising new media business model be so fundamentally broken? Here is why mobile display advertising simply doesn’t work:

  • Lack of Cookie Support = Minimal Targeting: In the online display world, browser-based cookies enable powerful tools for segmenting users based on interests or previous interactions. For example, when you abandon an online shopping cart, advertiser’s can track you with ads designed to lure you back into their online store. These cookie-based behavioral and contextual capabilities don’t exist today on mobile platforms. In fact, if your user is on an iphone, they are probably using Safari which turns off cookies by default. This means that ad targeting is incredibly difficult and only marginally relevant.
  • Ad Click  = User Experience Disruption: Clicking on an application or browser-based mobile advertisement is an unpredictable experience. It’s not clear where the ad will take you or how a user will return to where they want to be. The only thing that is predictable is that an ad click will disrupt whatever task the user was previously trying to accomplish. This is particularly important because mobile device usage tends to be highly task oriented: users typically engage with a browser or application with an end in mind.
  • Tiny Ads = Useless Brand Experience: Tiny standard 1/3 inch by 2 inch mobile ads are too small to engage prospects with a compelling message. As Gilad De Vries wrote in Forbes (describing online display), “you can add all the bells and whistles you want to banner ads, but they’ll never truly create the kind of emotional experience that gets consumers excited about your brand.” This is infinitely more true for mobile display ads.
  • Bad Measurement = Underperformance: If you’ve ever tried to navigate around a 1/3 inch ad on a touch display, it’s very easy to accidentally click. In fact, research has shown that 40% of online clicks are either accidental or fraud. In a domain where advertisers relentlessly measure performance and return-on-investment, the math of mobile display doesn’t work.
  • Application Fragmentation = Limited Ad Interaction: As a marketer, my hope is that an ad click will result in a rewarding experience or a useful transaction. In a mobile world of purpose-built applications, it’s very difficult to deliver ads in context that drives any sort of meaningful interaction. When a user does interact, the many mobile platform, application, and screen limitations make it very difficult to create a positive experience for a mobile prospect.

So where do we go from here? Some big vendors will figure out new ways to monetize mobile that don’t rely on display. A great example of this is promoted tweets that appear on mobile Twitter clients. But for the ecosystem to thrive, there needs to be industry-standard advertising mechanisms that deliver real results. Otherwise, there will be many fewer ad-supported free products and services for users to choose from.

Mary Meeker: The Mobile Monetization Challenge

30 May

One of the biggest challenges for marketers is that eyes are drifting to mobile devices from traditional content and media channels faster than new marketing techniques are able to impress consumers of mobile applications, content, and media.

Mary Meeker – the famous Internet investment banker turned Kleiner Perkins VC partner – discussed the other end of this equation: “the mismatch between the growth in mobile usage and mobile monetization.”

According to Meeker, there are 1.1 billion mobile 3G subscribers around the world. Mobile data is one of the fastest technology adoption curves in history with 37% y/y growth. Still, there is just 18% worldwide penetration. This compares to 2.3 Billion global internet subscribers – a number which grew just 8% over the last year. And while there are 6.1 billion mobile phone subscriptions around the world, only 953 million of those today are smartphones – again showing lots of potential for growth.

As would be expected, mobile Internet traffic is growing at an amazingly fast pace: increasing 100% year over year to 10% of Internet traffic as of May of 2012.

When it comes to mobile commerce, mobile is just 8% of ecommerce today. The story for mobile advertising is even more dramatic: while 10% of media is now consumed on mobile devices, just 1% of advertising targets mobile platforms. In comparison, print advertising represents 25% of spending but just 7% of media time spent.

The Mobile Advertising Gap

Mary points out that this is an increasingly pressing issue as the media landscape rapidly reshapes itself. In India, for example, total mobile Internet usage has already surpassed desktop internet usage. For marketers, this is a problem: the industry has been much more effective at driving marketing impact through desktop Internet consumption than through mobile channels.

Part of the issue is the speed of the change: it’s hard for marketers to test and ramp new marketing techniques as fast as new platforms grow. Today, AllThingsD summarized Meeker’s argument that “Effective desktop CPMs are five times the price of mobile Internet CPMs in the U.S.: $3.50 versus $0.75. And companies like Pandora, Tencent and Zynga currently report that average revenue per user is as much as five times lower on mobile. Google’s and Facebook’s financials show mobile is constraining revenue growth.”

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