Mobile Advertising – Is it REALLY all about apps?

I recently had the honour of being asked to judge the 2010 AIMIA Awards in both Best Mobile Advertising and Best Mobile Products categories.

This was a fascinating exercise on a couple of levels. Perhaps the first thing to strike me was the vast disparity between the number of entries in the mobile advertising category vs mobile product – six versus 21. Mobile products and services are starting to find their place in the world, but obviously mobile advertising has a lot of catching up to do.

Where’s the web?

The second thing that was interesting was that in the Mobile Advertising category there were a couple of iPhone Apps, and integrated Bluetooth campaign, some content offerings, some multi-platform implementations – but there wasn’t a mobile web campaign to be seen.

Where's the web?

Given that according to AIMIA – 20% of the Australian population use the mobile web every day it seems odd that more effort isn’t going into creating innovative advertising campaigns for this channel.

It seems that every proverbial marketer and their dog wants an app – but mobile web is being shunned. My estimates are that less than 0.8% of the total digital display ad spend will make it into the mobile channel this year.

And it doesn’t look like the Australian community is all alone in the world either. An article published recently in Advertising Age in the US documents a similar trend in the world’s largest advertising market.

In the US, it seems, a vast proportion of “mobile” ad dollars are going into the creation of smartphone (read iPhone) apps.

The richer get richer?

The argument in the US (and I’ve heard it used here too) is that apps are a better way of fostering an engagement between a consumer and a brand because of the rich interactivity, the tactile nature of the device and the indisputable “buzz” that still surrounds high end smartphones.

The counter argument is that apps are not scaleable, they have to be redeveloped for each new platform and the numbers just aren’t there. A few thousand downloads gets you to the top of your category in the AU App Store, but these are not usage figures that are going to make many marketers at the top end of town fall out of their chairs.

Storm in an iCup?

The Ad Age article I mentioned earlier suggests that the hype surrounding apps will die down and that the mobile web will become the predominant mobile interaction between consumers and content/services/advertising. I don’t disagree with this assertion, however there are a couple of points media owners and marketers need to get their heads around before we start seeing some serious traction (ie spend) in this space.

Mobile advertising doesn’t (or shouldn’t) exist

At the end of the day, marketers don’t give a damn about mobile advertising. They don’t give a damn about advertising full stop. What they are trying to do is get a brand message to a consumer in an engaging way. That’s why the digital media industry (all of it) needs to stop thinking about “Mobile Advertising”.

Mobile devices are just another means for brands to access consumers. What’s interesting about these mobile devices is that they can be engaging in a way that previous media has never been able to be – they are location aware, motion sensitive, personalisable, and always with us.

They are also, primarily, COMMUNICATION devices.

Smaller, slower and more expensive ain’t ever going to work

One of the big issues that I’ve observed in the mobile industry (and I’ve been in this game since 2001), is that developers, creatives, brands and publishers seem to view mobile as a smaller, portable version of the PC and develop content and creative accordingly. So what we end up with is smaller, slower, more expensive versions of what we started with. And surprisingly consumers aren’t thrilled about this.

Don’t start with your current site, campaign, creative – start with your consumer.

It’s the measurement stupid

I’ve said it before and I’ll say it again. Advertising in the mobile space will not be taken seriously until there are some standards. What is being measured? How it is being measured? And how is this related to the fundamental missing piece in much advertising (be it m-sites, banners, apps, SMS campaigns – you name it!). Return on Investment.

We can see a marketer putting $1 in – but where do we show the marketer getting $1.xx out.

Categories: digital advertising

Online Ads – Are the Yardsticks Broken?

October 21, 2009 2 comments

Over the past two months I’ve been doing the rounds, buying coffees for a large number of luminaries in the Australian digital media industry.

The purpose of these discussion has been two-fold. Firstly to fuel my spiralling caffeine addiction and secondly to start developing a map of the digital industry and the issues and opportunities facing it.

A couple of themes have surfaced with alarming frequency – in fact in almost every meeting I’ve had it’s been mentioned that value and success are getting harder to quantify and to communicate. While there are established pricing models and success metrics, some are questioning whether these are still as appropriate as they once were. Others are questioning whether they’re even valid.

Two articles I’ve come across in the last few days have served to shine a spotlight on these issues.

The first “Let’s Kill The CPM” by the illustrious Shelby Bonnie (a founder of CNet and former Chairman of the IAB in the US) argues that the CPM – cost per thousand impressions, the basic sales model of virtually digital display advertising – should be scrapped.

Are online advertising metrics really broken?

Are online advertising metrics really broken?

The second, “What to Measure? Only 16% of the Web Is Clicking Display Ads” from Advertising Age, reviews a study from ComScore and media buying giant Starcom. The report showed that “the number of people online who click display ads has dropped 50% in less than two years, and only 8% of internet users account for 85% of all clicks”.

Given that all digital media buys are based on CPM and the success of all of each of these buys is measured on click-through rate (CTR), these seem to amount to a call for a fairly radical rework of digital advertising worldwide.

Why now?

It seems that the GFC has had a fairly profound impact on the advertising industry in general – and the digital advertising industry in particular.

Online display advertising is still growing in Australia – 19% for the last financial year according to Frost & Sullivan with similar rates of growth predicted over the next few years. However some Australian internet execs are privately suggesting that the GFC has resulted in – or accelerated a tectonic shift in the way “traditional” online media is bought and sold.

At first glance this shift seems to be a product of basic economics – advertisers reduce budget, publishers compete harder for this budget, and prices come down. High school economics, right?

This paradigm would also suggest that when things start picking up, the pendulum will swing back in the publishers’ favour and prices will rise. In this case it doesn’t necessarily seem to be happening – prices seem to be coming back, but not necessarily as far or as fast.

There could be any number of things behind this shift. But in my opinion increased fragmentation of the online has worked in the favour of the advertising buy side. There are simply more sellers willing to compete harder for digital advertising kitty that’s not growing fast enough to sustain them all.

What next?

While Shelby Bonnie suggests writing off the CPM model, that’s easier said than done. The entire digital media buying, selling and fulfilment infrastructures are based on the concept of CPM. And moving to cost per click (CPC) or cost per acquisition (CPA) models are going to cause even bigger problems for display advertising. If people aren’t clicking on display ads there is no CPC, and by extension how can they be acquired as customers from ads they haven’t clicked on?

And as for ComScore/Starcom – while they are pretty bleak in their assessment of click-through as a measure of success, they are not writing off digital display. Their contention is that online display coupled with search advertising can be a potent combination – that is, display advertising drives search behaviour.

So to my mind it seems that online display – while theoretically accountable for delivering customers – is and always has been a square peg in a round hole. Marketers perhaps need to accept that engaging consumers with their brand is a different process from driving purchase activity.

Neither is more important than the other, but you can’t necessarily achieve both objectives from the same piece of creative.

App Stores and Garden Walls

September 15, 2009 Leave a comment

Walled gardens are a funny old thing.

They’re fairly roundly disparaged by most observers of the Internet. After all, content consumers don’t want to be told what to consumer they want to be free to choose. Right?

History lesson

But since Quantum Link changed its name to America Online (AOL) in October 1989, walled gardens – and their wall-less equivalent, the portals – have had a big impact on how digital content is consumed.

I’m not calling “lights out” on Google and the use of search engines and social media to access content.

I do, however think its worth remembering that historically the companies who controlled the “pipe” through which content is accessed had a big first mover advantage when it came to monetizing this content.

The issue is not that “pipe” companies haven’t been able to capitalize on this advantage – they just haven’t been able to hold on to it.

I’m not going to turn this into a history lesson – we all know what happened to AOL. My point is that the model has been replicated in the Australian market a number of times since.

Life in the old walls yet?

Life in the old walls yet?

Mobile value added service

When Hutchison Telecommunications – launched 3 Mobile in 2003, Australians got their first real taste of commercial 3G mobile internet. And the content model was a walled garden.

Telstra had at least three failed attempts to crack the mobile content market, Telstra MobileLoop, Telstra i-mode and Telstra Active, were all services that came and went before the launch of NextG in October 2006.

And while some content remains free to browse on Telstra NextG – content sales have become an increasingly important part of the NextG revenue proposition.

Mobile Hybrid Models

One thing that all walled gardens seem to have had in common is an internal tension between content transaction revenue (user pays) and advertising revenue (advertiser pays).

The advertising folk want unfettered access ot consumer for all content so that they can monetize inventory. The transactional folks want nothing shown to anyone unless they have coughed up their hard-earned.

In the mobile space this is exacerbated by the fact that transactional and subscription revenues still dwarf advertising revenue in virtually every market I can think of.

The App Store effect

One of the most recent and widly successful walled garden models I’ve seen is the iTunes and App Store.

I think many app publishers (and music publishers for that matter) would agree that the service Apple has set up isn’t as publisher friendly as it could be.

Apple staff scrutinize which apps go where, and when they are made available. Apps can be removed at any time without much in the way of recourse. And trying to make your app easy to find isn’t the simplest task in the world given the clunky search service that is App Store on the iPhone.

But they still managed to hit 1.5billion downloads after a single year in operation.

So another walled garden which seems to be making inroads – despite the fact that this model has been written off by all and sundry in the last 10 years.

A new approach?

So what’s a poor telco to do? Since day one, the phrase that has struck fear into the heart of every carrier is “dumb pipe”. They are terrified of watching the high margin content and advertising businesses slip through their fingers and being left with the low margin, commodity business of allowing access to digital content.

But they do have a couple of weapons in their arsenal. I believe the smart ones will use these to ensure they can keep the “dumb pipe” scenario at bay.

1. Billing

Telcos have a huge potential advantage in the content sales business. Not necessarily as a retailer, but as a billing partner. Allowing the long tail of specialist content retailers (both online and mobile) to use a simple, trusted, seamless process (ie your phone bill) to pay for your content is an opportunity on both sides.

2. Personalization

When you use your mobile or wired computing device to access the internet, your service provider knows you are doing it. They should know enough about you to make your content and advertising experience a better one.

Working with their own and other advertising networks, carriers should be able to ensure that the advertising you receive is of the highest value to you, the consumer. In theory they should be able to ensure you see ads that have you saying to yourself: “Now that’ just what I was looking for”.

Paid content – everything old is new again!

September 4, 2009 Leave a comment

Apple can do it.

Rupert wants to do it.

The world-wide music and movie industries are desperately searching for a model that will work for everyone.

Even the SMH’s Richard Glover seems to think it’s a good idea.

User pays content is back in the news. In the crazy days when digital advertising was growing at 50%, 60%, 100% per annum inventory was king. Get the content up there – get the eye-balls viewing it and damn the torpedos.

In our post-GFC world some of the shine seems to have come off this approach. Sure, people are still making money from advertising and revenues are still growing. But the argument for “pay to play” content is that we pay for everything else we consume – someone has to be paid to create it after all – and if the producers can’t make the right margin, the quality will fall.

The vanguard of the fight for user pays content are the music and movie industries. At least they have the benefit of having had a clear user pays model for the content they produce from day one.

Money for nothing?

Money for nothing?

CDs, DVDs and trips to the multiplex were never free.

The newspaper and magazine industries however, bought into ad supported model in a big way. The mantra between 1997 and 2001 seemed to be “build it and they will come” – and while they are here we can at least throw some ads at them.

The issue is that many of the costs of producing quality content (music, journalism, TV, art – whatever) are not subject the one of the central tenets of the web-based economy: that it reduces costs of creation and distribution, and therefore, the cost of the content to the consumer can be reduced to near zero – and advertising will provide the revenue.

But advertising revenue isn’t growing at the stunning rates it has been in previous years. For the 2008 calendar year US internet advertising grew only 10.6% (to US$23.4bn) according the the US IAB. Australia fared marginally better in FY08/09, growing 18.5% to AU$1.8bn, according to the local chapter of the IAB.

Compare this to the growth of 61.5% for calendar 2006 and 34.5% for calendar 2007.

So what does this all add up to?

In my view the time is ripe for the digital media industry to move to the next level. Advertising is not going away – but it is not the “golden hammer” that will allow content to be free. New commercial models are needed – models in which some hard decisions are made about content quality, access and pricing.

I believe that consumers will pay for content – as long three key conditions are met:

1. Simple, low cost subscription pricing models
2. High quality, differentiated content – personalized, localized and in real time
3. Some means (technological, legal or moral) of discouraging consumers from accessing this content without paying something for it.

And when these are in place I believe we see some enormous leaps forward in the ways in which content is created and consumed in the digital world.

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