Apple Leaves Gaping Price Hole Between iPad Mini And Rival Tablets

From my Forbes.com blog The New Persuaders:

Let’s just get it over with at the outset and concede that Apple’s just-introduced iPad mini will be a holiday hit, selling millions of units to people who know they can’t go wrong giving a gift of a new Apple product.

And at a starting price of $329, that gift-giving isn’t a budget buster for many people. Let’s face it: Apple has yet another great-selling product on its hands, this time in the palm of ours.

And yet, I wonder if Apple just punted a chance to grind its rivals in smaller tablets, chiefly Google’s Nexus 7 and Amazon.com’s Kindle Fire, into the dust. The Nexus 7 starts at $199, the Kindle Fire even lower at $159. But Google also may release a new Nexus 7 model next week at an Android event, potentially dropping the price of the current low-end model to just $99.

OK, so let’s get something else over with. By all early reports so far, the iPad mini is better than either of those two existing devices. It feels better, it looks better, it’s lighter, it’s thinner, it even still has a noticeably larger screen and especially viewing area than the Nexus 7 or Kindle Fire. Not least, it has Apple’s App Store, with apps that fit the tablet form factor rather than plastering smartphone apps onto a bigger screen.

So yeah, millions of people will love it.

But millions of other people will be hearing a lot about the Nexus 7 and the Kindle Fire, too, and Google and Amazon.com have a huge incentive to advertise the heck out of them. Honestly, if you don’t do a side-by-side comparison, which is tough to do, you may pick up a Nexus 7 or a Kindle Fire and say, “Hey, this looks pretty good. Why do I need to spend an extra $130, or even more?”

That’s why it’s surprising that Apple, whose CEO Tim Cook has talked about not leaving a significant price umbrella for Apple products, did just that with the iPad mini.

Read the complete post at The New Persuaders.

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Google CEO Larry Page Speaks! Big Reveal: $8 Billion In Mobile Revenues

From my Forbes.com blog The New Persuaders:

Investors have had a chance to digest Google’s third-quarter earnings longer than they expected, but they still have indigestion over the disappointing results. Can CEO Larry Page (yes, he will speak!) and his executives provide a Maalox moment on their earnings analyst call?

We’ll find out shortly, starting at 1:30 p.m. Pacific. You can watch it here as well. Keep refreshing for updates through about 2:30 p.m.

Update: It looks like Motorola was the chief culprit. Yes, less lucrative mobile ads seem to be a factor, but not one Google seems overly concerned about–it’s at least the third time I’ve heard executives say that mobile eventually could be better than desktop ads. Indeed, I was struck by the mention that one reason for the rise in costs that led to lower profits was sales of the probably near-zero-margin Nexus 7 tablet–which was striking for a single, non-advertising product. For better or worse, Google’s betting big on mobile, from ads to devices, and expects whatever shakes out to be positive. Investors clearly aren’t so sure.

And we’re underway. Page still has a strange froggy voice–seriously, really strange like he inhaled too much helium, so I can understand why he hasn’t spoken much in public. Anyway, he’s keeping his remarks short. You can read the prepared remarks on Google+. We had a strong quarter, he says, and I’m really happy with our business. Revenue was up 45% from a year ago.

Today, we leave in a world of abundance–abundant information and abundant computing. Many of us feel naked without our smartphone. Google is super-well-placed to take advantage of these opportunities. We’re seeing tremendous innovation in mobile advertising. Eventually, he adds, it will work even better than desktop ads.

We took a big bet on Android back in 2005. Most people thought we were nuts. Today, there are over half a billion Android devices, with 1.3 million more being activated every day. He suggests everyone go out and buy a Nexus 7 tablet.

Our run rate a year ago for mobile advertising was $2.5 billion. Along with apps and Google Play, it’s now over $8 billion. That’s quite a business, he says mildly–though based on the new way it’s calculated (see below), it may not be as amazing as it seems.

We had spread ourselves too thin. We sunsetted 17 more products last month. It’s more important than ever we converge our services.

We want to make advertising super-simple for our customers. Today, separate campaigns for desktop and mobile makes it more difficult and mobile opportunities often get missed. Advertisers should be free to think about their audience while we do the hard work optimizing across channels.

That’s the gist of his first widely public remarks (he spoke the other day at Google’s Zeitgeist event to the media elite).

Now CFO Patrick Pichette goes into some detail….

Read the complete post at The New Persuaders.

Advertising Experts: Ignore Google’s Earnings, It’s Doing Just Fine

From my Forbes.com blog The New Persuaders:

After reporting disappointing third-quarter earnings, and giving investors a few extra hours to sell their shares to boot, Google saw its shares hammered before trading was halted. But while Motorola Mobility, which Google acquired for $12.5 billion in May, clearly is a big drag on the company, ad folks say its core business is just fine.

Bryan Wiener, CEO of the digital marketing agency 360i, a specialist in search advertising in particular, says Google’s core business still appears healthy. The only hitch, he says, is that mobile ad prices per click are still 30% to 50% lower than desktop clicks, but he says that gap is narrowing as mobile cost-per-click continues to rise.

The main issue is not so much that advertisers view mobile ads as less effective. There are actually two other issues.

First, there’s still less competition for mobile ad space. And since Google ads are sold by auction, less competition means lower prices.

Why is competition less? That brings up the second issue: It’s not yet clear precisely what impact mobile ads have. They don’t work exactly the same as desktop ads, where people customarily conduct a search, click on an ad, and then a certain percentage buy the product. That’s easy to track.

On their mobile phones, however, people are more often searching for a store, rather than looking to complete a transaction online. They may well end up buying in that store–some companies are starting to provide ways to track that connection, and marketers anecdotally know it’s happening–but separate databases for online and store activity still means it’s tough to close the measurement loop.

Wiener thinks that will get solved eventually. Even in the short term, mobile search ads that are still Google’s bread and butter are better positioned to show their value than mobile display ads, which may appear in hard-to-track apps and still aren’t standardized enough for marketers to spend big bucks to reach broad scale. That means Google for now is likely to fare better in consumers’ rush to mobile than, say, Facebook and Yahoo. “Everybody is still bullish on mobile search,” says Wiener. “But it’s still very early in the game.”

Looking ahead to the fourth quarter and beyond, says Wiener, “our clients are cautiously optimistic” about search ads in particular despite the uncertainty of the economy and the election. …

Read the complete post at The New Persuaders.

3 Reasons Google Missed Q3 Earnings Estimates

From my Forbes.com blog The New Persuaders:

Google’s shares plunged this morning by 9% after the search giant’s third-quarter earnings came in considerably lower than expected. The results were accidentally released hours earlier than expected, leading to a halt in the shares’ trading for a time.

Google earned a $9.03 per share profit before certain expenses, far below the $10.63 Wall Street consensus estimate, and down 20% from a year ago. GAAP profit was $6.53. Net revenues after paying partners for traffic were $11.53 billion, up 19% from a year ago. That also missed the Street’s estimate of $11.9 billion. Paid clicks, a key indicator, rose 33% from a year ago, and cost per click, another key measure but one whose meaning is murky, fell 15%.

So what happened? Here’s a quick assessment, which will be supplemented in a new post following the 1:30 p.m. Pacific earnings call:

* Costs jumped. They were up 71%, to $11.4 billion. It appears much of that increase came from Motorola Mobility, which Google acquired for $12.5 billion in May. After all, the acquisition added more than 20,000 employees. As Citi analyst Mark Mahaney said in a note to investors: “Bottom line divergence partly due to Amortization expenses, which came in at $317MM vs. our $197MM estimate. That contributed perhaps $0.40 of the EPS shortfall.” Update after the earnings call: But not just that. CFO Patrick Pichette specifically mentioned costs of selling the likely near-zero-margin Nexus 7 tablet Google released during the quarter–a single product line, so the company’s is clearly pushing it hard.

* Motorola losses were huge. The unit posted a $527 million loss on a GAAP operating basis. Mahaney again:  “Another major delta was Motorola, which generated $151MM Op Loss vs. our $28MM estimate.”

* Ad revenue didn’t set records. It was up 16% from a year ago. Although lower cost per click isn’t always an indicator of a problem, in this case, the fourth consecutive decline has investors wondering anew if it’s due to the lower prices mobile ads get or even competition from the likes of Facebook. …

Read the complete post at The New Persuaders.

Facebook’s Mobile App Install Ads Get Moving

From my Forbes.com blog The New Persuaders:

Exhortations to install apps are likely a significant chunk of Facebook’s advertising revenues, and now they’re poised to become an even bigger factor in the social network’s future. Today, two months after offering app install ads for mobile devices to a select group of app developers and their marketing partners, Facebook opened up the ads to anyone.

These ads appear right in people’s mobile news feeds, providing prime placement for games and other apps in Apple’s App Store for iPhones and iPads and Google’s Play store for Android devices. Not surprisingly, Facebook says in a blog post that mobile app install ads are already working:

In early results, beta partners like Kabam, Fab, TinyCo and Big Fish were able to reach a more relevant audience and efficiently drive installs. For example, TinyCo saw 50% higher CTRs and significantly higher conversion rates compared to their current mobile channels, as well as a significant increase in player engagement.

A select subset of Preferred Marketing Developers (PMDs) has been testing mobile app install ads and saw similarly positive results. For example, Nanigans’ clients efficiently achieved 8-10x the reach compared to other mobile ad buys. Ad Parlor saw consistent CTR’s from news feed of 1-2% from engaged users looking for iPhone and Android games that their friends were playing.

No doubt those numbers will come down as the novelty factor in any new ad or feature wears off. Still, even a fraction of those results would still be valuable to advertisers.

That’s assuming–and this is a fair assumption given Facebook’s wariness about ad overload–that the company doesn’t go over the top and overload people’s mobile news feeds with the ads. Avoiding overload is especially important for these ads because unlike many of Facebook’s marquee ads, they don’t have a social component, meaning they appear strictly in response to developers paying for them, not because a friend liked an app.

Too many of these ads that don’t have the appeal of a friend’s connection, and the dreaded banner blindness is likely to set in.

There also more coming to improve these ads, according to Facebook engineer Vijaye Raji:

In coming months, we’ll continue to make updates that improve the user experience and the performance of mobile app install ads. For example, you may be able to customize your ad unit based on your audience, ensure that your ads are only shown to people who have not installed your app on iOS or Android devices, and allow people to start installing your app without leaving Facebook.

Google: Here’s How Well Mobile Ads Can Work

From my Forbes.com blog The New Persuaders:

The big rap on mobile advertising from marketers is that all they get is a tiny piece of a tiny screen to tell their stories–nothing like TV spots, print ads, or even Web banner ads. That’s one reason spending on mobile ads remains so small that it’s worrying investors in every online company from Google to Facebook to the New York Times, all of whose audiences are using their services more and more via mobile phones and tablets.

The other reason the year of the mobile ad always seems to get pushed out to next year? Marketers aren’t sure how to measure their impact. Measure only clicks on the buy button, without tracking how mobile ads lead customers to physical stores as they surely do, and it doesn’t look like many mobile ads pencil out as well as Web ads. It’s no wonder that a new survey out this morning by the Chief Marketing Officer Council shows only 14% of CMOs are satisfied with their mobile efforts, and 43% definitely aren’t.

Google, for one, is pushing hard to change this situation, especially since both these concerns have emerged front and center among marketers in the six months since Google launched its Mobile Playbook intended to help brands do more effective mobile marketing. With a new update to its own mobile marketing vehicle announced this morning, Google is aiming to answer those concerns using a raft of real-world examples.

First, several examples of mobile campaigns illustrate that the main problem isn’t lack of screen space, but lack of imagination by marketers. “Mobile is a great canvas for brand-building,” says Jason Spero, Google’s head of global mobile sales and strategy. “It’s going to produce some of the greatest campaigns in digital. But it’s shocking how far behind the [consumer] consensus the broad base of companies are.”

But some are managing to use the distinctive features of mobile devices to vault ahead of that laggard pack. Google points to several award-winning mobile campaigns from this year’s Cannes Lions Festival that showcases creative advertising. They look nothing like standard banner ads and, for better or worse, nothing like the “native” ads that are nearly hidden inside the news feeds of Facebook and Twitter.

That General Motors ad at the top, for instance, was a Game Time app that blatantly hijacked people’s attention from the game itself and, as the video says, “distracted them from watching our competitors’ ads.” Other mobile ads by Korean retailer eMart, Brazilian financial services firm Bradesco, Toyota, and others used smartphones’ cameras, touchscreens, GPS location data, and accelerometers to provide experiences not possible on the desktop, from back-seat driving games to QR codes that provide deals only at noon local time to attract lunchtime shoppers.

Second, Google’s calling out examples of how to measure the impact of mobile campaigns beyond the click, which may have even less meaning on mobile phones than on the Web. Adidas, for instance, with its agency partner iProspect, determined that including the real value of a click on a store locator button, which it had identified from store data, proved that mobile ads were paying off in in-store sales. “Mobile is driving behavior in the real world,” says Spero, and cases such as Adidas’ are starting to prove it.

Facebook Live: Charlie Rose Interviews COO Sheryl Sandberg, VC Marc Andreessen

DAVOS/SWITZERLAND, 28JAN11 - Sheryl Sandberg, ...

Facebook COO Sheryl Sandberg (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

For better or worse, you know a company is serious about putting forward a clear image of itself when it submits to an interview with Charlie Rose.

And so on Oct. 2, Facebook COO Sheryl Sandberg and board member and uber-VC Marc Andreessen talked with the PBS journalist at the annual ad confab Advertising Week in New York, clearly in hopes of persuading brand marketers to invest much more on the No. 1 social network. Here’s a live account of what they had to say, paraphrased at times (especially when it comes to fast-talking Andreessen):

Rose asks Andreessen where advertising is heading in the Internet age.

Andreessen: People love the Internet and there’s such a powerful global phenomenon putting the world in people’s hands. We have the fundamental challenge in advertising and media: Most of the money is trapped on the wrong side. We still don’t have most of the money and advertisers moved over to online. We now can see that transition happen, particularly with mobile.

Sandberg: You went from radio to TV and print and then to online. We think Facebook represents the next stage of online and we’re still in the very beginning. Ads online today are onetime and one-way, no ongoing relationship. We’re at the very beginning of changing that. Businesses have an opportunity to change their relationships. They can establish an ongoing relationship. And members have 130 friends they can pass messages along to.

Rose: What are the challenges of mobile for Facebook?

Sandberg: Mobile is a huge opportunity for Facebook. There soon will be 5 billion phones. The engagement opportunities for us are obviously much, much higher. Our mobile users are much more engaged, and that forms the basis for monetization.

Also, the marketing messages can be put into the newsfeeds.

Rose: But does it in any way make the user unhappy?

Sandberg: We’re looking very carefully at this. We’ve been very pleased with the results. We’ve also seen a real improvement for marketers.

Rose: Has the monetization been slower than you expected?

Sandberg: Marketers understand they can’t just do the same campaigns. Then we have early adopters, and we’re working to help them understand. …

Read the complete post at The New Persuaders.

Apple’s New iOS 6 Ad Tracking Feature Is ‘Broken,’ Says One Source

From my Forbes.com blog The New Persuaders:

With the new iOS 6 operating software released with the launch of the iPhone 5 last Friday, Apple introduced a new version of a feature that allows advertisers to track phones to serve targeted ads. But it seems that for people who updated their iPhones via wireless networks, Apple’s new Advertising Identifier is not working.

That’s a big deal for advertisers, for which iPhones and iPads are a rich channel for mobile marketing. Without being able to identify users–or more accurately, their phones–they can’t track whether those ads produced a sale or other “conversion” such as an app installation. And they may not to spend a lot on iOS ads until they can do that again. “It’s crucial for the advertising market,” says Ravi Kamran, CEO of the apps marketing platform Trademob, which discovered the problem. “It drives the whole ecosystem.”

Apple’s new Advertising Identifier, which replaced a Unique Device Identifier widely seen as flawed from a privacy perspective, shows numerical IDs that are entirely zeroes instead of the usual unique sequence of numbers. In an interview, Kamran said the problem affects only those phones updated via WiFi, not via iTunes on a computer or via Xcode that Apple software developers use, but that’s a lot of people.

For the time being, advertisers will have to depend on third-party identifiers such as Open Device Identification Number, Kamran says. IPhone and iPad users who don’t like being tracked may be perfectly happy the Advertising Identifier doesn’t work. But the new identifier also offered a way to opt out of tracking, so ultimately a working Apple identifier is probably desirable for all concerned.

I’ve contacted Apple on whether it’s aware of the issue and what it may do about it and will update this post if and when I hear back.

Apple’s iPhone 5 Sales ‘Shortfall’ Means Precisely Nothing

Eager buyers crowd Apple’s Palo Alto store shortly after Sept. 21 opening

From my Forbes.com blog The New Persuaders:

Only one company could see its stock fall when it sells 5 million of its newest product in a single weekend: Apple.

Apple said today it sold 5 million iPhone 5s the past three days, and its shares promptly fell $9.30, or about 1.3% on the day. The reason: Analysts had forecast it would sell up to 10 million. Now they’re scrambling to explain what happened.

The correct answer: Nothing. Let’s get real. First of all, it’s not clear that Apple really fell short of any reasonable expectation. As one person noted today, the supposedly disappointing 5 million in iPhone 5 sales in a weekend is more than Nokia sold of its latest Lumia smartphones in an entire quarter. So Apple is hardly losing much ground to competitors.

Second, that 5 million–actually, as Apple put it, “more than 5 million”–doesn’t count people who preordered but haven’t yet received their iPhone 5s. It’s unclear how many that would be, but one analyst estimates it could be 1 million or more, even assuming Apple was correct when it previously said most customers who preordered would get their iPhone 5 last Friday.

Third, while Apple no doubt would like to sell as many iPhone 5s as possible, it so routinely runs short of demand on new products that you have to wonder if that’s part of its marketing plan. Scarcity, at least for a product generally well-reviewed and certainly highly anticipated, suggests to potential buyers on the fence that this is the device they’ve got to have. It’s hard to imagine that Apple, of all companies, doesn’t have the means to fulfill that pent-up demand over the coming weeks and months. …

Read the complete post at The New Persuaders.

Another Funny Samsung Ad Ridicules Apple iPhone Fans

From my Forbes.com blog The New Persuaders:

Samsung is an old hand at poking fun at iPhone fans.

It ran an ad last November for its Galaxy S II smartphone that portrayed Apple fanboys and girls as blindly obedient doofuses. It ran another for the S II in January during the Super Bowl that portrayed Apple fanboys and girls as blindly obedient doofuses.

And now it’s running a new one that extols the cutting-edge virtues of the Galaxy S III that and portrays Apple fanboys and girls as–you guessed it–blindly obedient doofuses. Give Samsung points for consistency–and some real humor.

“I heard you have to have an adapter to use the dock on the new one,” says one guy standing in a line in front of a building in Chicago that heavily suggests an Apple store. “Yeah yeah, but they make the coolest adapters,” another line-waiter earnestly replies. “This year,” says another young man, “we’re finally getting everything that we didn’t get last year.”

Later, a guy in line using a Galaxy turns out to be holding a place for someone else. His parents. Zing!

The initial numbers for iPhone 5 pre-sales suggest the ads may fall on deaf ears, or at least ears plugged by Apple headphones. But the spots last January may have had an impact. BrandIndex said the campaign helped Samsung edge past Apple in brand perception, at least for awhile.

It looks like the iPhone 5 will do just fine. And if Samsung’s predictions are any indication, the S III will do well this year, too.

But Samsung, along with Google, maker of the Android software running on the devices, clearly hope to steal some of the iPhone 5′s thunder, as well as siphon off some of its sales. Will these ads do it?

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