Display Ads To Eclipse Search As Mobile Revenues Take Off

gartnermobileFrom my Forbes.com blog The New Persuaders:

All that worry about how the lack of mobile ad revenues will hurt Facebook, Google, and a raft of startups? Fuhgeddaboudit.

Researcher Gartner today upped its forecastalready pretty heady, for mobile ad sales to $11.4 billion this year, up 19% from 2012. Gartner research director Stephanie Baghdassarian says that’s because of the rapid rise in the purchase and use of smartphones and tablets like the iPhone and the iPad.

It’s not the first such positive report we’ve seen in recent months. And already Facebook, for one, is putting up impressive numbers on mobile ads, helping buoy its shares in recent weeks.

But Gartner’s report has some interesting detail about the changing mix of mobile ad types and which parts of the world growth is coming from. Display ads will grow faster than search ads, overtaking them by 2016. That could be a challenge for Google, though it also has been investing heavily in display ads in recent years to become No. 1 or 2 with Facebook depending on who’s measuring.

Delving deeper into the details, here’s what Gartner’s expecting to see:

* Mobile search will continue to do well, but eventually display will lead the way:

Mobile search — including paid positioning on maps and various forms of augmented reality, all of which can be informed by location — will contribute to drive mobile ad spending across the forecast period, although it will diminish in strength as the period progresses. Gartner believes that mobile display ad spending will grow and take over from mobile search. It will initially remain divided between in-app and mobile Web (in-browser) placements — reflecting consumer usage — although after several years of in-app dominance, Web display spending will take over in-app display from 2015. 

* Mobile ad prices will fall:

The rapidly growing share of time that consumers spend on mobile devices is generating ad inventory at a pace considerably faster than most advertisers can shift their spending to the medium. This creates a surplus condition that is driving down unit ad prices which in turn has led to a situation in which a significant portion of mobile ad inventory is taken up by app developers paying for ads to promote their apps and get them more downloads, a category known as “paid discovery.”

Here comes another bubble:

While the revenue basis of paid-for app store downloads provides some economic justification for this category, for many developers the outlay for ads is close to their maximum ad income or even exceeds it. This creates a circumstance, reminiscent of the early days of Web advertising, in which cyclical advertising arrangements among websites produced an inflated picture of revenue that may ultimately prove to be a bubble. “Some correction in the growth rate must occur before demand from brand and local advertisers catches up with supply, and more sustainable economics support a faster growth rate commensurate with consumer adoption,” said Ms. Baghdassarian.

Overall mobile ad revenues are forecast to hit $24.5 billion in 2016–about the same as Gartner’s earlier forecast, but with faster near-term growth than expected. And where is all this mobile ad money coming from? Not surprisingly, print–especially newspapers–as well as radio.

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5 Reasons Why Facebook Shares Have Soared Past $30

Mark Zuckerberg, founder and CEO, shows off th...

Facebook CEO Mark Zuckerberg (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

After languishing ever since Facebook’s mostly botched initial public offering last May, the social network’s shares are up more than 5% today, moving past $30 a share for the first time since July. Why the sudden investor interest in what was one of last year’s biggest disappointments in the business world?

* Something new is coming: I and a crowd of other journalists have been invited to a press event on Jan. 15 to “come see what we are building.” That could be anything, from new kinds of ads (though that’s not the usual thing Facebook engineers mean when they talk about what they’re building) or a mobile phone (very unlikely, since CEO Mark Zuckerberg put the kibosh on the idea awhile ago) to a search engine, a music service, or an expanded e-commerce initiative.

Or, the most likely of all, something entirely different–possibly several things, to read probably too much into the invitation’s wording. In any case, it’s enough of an event that investors are likely intrigued and want to get in ahead of an announcement that at the least will get a lot of coverage.

* Ad revenue growth is accelerating again. In its third quarter, Facebook surprised investors with a 36% jump in ad revenues, sending its shares up 20% the next day. Although mobile ad revenues are a big part, a new ad exchange and an ad targeting program called Custom Audiences also appear to be getting traction.

* In particular, Facebook appears to have a good start on solving a key issue during the IPO: mobile advertising. The big kicker in that third quarter was mobile ad revenues, which hit $150 million, or 14% of revenues, from almost zero just six months earlier. As Zuckerberg said during the third-quarter earnings call, “I want to dispel this myth that Facebook can’t make money on mobile.” In particular, ads in mobile news feeds are working for advertisers because they look more like a natural part of what people are already looking at. …

Read the complete post at The New Persuaders.

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.

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