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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Free Calling For iPhones: Is This The Real Facebook Phone?

fbmessenger

Facebook Messenger app

After testing a free voice calling feature for its Messenger app in Canada recently, Facebook has quietly made the feature available in the U.S. as well–to iPhone users, anyway. Now, according to The Verge, iPhone users can make free calls using a WiFi connection, with no carrier data charges, or using their data plan.

It’s hardly the first free voice calling app. Google Voice has offered this for a long time, and there’s also Gmail Chat. Neither is limited to iPhone users or, of course, Facebook members. There’s also Skype, which allows you to make free calls to other Skype users.

Given that most people with a cell phone have voice minutes by default, often so many that they don’t end up using them up each month, this isn’t something a lot of people are probably clamoring for. But for Facebook, it offers several benefits. In fact, it could provide nearly all of the benefits of the long-rumored Facebook phone–the notion of which was quashed by none other than Facebook CEO Mark Zuckerberg himself last year:

* People will end up using Facebook more. In other words, it’s one more way, along with yesterday’s announcement of its Graph Search service, that Facebook is making itself not just entertaining, but useful. That’s key to keeping the 1 billion-plus people from gradually wandering away from what is, for all its appeal, the biggest time-waster online.

* It’s another mode of communications. And communications–that is, being social–is what Facebook is all about.

* It may be especially appealing to young people, who often have limited voice or data plans. And Facebook, whose membership now tends to be older than newer rival services, needs to keep young people engaged.

* It’s a way for Facebook to make sure people turn to the company’s apps on their mobile devices rather than to rivals’. Facebook has recently managed to ramp up its mobile ads, to as much as 20% of overall ad revenues. So this is less of a concern when it comes to making money directly through apps. But Facebook remains in catch-up mode in mobile–for pete’s sake, its biggest project in years, Graph Search, has no mobile component at the outset. So it has to make sure it offers useful features, especially those native to smartphones and tablets, or it could gradually become less relevant to the rising number of people for whom the phone is their computer.

Nobody really needs an actual Facebook phone, because apps make every phone a Facebook phone. Free voice calling is just one way to make sure it remains that way.

Will Digital Stuff Always Be Worse Than Analog?

ImageWhen I tweeted today that it’s getting tougher to do phone interviews because of poor-quality cell and IP telephony calls, I touched a nerve. “Bring back the Bell System!” said one tweeter.

The fact is, cell phone quality has never been great, but a lot of people, CEOs and executives included, now seem to use them almost exclusively, so the poor quality is more noticeable–and annoying. And while enterprise-quality IP phone systems seem fine, home versions like your cable company’s or Google Voice that more people are using still don’t match landlines.

Perhaps it’s just a transitional phase, before we get the unlimited bandwidth we’ve been promised for so long. But it seems like a long transitional phase.

And it’s not just phones. CDs still don’t sound as good as vinyl, and MP3 files are even worse. Do I even need to mention Internet video? Most people probably don’t notice that the average digital camera image can’t match the best film images, but film images taken with a good camera still have better resolution (or at least the grain looks better than pixels).

Of course, digital has its advantages. No skipping records, for instance. (Well, not actually true–my car CD player doesn’t like it when I hit a bump.) No snarled tape. Digital phones and music players are much more convenient to use, and do a whole lot more than just make calls. Videos taken with most digital cameras look a lot better than anything we used to take with tape-based camcorders.

I don’t mean to sound like an old crank, even if I might be. But I wish in the rush to digitize everything, we could remember that quality matters, and make that as important as convenience.

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