The drivers behind this take-off of mobile ad spending are:
Increased device ownership, particularly of tablets. Smartphone installed base growth in 2012 was more than 35%, while tablet installed base growth exceeded 120%. By 2016, tablet sales will overtake the sales of desktop and laptop PCs.
The intensity of online tablet use. Despite tablets representing less than 30% of the mobile device market in the US, they represent more than 40% of total mobile page views. In addition, the majority of tablet users watch video on their tablet, compared with about a third of smartphone users.
AppGratis is a French app promotion and discovery platform startup that was recently ejected from the App Store on the grounds that it violated Apple’s developer T&Cs. Back in September 2012, Apple tweaked its developer guidelines, adding a clause that states: “Apps that display Apps other than your own for purchase or promotion in a manner similar to or confusing with the App Store will be rejected.”
Simon Dawlat, the CEO of AppGratis, shares his vision in great detail here and explains why he thinks the ban is totally unfair. Even France’s digital industry minister, Fleur Pellerin, has spoken up in support of AppGratis, describing Apple’s actions as ”extremely brutal, unilateral, and without explanation,” and calling on Cupertino to “behave ethically.“ Natasha Lomas at TechCrunch fairly and exhaustively summarizes the whole story here.
Without going into the legal details here, one may argue that there is a blurring of the line between app discovery and app promotion. I personally viewed AppGratis as a traffic booster based on curated app discovery experiences. I think it definitely helped gain some initial visibility in app stores, but I think app developers and publishers still needed to measure the customer lifetime value and make sure their audiences would stay engaged.
Anyway, the AppGratis controversy highlights the growing dependency from publishers and developers to Apple and Google in the app economy.
That’s kind of a bold statement to make when many companies — be they media players or the likes of Facebook — face a mobile monetization gap and when most successful companies generate only dozens of millions of dollars of direct mobile transactions. Despite the hype around “freemium” models, the reality is that few companies can now rely on a standalone mobile business model and that most mobile business models remain unproven.
The Web extended most business models and created only a small number of truly successful new ones. Mobile will follow the same path: Extension, rather than disruption, will be the norm for most businesses, with a few disruptive mobile pure-plays as the exception but not the rule. That doesn’t mean, however, that mobile-first businesses won’t disrupt existing players. Mobile is an enabler of new direct-to-consumer products already, in industries such as car services, food delivery, and home health products. And mobile is disrupting born-on-the-Web companies such as Facebook.
I listened to the Mark Zuckerberg interview from the TechCrunch Disrupt event in San Francisco this week.
There were a few choice quotes (I'll paraphrase them here - these are not literally a transcription. You can find the video/audio on the TechCrunch site):
"The biggest mistake we made (with our mobile services) was relying too much on HTML5 and for too long."
"We finally realized that a good enough mobile experience would fall short. We needed a great mobile experience. The only path to great is native on iOS and Android."
"Our mobile users are more engaged and use our services more frequently."
"All of our code is for mobile."
"We'll build native code for iOS and Android." (And it is building for iOS first)
"Ads can't be standalone on a sidebar in mobile. They need to be integrated into our product."
"We reorganized. A year ago, 90% of the code check-ins were from the core mobile team. Now 90% comes from other parts of the organization."
"We reorganized. We were in functional silos. We now have product teams (responsible for delivery)."
"A Facebook phone doesn't make any sense."
Some context. Certainly, Facebook is unique with it being a media-centric company and very global. It does need mobile Web to reach much of its audience - now nearing 950M. For many companies, mobile Web will continue to be a relatively low-cost, broad-reach play to get to most of the phones. Mobile Web doesn't go away, but it is not where the differentiation will happen - at least in the near term.
It was more than 10 years ago that I listened to my first sermon about the growing importance of mobile as a marketing channel. It was late 2000 or early 2001; I was working at DoubleClick at the time, and my boss left the company to join a mobile startup, claiming we should’ve already had a mobile ad offering in place because it wouldn’t be long before smartphones replaced PCs entirely.
Suffice it to say I’m still waiting anxiously for a chance to throw away my computer -- and likewise, marketers are still waiting for mobile to become a genuinely important marketing channel. It’s not that they’re pessimistic: In fact, the marketers in our surveys rank mobile just a hair behind social media in terms of channels they think will grow in effectiveness over the coming years. But anticipation has never quite equaled reality -- and so most interactive marketers across the US and Europe continue to bide their time, waiting for a mobile marketing opportunity that’ll match the hype.
And that’s where mobile apps appear to come in. Few interactive marketing opportunities are more hyped than mobile apps, but in our search for a mobile marketing channel that really works we’ve lost sight of one crucial point: Marketers’ target audiences don’t care nearly as much about branded applications as the marketers themselves do. In fact:
Today Facebook announced three mobile enhancements for Facebook Places, including new functionality that developers of mobile applications may incorporate into their products and a powerful new (and free) platform for connecting mobile consumers with relevant ads for nearby businesses. Today's pronouncements demonstrate the ambition and vision Facebook has for itself in mobile computing and socializing over the long term, but in the immediate future Facebook now is poised to bring the wonders of checking in to the masses.
Chances are, you are NOT reporting your location (aka "checking in") to your friends and followers in social networks. According to Forrester data from earlier this year, just 4% of US online adults have ever used location-based social networks on their mobile phones. Simply put, there hasn't been enough WIIFM ("What's In It For Me") to entice and retain the typical consumer. Now, Facebook is set to change that, lowering the bar and improving the WIIFM for a wider range of consumers. Average Facebook users who previously felt "checking in" was better suited for narcissists and techies can now realize benefits from location-based services (LBSes, also known as geolocation) via a larger and richer set of offers and deals.
Foursquare, the geolocation social tool, has been a media darling as of late. Not only is it growing, but people innately understand the monetization model, which is not something you can say about every social site and tool. As people “check in,” or report where they are to their networks, Foursquare serves them offers from nearby businesses. It’s a win-win-win situation: Businesses can market to people who are able to immediately take action; Foursquare earns revenue; and users get valuable offers they can use.
But Starbucks’ current program on Foursquare may kill the goose that lays the golden eggs (or at least demonstrate how that goose may die a slow, lingering death of neglect). I believe (and I’m curious if you agree) that Starbucks’ ubiquity combined with the offer’s difficult redemption is decreasing attention for Foursquare’s other offers. If other large chains follow suit with similar promotions, those “Special Nearby” tabs within Foursquare’s mobile apps won’t get as much notice, and that means problems for advertisers on the Foursquare platform.
Following its acquisition of Quattro Wireless for $275,000,000, Apple has just announced the launch of iAd, its mobile advertising platform (see my colleague’s take here). Adding the $750,000,000 that Google is ready to invest in AdMob (the deal is still under FCC scrutiny), the two most disruptive new mobile entrants have invested more than $1 billion — a clear signal that mobile advertising has long-term potential. The main difference between Google and Apple is that Apple is only just entering the advertising business, while Google’s entire business model simply IS advertising. However, that potential has yet to be realized. Does that mean stakeholders can generate significant revenues in the short term and that operators will be bypassed once again? I have read in various places some strange comments suggesting that Google’s mobile ad revenue share with mobile operators would be a way to finance network evolution. Just compare the cost of a base station and the significant investment required to finance 4G with absolute mobile advertising revenues and you’ll quickly figure out for yourself that this is unlikely to happen anytime soon. This is more of an online advertising discussion around the Net neutrality debate (remember France Telecom’s CEO warning that he was not “building freeways for Californian cars”!) but it will crop up later for mobile.
Apple announced iAd today as part of their OS 4 program today. I speculated in this post on why they purchased Quattro Wireless a few months ago, but now we have more details. This post is on iAd only - my colleague Charles Golvin has a more complete analysis in his post.
First, looks like Apple will leverage Quattro's business model and use their sales force to sell ads. This should work early on for large buys.
They are continuing to be very supportive of their developer community with 60% of the ad revenue going to the developers. Not a lot of details now, but this could be generous. Part of the revenue needs to go to the sales team as well. There will be less leftover for Apple. Models such as Admob's have more of a self-serve model that have the potential to be more cost-effective especially with smaller buys. The types of companies that will have the budgets to develop interactive ads that take full advantage of the platform - accelerometer and location plus rich media - will have the budget to spend on media as well - not just on the creative.
Beyond developers, Apple is continuing their focus on the consumer experience. They are looking to protect the quality of the user experience by controlling the ad experience. Steve has raised the bar on quality of mobile ads by keeping consumers within their existing application or experience. He anticipates that the ads will be engaging enough to be considered entertainment.
My colleague Julie Ask just published a piece on the reality of mobile coupons in response to questions like “do consumers use mobile coupons?” “should we be developing a mobile coupon offering?” and “what technologies should I adopt to support mobile couponing efforts?” – questions that she and I get asked with some frequency.
I was involved in some of the initial structuring of this report and then also involved in the editing phase. And I would love to recommend it to interactive marketers. Here are the most important takeaways:
Consumers like the promise of mobile coupons, but there is not yet mass adoption. Mobile coupons promise to be a convenient way to aggregate customized discounts all in a single place (your mobile phone) that is much easier for storage than say an envelope of clipped paper coupons.
Mobile coupons appeal to advertisers too, but technology hurdles prevent mass utilization. Advertisers love the idea of being able to offer targeted promotions that are cheaper to deliver and redeem than traditional coupons. But the reality is that scaling redemption technologies and processes at check out is pricey for the limited coupon-using audience today.
Advertisers should start small mobile coupon trials now. Mobile coupons don’t need to be your top marketing priority for 2010 (that honor goes to paid search, display ad, advanced email and social media) but we do recommend now as a good time to start a trial. Vendors like cellfire can outsource the management and distribution of mobile coupons and offer flexible terms in an effort to sign up new advertisers.