It has taken just five months for mobile advertising to go from a trickle of coverage in the mainstream media to a feeding frenzy. Since Google announced its plan to buy mobile ad network AdMob for US$750 million AdMob for US$750 million in November, national papers and newswires (in the US particularly) have clambered over each other to report the latest rumor, speculation and hearsay, followed by innumerable me-too pieces in trade journals and blogs.
This is manna from heaven for the wider mobile business – mobile publishers, mobile agencies, as well as the mobile advertising networks, which have all been fighting for years to get a fairer share of marketing and advertising budgets. The more coverage mobile advertising gets in the business pages more recognition it deserves with the business press and, thus, brands and creative agencies. This is all thanks to Google, Apple, the FTC and a soap-opera-like story line that’s got the media hooked.
“Anything that brings more money into the mobile ad ecosystem is a good thing,” said Ilicco Elia, head of consumer mobile, Reuters, when asked his opinion on Apple’s iAds, “I look forward to seeing the case studies from and statistics on the effectiveness of these campaigns. This should grab the interest of brands and get them thinking more about mobile advertising… It’s all a good thing.”
Before we delve into why this is good news, let’s get some things into perspective. In true soap-opera style we have four cliffhangers. We’ll give you the facts you draw your own conclusions.
The Cliffhangers:
1) Should the FTC stop Google buying AdMob?
2) Should advertisers pay US$1 million to advertise on Apple’s iAds?
3) Are Google and Apple at war?
4) Will the FTC investigate Apple?
P.S. (10-05-10) Thanks to James Coops from Mobyaffiliates for including this post in the latest Carnival of the Mobilists, a weekly roundup of the best in mobile and wireless blogs.
1) Should the FTC stop Google buying AdMob?
The facts:
• We know from Google that the Federal Trade Commission (FTC) has been investigating its acquisition of AdMob. Everything else reported has been unattributed rumor and speculation.
• Mobile advertising is a nascent business – estimates for global mobile advertising expenditure in 2009 ranged from US$1.4 billion to $7.5 billion (see the Mobile Stats Compendium for details) – but it is expected to grow fast (maybe even faster now it’s mainstream news).
• This market is served partly by mobile ad networks. There are dozens of them, serving different geographies and different types of publishers and advertisers.
• No one really knows the market share of any ad network, because they do not reveal revenues (… but all the FTC has to do is ask, surely? So it’s surprising that it’s not been put to bed yet).
• AdMob claims to serve ads to 18,000 mobile Websites and applications. This might sound a large number (and is widely misunderstood) but AdMob is a mass-market, blind network (many networks are not, please see Mobile Ad Network Guide for definitions and profiles). This means: a) publishers could be tiny, b) deals will not be exclusive to AdMob c) ads are mostly cost-per-click (CPC), so advertisers don’t pay anything unless the user interacts.
Get it in perspective: AdMob has only a small fraction of global mobile sites. No one knows how many mobile sites there are exactly, but this will give you an indication: there are 15,000 official sites on NTT Docomo’s i-mode service Japan – that’s one operator portal in one country …albeit the biggest portal, probably (See this Mobile Guide to Japan for details).
Why it matters: the FTC needs to put this to bed. So much press coverage of a) AdMob and b) talk of market dominance will not help advertisers or publishers to make an informed decision about what mobile ad network is best for their business. Meanwhile Google and AdMob are caught in limbo.
What the mainstream press is saying:
• Google’s AdMob purchase said to be opposed by U.S. FTC staff (Bloomberg)
• FTC decision in Google’s AdMob deal imminent (San Francisco Chronicle)
• What people are telling the FTC about Google-AdMob (Round up by Google blog)
2) Should advertisers pay US$1 million to advertise on Apple’s iAds?
The facts:
• Despite the media hype, iAd but doesn’t exist yet (only announced). These are adverts that appear in applications downloaded to Apple mobile devices from the vendor’s App Store. The revenue from the ads will be shared 60:40 between the app owner and Apple (some ad networks take more than this, by the way). The backbone to iAds is provided by Quattro Wireless, a mobile ad network that became part of Apple in January 2010, two months after Google bought AdMob.
• Many ad networks offer in-application services already (AdMob is probably best known for it), but Apple’s ads will be jazzier, and appear to be closely tied to the upcoming Apple operating system.
• The US$1 million price tag has not been announced officially, it was reported in The Wall Street Journal following an Apple sales pitch to potential advertisers.
• The WSJ also reported that Apple is planning to charge $0.01 each time an advert is seen – that’s cost per thousand impressions (CPM) of US$10 – and $2 each time a user interacts (i.e. CPC). Comparing this to price ranges for networks profiled in the Mobile Ad Network Guide, $10 CPM is middling; but CPC usually ranges from pennies to US$0.50 at highest. But this is the first time mobiThinking has heard of any network charging for both CPM and CPC at the same time.
The question for advertisers is: how big is the audience for my ads?
The facts:
• App Store applications only work on Apple devices. What we know:
a) Apple sold 25.1 million phones globally in 2009. This sounds impressive, but is only about 2 percent of handsets or 14 percent of smartphones.
b) We are told there are now 200,000 apps on the Apple App Store. This sounds impressive until you learn that the fifth most popular App was installed by 51.5 percent of App Store users, while number 1,000 was installed by just 1.75 percent (according to AppsFire in November).
• What we don’t know:
a) How many iPhone owners use applications from the App Store regularly?
b) How many people view applications from the App Store on a daily basis?
The question for advertisers is: will my ad appear in the most popular apps most relevant my brand.
Get it in perspective: it costs US$330,000 to advertise for three days on NTT Docomo’s i-menu – that’s the front page of the busiest mobile portal in Japan – this page is seen by 15 million visitors per day. (See this interview with D2 Communications’ president Akihisa Fujita
The question for advertisers is (assuming the US$1 million price tag on iAds is true): what can Apple’s in-app advertising offer that’s three times as good as the prime real estate on NTT DoCoMo’s portal?
Why it matters: the joker here is the Apple factor.
• The big question is how many column inches will the first iAd advertisers receive, in all those media reports on Apple, when iAds actually launch.
• Meanwhile Apple’s price tag makes all other mobile ad players look extremely cost effective.
• See comments from leading mobile ad networks YOC and Jumptap below.
3) Are Google and Apple at war?
It has been widely reported that Google and Apple are at war. Let’s assume ‘war’ is a tabloid term for ‘competition’, because this really isn’t a matter of life and death. Although you shouldn’t expect either side to stamp it out this warmongering as it means lots of fantastic free publicity.
The facts:
• Apple and AdMob have both bought mobile ad networks… but so did Microsoft, AOL and Nokia previously.
• We’re told that Apple planned to buy AdMob before Google stepped in. So what? There are half a dozen independent mobile ad networks in the US, alone. Quattro was part of Apple within two months (and according to rumors cost substantially less).
• Apple and Google both make smartphones… but RIM and Nokia sell more. In 2009 Nokia smartphones outsold Apple’s almost 3:1 and all smartphones with Google’s Android operating system almost 12:1. Note: that’s just smartphones, in total handsets, Nokia outsold Apple 17:1 and outsold Android 64:1. (see Mobile Stats Compendium for details)
• Google and Apple’s mobile strategies are different. Google has mobile search, mobile Web sites, search advertising and banner advertising, all targeted at all handset users (replicating its online businesses). Apple has mobile applications and music download store only available for Apple handsets, and now will sell advertising within them. (Note: like all ad networks Quattro focused primarily on advertising on mobile Web sites, but it is unclear how this sits with Apple’s app-centric business.)
• Apple’s purchase of Quattro and now (reported) plans to charge $1 million for iAds just make Google’s defense against the FTC even stronger.
Why it matters: But this phony war (the real story is that they might compete a bit in some bits of their businesses – big deal) distorts the facts, it inflates the importance of Google and Apple and AdMob and Quattro and the big picture has been lost.
The warmongering media:
The war between Apple and Google has just begun (New York Times)
Google is now Apple’s greatest enemy: here’s why (Mashable)
Is Eric Schmidt just too nice to beat Apple? (San Francisco Chronicle/Business insider)
4) Will the FTC investigate Apple?
The facts:
• The latest plot twist emerged this week as rumors surfaced that the FTC might investigate Apple. This is (and will no doubt remain) unverified by the FTC or Apple.
• Apple’s mobile business is presently only focused on its own handsets, which has a much smaller market share than hype would suggest (see stats above). It is not interested in the innumerable mobile sites visited by iPhone users, because unlike Google, Microsoft, Nokia, Yahoo etc it has no mobile Web presence. It is only interested in the applications users download from its App Store, for which it takes a 30 percent cut of revenues (which will be supplemented if it can take 40 percent of any advertising therein). Note: Western portals and app stores take a much larger percentage of revenues than in Japan – the NTT Docomo i-mode portal charges publishers 10 percent (see the Japan Mobile Guide for more details).
• Recent changes to Apple’s rules (already tighter than most application stores) have been interpreted by the commentators in the media as Apple trying to exert greater control over this niche market of applications – and the ads therein – for Apple handsets, allegedly to the detriment of other handsets, other ad networks and developers. And thus, it is claimed, it is now drawing the eye of scrutiny from the regulators.
• Ironically, Apple has been a victim of its own hype. With the help of the media (nationals included), Apple has encouraged lots of companies to focus development and marketing efforts on applications for its handsets (often neglecting all users of other phones). Accruing 200,000 applications for one mobile platform is a remarkable achievement (even if most are flops, see above) and it is going to get you noticed, especially if you play tough.
• The FTC story originated in the New York Post which alleges that the Department of Justice and FTC are negotiating over which watchdog will launch an inquiry into Apple’s new policy that requires software developers to only use Apple’s programming tools to write applications for Apple platforms, rather than programming tools that make applications more easily portable to competing platforms e.g. Nokia, Research In Motion, Microsoft and Google.
• Apple is also at loggerheads with Adobe over its plan to ban the Flash programming language from Apple products – this recently led to a public diatribe from the Apple CEO.
• Reuters reports that developers have raised competition concerns over iAds. Apple’s new agreement with developers prohibits data about app usage to be transmitted to outside analytics companies. Rival ad networks, such as AdMob, rely on these statistics to determine how successful an online ad is in reaching its targeted audience. So, the article argues, the new rules could create an unequal playing field for ad networks competing against Apple’s.
Why it matters: On the one hand talk of regulatory scrutiny makes Apple’s App business look all the more important. On the other hand the mainstream media may start to explore the merits of investing mobile development and marketing funds in one single platform, rather than focusing on a more all-encompassing mobile strategy.
The beauty of the mobile ad soap opera
Whatever our quibbles with how the story is reported, the big picture is that mobile advertising is now mainstream and as long as the soap opera keeps the media hooked, it should stay that way. Without the expensive-sounding acquisitions (it’s amazing to think that Google only announced its planned purchase of AdMob in November), then Apple’s posturing on mobile advertising, the threat of FTC intervention in Google and now possibly in Apple, it’s difficult to see the business press taking any notice of mobile advertising – the figures alone aren’t big enough to get them excited…yet (expect the forecasts be rewritten this year).
This is the perfect case of: all publicity is good publicity. The more the mainstream press covers mobile advertising, the more brands and their creative agencies will take notice.
Industry comments on the Apple iAd story:
Christian Louca, Managing Director UK, YOC:
‘Apple certainly is setting the bar high for its new mobile advertising business – US$1million is a massive increase on what advertising executives are currently spending on mobile. I can see what Steve Jobs’ thinking is – Apple is an aspirational brand and their pricing is reflective of the exclusivity of the experience. In some ways I admire their attitude and their confidence that they don’t need to mess around with smaller budgets because of the strength of the Apple name and the kudos that the iPhone has in the market, but clearly that’s not how the majority of players in this space can or should work. It’s certainly not how we run things at YOC, where $1million could get an advertiser significantly more reach and value for money across our extensive network!
I also wonder how many brands will be willing to pay such a heavy premium to target iPhone users. While Apple has sold an impressive amount of iPhones globally, in terms of overall mobile users the platform still accounts for a very small fraction of the market, making it an extremely expensive and limited way to target consumers – especially when you consider that it has recently been reported that Android has overtaken the iPhone in terms of data usage for the first time in North America. This is a trend that I predict will continue on Android and other open platforms, representing a far more wide-reaching opportunity to target mobile users with cross-platform campaigns. The in-app advertising format touted by Apple also discounts a vast array of other highly effective mobile advertising formats such as search, which is a clear traffic driver across the YOC network, presenting brands with great opportunities to target consumers in a tailored and relevant way.
There is no denying that the iPhone is an exciting platform and that Apple has helped to show the industry what can be achieved in terms of rich and immersive user experiences. But when looking at the bigger picture, Apple represents only a small segment of the global mobile ecosystem.’
Paran Johar, chief marketing officer, Jumptap
“What makes mobile advertising “hot” is not necessarily the platform, handset, or OS. Those may contribute to the initial “sexiness” factor. However, long-term advertisers are looking for ROI and publishers are looking for a higher yield of their mobile inventory. Many elements contribute to advertiser ROI, including relevance of advertising and creative. Our approach to relevance is rooted in our vision for the future of mobile advertising based on ‘consumer intelligence’. This strategy of consumer intelligence allows users to manage their own profile so that we can present them with more relevant ads based on their interests. In conjunction with this, our strategy for creative and rich media is the most open in the industry, allowing an advertiser to integrate whatever rich media provider they choose to use into our network.
Our pricing for mobile media is simple and based on either CPM or CPC, not both. By having an additional charge above a CPC, an advertiser is essentially paying twice for the media the second time without knowing how much until the campaign ends.”
Further reading:
Japan, Canada, USA, Germany, UK, India, Australia, Spain, South Africa, Brazil
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