In 2013, US consumers spent over 2 hours 19 minutes using mobile phones – that excludes making calls – matching PC consumption. In 2014 mobile usage will rise to 2 hours 51 minutes, while PC consumption contracts to 2 hours 12 minutes, according to forecasts by eMarketer (April 2014). So why are US advertisers expected to spend twice as much on PC advertising as mobile next year?
US consumers only spent more time watching TV – at a whopping 4 hours 31 minutes – than consuming mobile media in 2013. Mobile usage outstrips radio (1 hour 26 minutes) and print (32 minutes).
Note: print is reading off-line newspapers and magazines – the online/mobile version are included in the digital categories. Also, if you are wondering about multi-screening, i.e. surfing the mobile Web with the TV on in the back ground, then eMarketer counts both mobile and TV separately.
Figure 1: Average time spent per day with mobile media by US adults 2010-2014: eMarketer (April 2014).
US mobile v online ad spend
So US citizens now spend more time with mobile than PC, led by activities such as social networking, but is that reflected in mobile marketing spend? No. While mobile media expenditure is growing rapidly, it is still way behind online spending.
eMarketer (December 2013) estimates that US advertisers spent US $9.60 billion on mobile advertising in 2013 – this includes the whole caboodle: spending on classified, display, search, messaging and email for feature phones, smartphones and tablets. That is less than a third spent on PC advertising at $32.98 billion.
Interactive Advertising Bureau (IAB) believes US advertisers spent less on mobile, at $7.1 billion, and more on PC advertising, at $35.7 million, but the numbers are broadly similar.
Fast-forward to 2014 (when US consumers will spend considerably more time with mobile than PCs): eMarketer predicts US advertisers will spend US $14.97 billion on mobile advertising in 2014. That is less than half the predicted $33.12 billion that that US marketers will spend on PC advertising.
Figure 1: US digital ad spending by channel 2012-2017: eMarketer (December 2013).
Adjusting to the mobile-first reality
Some companies are coming to terms with this mobile-first reality. Notably, Mondelez International (the spin-off of Kraft’s snack foods) has a commitment to invest 10 percent of its global marketing budget in mobile; and last year signed a mobile-only media deal with Google. Unfortunately it is still a rarity to find companies committing a representative chunk of their marketing budget to mobile.
You know things are bad in the ad world when the Interactive Advertising Bureau, together with leading publishers, writes an Open letter to US advertisers (February 2014) with the opening:
“We’ll just say it: It’s time to improve your mobile advertising.”
The letter implores advertisers to use HTML5 for their mobile media campaigns. There’s also a checklist to make sure brands’ media agencies are up to the job with mobile. The notable omission from this IAB checklist is that mobile ads must click-through to a mobile-friendly site or landing page, but it’s a good start.
Marketers are expected to get with the program… albeit slowly. Mobile ads will overtake desktop ads in the US by 2017, when mobile ad expenditure will reach $35.62 billion, while desktop declines to $27.21 billion, predicts eMarketer.
Cost of mobile advertising
So does this disparity between mobile usage and mobile media spend make mobile advertising a cheap option? While it is commonly claimed that mobile ads are much cheaper than PC ads, it’s hard to find evidence that this is, or is still, the case.
For example, back in 2012, KPCB’s Mary Meeker claimed that mobile (average price $0.75 eCPM) cost five times less than desktop media (average price $3.50 eCPM).
• According to Turn (October 2013) mobile media (average price $1.02 eCPM) doesn’t cost a lot less globally than digital (average price $1.28 eCPM); certainly not multiple times cheaper. By the way, eCPM stands for effective cost per thousand impressions and is generally the way that brand advertising is purchased online.
• According to Marin (March 2014) the situation is similar with search advertising, which is generally priced in cost-per-click (CPC). Marin estimates that US advertisers paid a third less for click-throughs from smartphones (average price $0.58 CPC), than PC clicks (average price $0.83 CPC). Tablet clicks (average price $0.76 CPC) were only marginally less than PC clicks.
Interestingly, Marin expects paid-for search clicks from mobile devices to overtake those from PCs by the end of 2015.
Figure 1: Average price US advertisers paid for click-throughs from PCs, smartphones and tablets: Marin, October 2013.
Are mobile ads good value for money?
Marin’s data finds that smartphone users click on search ads (3.75 percent) more often than those using tablets (2.7 percent) or PCs (2.29 percent). However conversions (i.e. purchasing, signing up or other KPIs) are a bit lower for smartphones (4.4 percent) than tablets (5.5 percent) or PCs (5.3 percent). But mobile conversions are growing rapidly, with both smartphones and tablet conversions growing at well over 50 percent compared with 2012.
There are several possible explanations for this disparity between smartphone clicks-throughs and conversions:
a) Lack of mobile-friendly site or landing page – so when the consumer clicks through the page delivers a poor experience on their device.
b) Inability to purchase – many sites (even mobile-friendly ones) do not allow mobile visitors to purchase… duh.
c) Failure to track all conversions – if the mobile user clicks through to the mobile site, gets directions to the nearest store and purchases or clicks to call and buys over the phone, are these recorded as mobile conversions?
Marketer’s issues with mobile advertising
Is there something about mobile advertising that puts marketers off? This was examined in an Ovum/IAB survey (September 2013) of Marketer perceptions of mobile advertising.
The following key challenges were highlighted as important or high importance, by 50 percent or more of respondents:
• Lack of standardized metrics (important 55 percent; high 13 percent).
• Device operating system (OS) fragmentation (important 44 percent; high 23 percent).
• Privacy issues (important 43 percent; high 22 percent).
• Difficult to create mobile rich media ads (important 47 percent; high 12 percent).
• Lack of agency expertise (important 42 percent; high 15 percent).
• Lack of standardized advertising units (important 48 percent; high 9 percent).
• Lack of global, mass market inventory beyond SMS (important 46 percent; high 11 percent).
Figure 1: Graph shows: Key challenges for mobile advertising from a mobile marketers perspective: Ovum/IAB (September 2013).
The mobile app advertising bubble
There isn’t much research showing how marketers are spending their mobile budgets – so we don’t know to what extent mobile ads mirror the same brand and product advertising we see in the more mature markets of TV, online, print and radio. However, a substantial proportion of mobile ad expenditure, particularly in-app advertising, is devoted to promoting underperforming/unwanted mobile apps.
There is a danger that app promotion, also know as app discovery, is artificially inflating mobile advertising, causing a bubble. This is an issue that was highlighted by Gartner last year.
As app stores become saturated with mobile apps, app owners have to spend more and more to try to convince people to download them and, more importantly, to use them. Fisku estimates that it costs app producers more than $1.59, in February 2014, to acquire a loyal app user.
This seems untenable. At some point, marketing departments will start to question if the mobile budget might be better spent on something else, for example, advertising products and services.
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