For the better part of the last ten years there have been pronouncements that ‘next year will be the year of mobile’.
These started around 2003 and the mobile web, after years of painfully slow evolution, is growing at considerable speed. But it feels that the industry is still at a loss on how to transfer this considerable shift in consumer behaviour into something meaningful in a revenue sense.
Why is this?
Isn’t what is happening now what we always thought was going to happen? Rapid adoption of web consumption via mobile. A move towards uniformity in terms of operating systems. Removal of barriers for publishing in a style native to mobile. Advertiser non-interest turning into legitimate curiosity around the mobile environment. Well yes … these were all things people thought were inevitable, but it seems like in 2012 we’re really not much closer to figuring out how mobile is going to become a contributor of meaningful incremental revenue for media companies.
If anything, the current outlook is threatening to create the opposite outcome for many media companies – it threatens to cannibalise existing revenue and even worse, move higher revenue generating users away from desktop/browser platforms and turn them into lower revenue users on the mobile platform.
If this sounds familiar, it should. The same thing happened to media companies around the world when the consumer web and the digital advertising market really exploded in the mid 2000s. The term used then was trading ‘analog dollars for digital pennies’ – which was generally a reference to newspaper companies who saw users migrate from the high yielding printed product (sold effectively as an all you can eat buffet at a set price) to the lower yielding digital product (sold a la carte via advertising). As more and more users embraced digital channels, advertising spend didn’t follow suit at the same speed. Much is said about the discrepancy between time spent per media channel and ad spend per channel – which ultimately tells a story that digital is being short changed and newspapers are seeing significant overspending from advertisers.
The same time spent versus investment allocated argument is now being used around mobile. In the UK mobile contributes one-fifth of reader traffic for 87 per cent of publishers, but just 29 per cent of them are seeing the same proportion of revenue come from mobile, according to respondents to a census issued by the UK’s Association of Online Publishers. The problem? Well, according to publishers it’s the media agencies of course. The same media agencies blamed for the lack of digital investment in the mid 2000s. See, the problem in the UK is "agencies don’t recognise the opportunity in the mobile market” but as soon as they do "mobile advertising will experience massive growth, revenue doubling within 12 months."
That is a great ambition but it’s a flawed one. Firstly, I can say hand on heart there are probably no bigger supporters of the potential of mobile advertising than media agencies. The second core issue is the assumption that all channels are created equal and that the logic that media consumption should mirror advertising investment within a channel is one of the more flawed notions that unfortunately is commonly raised by the industry. Basically, it assumes all channels offer the same level of impact and exposure, something we know isn’t true.
And this is the core issue facing mobile right now. And it’s the issue that publishers and companies betting their future growth on mobile need to think about. Content is driving the mobile web, just like it fuelled the browser based web, but the content creators are struggling to adapt their revenue generator to cater for it. You can migrate consumers onto the mobile channel. You can even build great technology that captures data and allows for targeting based on location, handset, habits and demographics. You can create compelling content that people love reading and want to spend large amounts of time with. However, all of this is irrelevant for advertisers if they cannot convert this user engagement into something that can communicate the benefits of their brand.
While online advertising via the browser is not without its flaws, publishers over the last 10 years have become pretty good at generating revenue – even if a lot of the time its via adding more advertisements to a page or delicately balancing ad impact and the user experience to create more intrusive formats. For many premium publishers, each 1000-page views can earn them anywhere between $80 and $130, others in more lucrative categories can see two or three times that.
Generating that return on mobile right now is impossible. Mobile lends itself to one, maybe two, advertisements per page. The screen size and ad formats mean matching browser yield is challenging. At best mobile revenue per 1000 page views might be $20 to $30, more realistic is $10 to $15. Herein lies the challenge. Mobile content carries with it generally the same overhead – technology, content creation cost, business overheads – but without the same yield. Users migrating from the desktop to the mobile can mean for a content-led business that you are delivering the user the same experience but for far less revenue.
The answer is in a dramatic rethink of the way mobile advertising operates. The current pseudo-web approach of banners, buttons and text links harks back to a decade ago. And it’s creating a similar issue – users migrating from one higher revenue channel to a lower revenue one but with the same operating costs. Mobile hasn’t given advertisers a compelling reason to invest meaningful dollars in the platform.
To me, it doesn’t appear the answer to monetising the mobile web lies solely in data and technology. It lies in great creativity driving impactful formats for advertisers that then utilise data and technology to enhance the message. To date, most investment in mobile advertising has been on the technology side not the creative side. Without creative solutions to ad format challenges mobile advertising will never realise its potential, and publishers and content creators will risk their entire business models being turned upside down. Again.
Ben Shepherd blogs at Talking Digital.
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