ADOTAS — In a recent research published by IDC, publishers are becoming a driving force in the world of mobile advertising, with Internet giants such as Facebook, Pandora, Twitter, and The Weather Channel dominating top advertising spend charts in the U.S.
So should mobile ad networks be concerned? According to IDC, the answer is yes. In 2012, those “mega publishers” controlled 52% of U.S. mobile display ad spending, compared to the 39% they received in 2011, and Facebook is leading the way. In a market growing by 88% annually (to a total of $4.5 billion in 2012) and with mobile marketing now eating about 11% of the total digital marketing spend, this is quite an achievement.
But many other sources think otherwise. According to eMarketer, Google, the ever reigning leader of digital advertising, collects 57% of mobile ad revenue in the United States, while Facebook, its nearest competitor, gets just 9%. Social networking only makes up about a quarter of iPhone and Android app usage, according to Flurry Analytics.
Regardless, are we actually seeing a growing trend? Are ad networks really losing their grip to those “mega publishers”? Let’s see where the real money is, since one would assume that’s precisely the same spots where mobile marketers would want their brand to appear. According to Hubspot, 73% of smartphone users say they used mobile websites, rather than an app, to make a purchase. Considering that all the publishers mentioned by IDC gain their traffic through their own apps, one can argue that in order to get true visibility that actually leads to conversion, brands should definitely stick to other publisher’s traffic. In today’s ecosystem, one can only make this happen through the ad networks.
But another argument favoring the ad network ecosystem is the example of Google and the immense success the search engine giant sees in search ads. Mobile Marketer claims 9 out of 10 mobile searches lead to action; over half lead to purchase. With such a success rate, can brands actually afford not allocating money to theIinternet giant?
The Three Pains of Mobile
If one is to discuss the real pains of mobile marketing, whether you are an ad network or a direct publisher, it would be small screens, small ads and a lack of relevancy. Small screens with small ads make the already “invasive” experience of display advertising into a much bigger issue with mobile. No mobile site or app publisher takes this topic lightly; you always have to keep in mind the user experience.
The solution Facebook and Twitter are both using is “native ads”. The concept is simple: Iinstead of inserting small annoying banners, unrelated to the actual user experience, they incorporate mobile promotions into their users’ feeds and timelines. They claim that the content actually relates to the user’s individual interest. In fact, these ads have never been proven to work. Relevancy remains questionable and with ad topics often completely unrelated to the user’s actual timeline entries, the mobile user may still feel they are invasive. However, Facebook has announced a new partnership with several players that all deal with user behavior analysis. They are hoping this will be the solution to this issue. Facebook, of course, has massive amounts of a user’s personal information. So their quest to match ads to users by relevancy only makes sense.
Relevancy is an issue ad networks are facing as well. While most of them work directly with mobile publishers and have the ability to access user information, they still fail to develop technology that accurately matches the right user to the right offer. The end result is that not only do they take over space on the user’s screen, they also end up serving ads which contain little to no relevancy to the user. This is the blind approach, otherwise known as “spray and pray.”
The good news is there are more advanced mobile platforms walking a different path. They realize the potential value of deep integration with the publisher’s traffic sources. The approach they’ve developed and use is called Real Time Performance. Essentially it means technology that is able to automatically learn user behavior, gather data and match specific ads to an individual end user, based on the latter’s past purchase history and mobile behavior. The bottom line is improved with increased ad relevancy and a higher value for the publishers’ ad space.
Sophie’s Choice for Publishers
So can all publishers go solo? The simple answer is no. Facebook, Twitter and Pandora all have the means and volume to connect directly to advertisers, which is the driving force to mobile monetization; no ads, no income. The technology behind these platforms is so robust and with an ever-growing demand for ad-serving accuracy, neither mobile publishers nor ad networks can allow themselves not having these. Small app developers and mobile site owners cannot afford to sustain such an operation, unless they run a business that scales like Facebook does.
The simple reason behind the idea of becoming an independent publisher is as old as business itself; cutting out the middle man (ad networks) and gaining back the substantial amount publishers regularly lose in monthly ad network fees (around 20%). When added to the rate ad exchanges typically charge, publishers are left with about 50% of their actual mobile traffic value.
But with Google having control over 75% of mobile traffic (Android anyone?), it’s still a force to be reckoned with. No publisher, big or small, can gain access to all users, in all regions unless they cooperate with Google and the rest of the ad network, all representing a big chunk of the mobile industry’s traffic sources and leading advertisers.
Status Quo for Now?
There is no doubt that current advertising and mobile traffic monetization models are lacking in structure and are continually being re-designed by market forces (ad network fees are negotiated, ad exchange models become free-of-charge, etc.). But with more players getting into the game and more Internet giants (yes, Yahoo! is already taking huge steps in this direction) eyeing the ever-growing marketing budgets allocated to Mobile, it seems that mobile ad networks, of all sorts, will continue being the “alternative of choice” to most advertisers, looking for true visibility, where it really counts — right at the palm of your hand.