The advertising economy in mobile, part 2: why it’s still relatively small (but bound to change)

In part one of this series, I noted the economic disparity between TV and digital advertising revenues on the one hand, and mobile advertising and app revenues on the other. To understand why mobile ad revenues aren’t as substantial, consider these three obstacles facing the mobile advertising industry. Each will need to change in order for revenues to flow more abundantly.

  1. Advertising supply glut: there is more content available to monetize via advertising, with hundreds of thousands of apps, millions of mobile and traditional websites, hundreds of millions of web videos, and much more, all eager to sell real estate to advertisers. That drives down advertising costs in general, but as the newcomer to the party, mobile may feel those effects even more. Social advertising falls in this category, too.
  2. Usage patters disadvantage mobile advertising: at my company, we often describe mobile usage as “snackable moments.” I love the description. Think about your smartphone use. You catch up on scores while waiting in line. You watch a movie trailer while taking the bus or train. You play a couple of levels of your favorite game while waiting for your doctor. I’m hard pressed to think of many times I’ve spent more than 15 continuous minutes with any one website, app or content item on my phone. Compare that to TVs and, increasingly, laptops and tablets, where watching or reading in 30 minute increments or more is the norm. These relatively short bursts of activity on smartphones make it harder to meaningfully engage users with ads. Small screen sizes also limit the advertising experience possible on a phone.
  3. The “ick” factor: smartphones have all your contacts, They know where you are. They contain your favorite family photos. They know your browsing and app usage history. Advertisers have to be very careful not to appear intrusive because anything that is not deeply personal or relevant to you is seen as alien.

These are substantial barriers to growth, but mobile isn’t the first advertising medium to face growing pains. The digital advertising business went through turbulent times in its early days, surviving the dot com bubble bursting and the massive decline in click-through rates to become a force today. I suspect that radio and TV advertising industries faced their own obstacles on the way to legitimacy. I therefore don’t think any of these challenges will stunt the mobile advertising industry’s potential in the long run. In fact, the very existence of these other ad industries leave me thinking that mobile’s ascent is inevitable. Toward that end, in the third installment of what I originally thought would be a two-part series, I’ll offer some guidance on specific ways companies vying for leadership in this industry should evolve to spur their growth.

Also, remember that there are several other good reasons today to mobilize your business aside from generating direct revenue. (More on this coming in a future post.) If direct revenue generation is the goal, though, keep the numbers and challenges I’ve provided in mind as you build your forecasts, and give you and your business a runway long enough to make the inevitable mistakes, learn, and optimize.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: