Mobile advertising is coming into its own, and companies that sell advertising are racing to stay ahead of the curve. Google of course intends to be one of those companies. The search engine giant relies on advertising for the revenue that is funding its myriad ventures into everything from wireless networking to contact lenses. But that revenue stream is under attack as users spend more time on smartphones and less time at computers. Smartphones have smaller screens, and that leaves less room for ads. When Google reported earnings yesterday, the company said its cost-per-click was down 9% from the year-ago quarter, reflecting the shift of ad inventory to lower-priced mobile ads.
Mobile does offer advertisers one key advantage which is the opportunity to make location-based offers. The problem for giants like Google is that location-based offers are most appealing to smaller businesses than to the corporate giants with huge advertising budgets.
But even businesses that are not necessarily looking for foot traffic know they need to reach consumers on their mobile devices, and many have responded by launching mobile apps. Ads that prompt a user to install a mobile app have been very successful for Facebook. The company doesn’t share financial results related to these “app install ads” but one software executive we spoke to estimates that Facebook gets $3.00 to $5.00 every time an app is downloaded.
Now Twitter is jumping into app install ads and integrating its own advertising platform with the MoPub ad exchange it bought last fall for an estimated $350 million. The combined platform is currently in beta testing with select customers in the U.S. “Our campaigns to date have consistently yielded high-quality, transactive app users, which is more than can be said about the vast majority of mobile ad platforms out there right now,” said Russ D’Souza, co-Founder of ticket search engine SeatGeek in a press release.
Mobile operators are busy exploring ways to participate in advertising without frustrating their customers. Telefonica is plunging in head first, launching its own mobile ad exchange with help from Blackstone.
Analyst Sue Rudd of Strategy Analytics believes carriers will eventually offer lower data rates to customers who accept advertising. “I think that market is taking off,” she said. “Both Juniper and Cisco have set up the edge routers for that.” She thinks ad insertion based on local information will be a good business for carriers, and says the media team at Strategy Analytics is already seeing “real money” there.
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