How Mobile May Flip The Money Switch
As news consumers gravitate toward mobile in troves, the question at many media companies is whether dollars, not dimes or pennies, will follow.
An audience-inventory problem persists in mobile because supply far outweighs advertiser demand for mobile real estate. The number of players — from local media outfits to Web giants like Facebook and Google — has driven CPMs in many cases lower than desktop, regardless of the traffic increases.
“You have this disproportionate share of mind and consumer attention going to mobile devices, and yet you also have this disproportionate, under-indexing share of wallet going to the mobile platform,” says Jed Williams, VP of strategic consulting and senior analyst for BIA/Kelsey.
“How can a consumer be spending this much time on a mobile device and the ad dollars aren’t following?”
Media companies, small and large, are trying to flip the switch.
Similar to the early days of desktop, publishers are realizing a new medium requires a new way of thinking, both in editorial and business. The native ad explosion has reached many national media brands, while smaller, metro-focused publishers are betting heavily on cross-platform sponsorships and location targeting.
In any case, the mobile ads are often packaged with digital, traditional and other marketing services, partly because of a fragmented, always-on-the-move user base and also because of the lower price points, Williams says.
“We see mobile as the quick switch from video cassettes to DVRs,” says Gordon Borrell, CEO of Borrell Associates. “Who cares what the format is that delivers the product — it’s still recorded movies.”
“If you’re an advertiser, you care most about reaching your audience,” adds Matthew Davis, director of product marketing a StepLeader, a North Carolina-based mobile app builder and ad player. “You don’t care what screen it’s on.”
Critical mass, more competitive ad units needed
Mobile, though, is 2014’s “it” medium, both for news producers and consumers. The traffic increases are alarming and the money, the thought goes, has to follow.
On the revenue side, BIA/Kelsey forecasts U.S. mobile ad spend to reach $20.7 billion in 2017, up from $7 billion in 2013 — a growth rate well above BIA’s projected CAGR from 2013 to 2017 for online, 13.8%, and traditional, 0.1%.
On the consumer side, the public relations firm Walker Sands reported in November that mobile devices accounted for 28% of its clients’ total website traffic in the third quarter of 2013, up 67% year over year. Similar reports usually conclude between 15% and 30% of total traffic now comes from mobile.
Yet the money, at least in relation to use, is not quite there. In a June study, mobile app marketer Fiksu reported mobile display cost per clicks was about 90% cheaper than desktop campaigns. Mobile CPMs, the study found, ranked behind all but social networks in prices by medium.
“For publishers, right now, it’s heaven and hell,” Anna Bager, VP and general manager of the Interactive Advertising Bureau’s Mobile Marketing Center of Excellence, told Adweek a year ago. “Mobile is cannibalizing their Web traffic, [and] they’re not making money.” (Bager could not be reached for comment.)
So, how do they change this?
For one, BIA/Kelsey’s Williams offers two requirements to succeed on mobile: a critical mass of users to leverage to advertisers and ad units/solutions that can compete with other media companies and pureplays who may specialize by vertical.
The latter may not be best accomplished by traditional “display” ads, according to mobile industry insiders interviewed for this story. A small screen size relegates most display units to 320-by-50 pixels, usually at the very top or bottom of a user’s page view, with few options for a right or left rail.
Borrell warns of mobile’s “cramming phase,” where publishers are merely shrinking ad solutions built for desktop computers onto a smaller screen. Long term, he says, this isn’t sustainable, but cautions that the medium is still in its infancy.
Even so, Gartner, a Connecticut-based tech research firm, projects display units will remain mobile’s highest-grossing format through 2017. The report also indicates video and location-based formats will grow substantially over time.
Holistic and native approaches
The Minneapolis Star Tribune predominantly sells 320-by-50 units at the bottom of its mobile app page view, according to Ray Faust, VP of sales, emerging media, at the paper. If a user clicks on the ad, a 300-by-250 ad will take over the screen, Faust says, ensuring the advertiser “a good [intended] click.”
(StepLeader’s Mind of the Mobile News Audience project reported 43% of news app consumers clicked on an ad over 30 days, of which a majority did so by accident.)
To supplement ad revenues, many media companies have unveiled sponsored apps. The most notable example may be the Dallas Morning News’ SportsDayHS app, which promises dozens of real-time prep sports scores. The SportsDayHS brand is carried across print, mobile and desktop, offering advertisers cross-platform reach that sometimes includes sponsored events.