Why monetising mobile is no picnic

[By Richard Mullins]

We’ve all heard the big numbers: there are more than 4,6bn mobile phones in the world, many countries have more cellphones than people, and there will be more smartphones than PCs in most countries by 2013.

The fact however remains that mobile advertising in 2009 accounted for a paltry US$1bn-$2bn of the $460bn global advertising market, even if growth rates are impressive at 20% or more per year in most markets.

The single reason that mobile advertising hasn’t yet exploded is that mobile Internet browsing is not yet a mainstream activity in most countries. Though mobile display and mobile search will grow, their reach and the time users spend with them remain relatively low and the payoff for marketers simply isn’t that great yet.

The end result is that it is still difficult for most marketers and publishers to monetise the mobile channel. Perhaps one reason that we are battling so much is that we’re over emphasising the importance of mobile display ads and ignoring the real advantages that the mobile channel offers today, whether you’re a publisher or an advertiser.

One of the most important of these is the fact that the mobile world offers a robust infrastructure for distributing mobile applications as well as a culture of paying for online content that is largely lacking in the traditional Internet.

Consider the booming mobile apps market, which is expected to grow from 7bn downloads in 2009 to over 50bn downloads in 2012. The total value of this market by then will be more than $17bn/year, a number that will be larger than the projected total global CD sales for 2012.

Interestingly, a huge proportion of mobile apps are paid for rather than free, with big disparities between different device platforms. For example, 75% of all apps downloaded through the Apple iPhone app store are paid for, as are 85% downloaded from Nokia’s Ovi store and 76% from BlackBerry App World.

Android-based phones buck the overall trend, with 57% of apps downloaded being free. This is hardly surprising considering that the Android platform is more open than the tightly controlled app stores of the competing handset operating systems.

What this does show us is that the mobile market is still fragmented and complex, which makes it hard to achieve the scale one needs to be truly successful. You can’t simply develop an app that works on BlackBerry and also works on Android.

The problem of inconsistent operating systems will fade away over time as smartphones become more like small computers that support cross-format standards. Already, devices such as the iPhone and iPad play nicely with older online standards like animated Gifs.

The opportunities in the future could be immense. For example, there’s huge potential to meld social content from location-aware applications like Foursquare with advertising and rich content. It will allow advertisers to deliver content to users relevant to their location or profile.

What this means is that marketers need to be thinking about how they could be engaging with their customers using mobile in a more sophisticated manner.

The mobile advertising opportunity will grow considerably in years to come, but we should not ignore the way that people are already using apps on their smartphones to engage with rich and location-aware content. What the devices and integration will look like, only time will tell.

  • Richard Mullins is director at Acceleration

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  • Great article Richard, Thanks

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