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Mobile Advertising Trends Raise Concerns on Revenue

smartphoneAnyone who has developed a responsive Web site that displays well for mobile visitors will likely find that their total audience has increased over the last few years.

If the responsive site has been well designed, the pages per visit and return visitors should be increasing as well.

Search engines recognize sites that are responsive and raise their rankings in search results because visitors will respond favorably to those results.

Unfortunately, all of this good news doesn’t mean that mobile advertising will deliver the same kind of numbers.

Numerous credible sources point to weak click-through rates and RPMs (revenue per thousand impressions) for mobile advertising.

Ironically, spending on mobile advertising continues to climb while spending for desktop advertising has weakened.

In the first half of 2014, Internet advertising increased 16 percent versus the first half of 2013, according to the Internet Advertising Bureau. At the same time, mobile advertising, which is included in total advertising, increased 76 percent.

Google continues to report declining cost per click in part because of mobile. Mary Meeker of Kleiner Perkins notes a decline in desktop shipments and an escalating growth in mobile shipments and usage.

She has previously reported an average desktop CPM of $3.50 versus $0.75 for mobile ads. SmartPhone shipments climbed 29 percent between the fourth quarter of 2012 versus the same quarter in 2013, while data usage climbed 81 percent.

These trends all point to challenges in how to make money with mobile advertising.

Problems or Differences?

In addition to the above trends, generating revenue from mobile is more difficult than desktop for several important reasons.

  1. The display area of the mobile screen of course is much smaller and potentially presents fewer ad positions than a desktop site with six or eight of them.
  2. Load times for many phone users tend to be slower than desktop. As a result, ad-heavy mobile pages will have lower pages per visit and click rates. Some ads may not display at all by the time the user leaves the page.
  3. Ad sizes have increased over time on desktops to do a better job of emphasizing brand and also to catch readers’ attention. Mobile ad sizes are much smaller except for the recent trend of using 300×250 instead of 300×100 or the original standard of 300×50.
  4. Narrow phone displays require much more scrolling, and plenty of research indicates that too much scrolling will result in the user leaving the page. As a result, they will likely see fewer ad positions.
  5. The fantastic growth rate of mobile phones and usage means mobile ad revenue will struggle to keep up.

Put these factors together, and the result is lower click rates and lower CPMs.

What to Do about It

Success with an Internet business has required a market share strategy for many companies almost since the beginning.

Where would Google, Bing, Yahoo, Amazon, Ebay, YouTube, Facebook, Twitter and many others be if they didn’t command an enormous amount of audience market share that they they turned into revenue market share?

First build an audience and then drive revenue.

If the mobile advertising trends for the foreseeable future maintain lower click rates and RPMs than desktop, one answer is a focus on audience growth.

Compare a site’s mobile performance over the most recent 30 days versus the same period a year ago. Has audience grown as much or faster than the growth in smartphones? Are pages per visit and return frequency as good as desktop or tablet?

If they are, then a site is on its way to adopting to the mobile trends and creating ad inventory that will monetize the audience.

Another tactic is with direct sales and using a CPM pricing strategy rather than CPC. If cost per click is lower for mobile, using CPM instead and charging a higher rate than a CPC equivalent will help make up the difference.

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