Hype in mobile advertising

By February 12, 2008 2 Comments

Don’t believe the hype

The Mobile World Congress is underway in Barcelona at the moment and surprise surprise there are some bullish forecasts about mobile advertising in the paper this morning under the heading Advertising’s lucrative new frontier.  On the operator side many in the industry are banking on mobile advertising to get them back to growth and save them from a slow death as a dull telecoms utitlity and on the device side Nokia has ambitions in this market – put this all together and it is unsurprising that these sort of messages are emanating from the industy’s flagship conference.

Leaving aside the question of whether these companies will be the ones who capitalise on the mobile advertising opportunity when it comes (hint – look at the wired internet for guidance) I want to take a look at the state of mobile advertising today.

Before I go any further I should make it clear that I am a big believer in the ultimate potential of this market – it will be huge.  The slightly downbeat tone of this post is purely a reaction to what I see as excessive hype about mobile advertising and a concern that the market won’t develop as fast as everyone hopes.

My biggest bugbear is the way people cite high CPMs and high click through rates compared with the wired web as evidence that the market is strong.  To me these are indicators that the market is still small and immature.  High CPMs are often a feature of small experimental ad campaigns where the advertiser is not that sensitive to price.  Similarly, high click through rates, whilst good in themselves, are to me a sign that people are enjoying the novelty of the mobile internet.  (It was good to read a similar sentiment in the FT article – also linked above.)

According to the FT UK operator 3 claims clickthrough’s of 8-10% on its mobile portal and Nokia is claiming 20%.  If true, I can’t believe that over the long term these rates are going to do anything other than plummet.  Nokia’s statistic implies on average users are clicking on every fifth ad – with the speed of the mobile internet today that is a seriously time consuming activity.

In the long run I would expect mobile internet traffic to be more difficult to monetise via ads than the wired web, not less.  The small screen, challenging data entry and slow networks all point in this direction.

The analysts are pretty confused as well, with estimates for the market size in 2007 varying from €58m (Jupiter) to $1bn (Informa).  That is one hell of a difference.  My gut based on anecdotal evidence of activity in the market is that the real number is near the lower end of the range.  I just don’t hear that many advertisers talking about mobile.

To finish on a positive note, I’m going to re-iterate my belief that the mobile internet will be huge.  3bn+ connected devices online of ever increasing sophistication tell me that.  I just think we will have to be patient to wait for both it and the associated advertising models to arrive at scale.