Mobile Device Ads on Rise

Story first reported from forbes.com

Worries that mobile advertising will never amount to much have investors worries about even relatively strong companies such as Google and Facebook. And there’s reason for concern, from whether people want their little smartphone or even tablet screens cluttered with ads to whether advertisers will ever be able to know, for instance, that someone who sees an ad then went into a physical store and bought something.

For now, though, the advertisers who command the marketing budgets don’t seem too concerned. According to a new report, search ads in particular are growing rapidly on mobile devices, especially tablets. The study, from online ad management firm Marin Software, points up several interesting trends, pretty much all of them a positive for advertisers and search engines–mainly Google, since it still owns 81% of all search ad spending.

First, a lot more clicks on search ads are coming from mobile devices, says Marin Marketing VP Matt Lawson. In the U.S., mobile devices accounted for 18% of paid search clicks, up from 14% in the first quarter. And in an indication of a surge in tablet ownership and use, the share of clicks on tablets, at 8%, was up 33% in the quarter.

More important to advertisers, those tablet clicks are paying off. The cost per click for search ads on tablets is 18% lower than for ads on desktops or laptops. And the click-through rate is 42% higher. Putting both together, advertisers are getting more bang for the buck on tablet ads.

Lawson says that may not last forever. One reason for the difference is that not as many marketers are aiming ads specifically for tablets, so those that do don’t have as much competition on keywords. Indeed, the cost-per-click gap is already starting to close.

Still, the results are prompting marketers to shift their budgets toward tablets. The share of Marin’s 1,800 advertisers’ and agencies’ overall online ad spending that goes toward tablet campaigns rose 40% in the second quarter alone–from 5% of budgets in March to 7% by June.

Not least, Lawson says, the conversion rate–ad industry lingo for clicks that lead to a sale, a lead, or another desired action–on tablets is comparable to desktop ads. In other words, it’s better than on smartphones, which still lag behind desktops in conversions.

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Mobile Revolution Powering Shift to a Connected World

Boston Globe

Emily Nagle Green is president and chief executive of Yankee Group, the Cambridge technology research firm. She is also the author of the recently published book, “Anywhere: How Global Connectivity Is Revolutionizing the Way We Do Business.’’ She recently spoke with D.C. Denison of the Globe staff.

Will the mobile revolution be bigger than the Internet? Yes, I think so. Over a 10-year period, the Internet connected about a billion people. This revolution will touch 5 billion people, but more importantly, it will probably touch a trillion things. And once you do that, you create a structure that will support the building of a lot of value on top of that.

What kinds of things will be connected? A pill bottle is a good example. I have one that was developed right here in the Boston tech hub by a company called Vitality. It’s connected to the Internet, and it communicates when it is opened and closed. The value is that other people, like family members, can keep track of how well I’m doing in taking my medicine. But there are many other things that are also getting connected: pianos, pallets in factories, vending machines, miners’ helmets — all sorts of objects can now report where they are, whether they are full or empty, wet or dry, running smoothly or broken. The ability to send that kind of information to the network in real time is important. These things are better, more useful, because they are connected.

Will the next Google be a mobile firm? Could well be, and it could even be Google, because Google recently said that they’re now putting mobile first in their business.

Has the growth of mobile been accelerated because executives are fascinated by these gadgets and the connectivity? You’re half right. It’s being accelerated by enthusiasm, but not just executive enthusiasm. It’s the enthusiasm of incoming employees and workers. We’ve all gotten quite savvy as individual consumers, and we’re taking that into the workplace. The millennials are bringing a much savvier sense of technology into the workplace. It’s that energy that’s pushing businesses toward the anywhere revolution.

Is all this connectivity going to benefit developing countries more than people in the United States, Europe, Japan, etc.? There’s a whole different set of benefits emerging in those developing markets. In the Boston area, for example, mobile experiences are supplementing experiences we already have access to, like banking and health care. But the mobile benefits that are emerging in places like India are often their first opportunity to get access to health care or banking. So it’s completely transformational for them: It’s contributing to changes like increased literacy and longer lifespan.

Is there anything that could derail this mobile revolution? There are a whole set of threats. I don’t think anything could stop it completely. But the wrong kind of regulation could slow it down.

What is the most recent connected device that you’re now using in your home? It’s a cool thing called a Chumby. It looks a little like an alarm clock, and it’s taken the place of the alarm clock on my night stand, but it’s much more than that because it’s connected via Wi-Fi to the Internet and it rotates through a series of widgets according to how I set it up. Mine displays the time, but it also wakes me up to Pandora Internet Radio in the morning, shows me headlines from The New York Times and The Boston Globe, and displays feeds from Twitter and Flickr. It’s a new path to me as a consumer. It’s a path beyond the computer, radio, phone, and TV.

What was the last mobile app you downloaded? RedSox.com. I like to have latest stats available in real time on my mobile device.

Do you try to plan and protect offline time? I do, but I’m not always successful in keeping my promises. We have a summer house in Pennsylvania, and one virtue it has is that the connectivity there is really poor. My daughter finds that annoying, but it does make it a place where it’s pretty easy to keep my promise to stay offline.

Squeezing Websites Onto Cellphones

The Wall Street Journal

When a group of engineers at National Instruments Corp. modified a 1988 Oldsmobile so it could be controlled by an iPhone, the company was quick to share the project on its online forum for customers.

A spouse "might not care about it, but our community eats it up," said Deidre Walsh, community and social media manager for National Instruments, a supplier of automation and computer measurement tools.

The Austin, Texas, company has a fostered dedicated online group of 125,000 engineers and scientists with do-it-yourself projects. Its strategy illustrates how companies have increasingly turned to Web communities to build their brand, address customer service problems and unveil new products.

But as people spend more time on their cellphones, many companies are considering taking their message boards, user forums and blogs to mobile devices. National Instruments is considering ways to build a mobile site, Ms. Walsh says but has to resolve issues such as how users can share programming code, which are large files.

Other companies, including technology giant Hewlett-Packard Co., are discussing ways to build their first Web sites specifically for wireless users. "We definitely have work to do to get our Web site mobile friendly," said Lois Townsend, H-P's director of community. "We know our customers want it."

H-P has a financial incentive to expand its community strategy. The forums, which often address problems before a customer has to call the service line, have saved millions of dollars in deflected calls, Ms. Townsend said.

The move to mobile isn't without challenges. Companies have to decide whether to create a barebones site accessible by even the most basic handset, or opt for a flashier application accessible by select smart phones. Different phones, screen sizes and platforms create headaches for site designers.

Mike Hardy, community manager for Pitney Bowes Inc., says moving the company's online forums to mobile devices is a "no brainer" though the postage-meter maker is still evaluating technologies to do so.

H-P and Pitney Bowes aren't the only companies without a mobile-friendly site. Among others without a significant mobile presence are retailer Ikea International A/S, Samsung Electronics Co. and Apple Inc. Samsung says it is exploring the possibility of mobile site but declined to comment further. Ikea and Apple didn't respond to requests for comment.

There are some who believe that the idea of a site designed for phones is becoming less relevant as mobile browsers improve. Most smart phones, for instance, are able to load up sites built for the computer.

Some companies are hesitant to build a mobile site because they want more than just a simple page displaying wares, said Robert Chimsky, a consultant for inCode Telecom. While there are still many companies without a mobile site or application, "given the way things are moving, having a mobile-enabled capability is going to be increasingly important," Mr. Chimsky said.

Companies, however, have to avoid overloading customers with information. "You have to be very careful of what you're pushing and how you're pushing it," Mr. Chimsky said. "It's that relevancy angle that's so hard."

The cellphone affords the opportunity to be more interactive with customers. That's where companies such as Lithium Technologies Inc. come in. The Emeryville, Calif., company's software runs the social components of many traditional Web sites, including those of H-P, AT&T Inc., and Best Buy Co.

Lithium wants to take those forums, blogs and other social-networking elements to cellphones with a service it plans to roll out next year. Beyond its own social-networking tools, the platform will draw in related feeds from services such as Facebook and Twitter.

"A lot of these companies don't have a mobile site, and right away, they'll have a lot of content," said Philip Soffer, Lithium's vice president of product marketing. "Because the community is active and based on addictive behavior, it's the kind of thing that works well on mobile phones."

Lithium declined to provide the pricing for its upcoming service, which would work on any phone.

It's not the only company looking to bring large corporate sites to the mobile Web. Rival Jive Software Inc., which powers communities for companies like Nike Inc., SAP AG and National Instruments, has opted to go with a program specifically designed for the iPhone.

The Portland, Ore., company last month unveiled an iPhone app that gives corporate workers access to Jive-powered message boards and blogs. While the app is a free download, Jive charges a company $10,000 a year for up to 1,000 users.

For BlackBerry users, the company has a simpler Web interface and email alerts on community developments.

Unlike Lithium, Jive is focused on smart-phone users, noting that sites specifically designed for the devices can do more. "We think the magic happens really when you're able to go deep with functionality," said Ben Kiker, Jive's marketing chief.

Google Sharpens Aim On Mobile Marketing With AdMob

AP

Four years ago, Omar Hamoui was just another ineffectual entrepreneur trying to spruce up his resume in graduate school.

Now, he's poised to become Google Inc.'s newest weapon as the company aims to extend its dominance of online advertising from computers to mobile devices.

Google is buying Hamoui's expertise in a $750 million acquisition of AdMob, a network for ads on iPhones and similar gadgets. He launched the business while struggling to support his wife and children as a student at the University of Pennsylvania's Wharton School.

Hamoui, 32, changed his life by setting up a system for advertising on mobile devices. Though that sounds simple, it was a breakthrough because Hamoui's network got around stifling controls that wireless carriers had imposed on the content their customers could see on their phones. The crack that AdMob opened in the carriers' "walled gardens" made it easier for independent programmers to profit from applications planted on mobile phones.

Users tend to click on mobile ads five to eight times more often than they do on PC ads

"It took a lot of guts because (the carriers) were the gatekeepers of the industry," says Rich Wong, an AdMob investor and board member who is with Accel Partners. "Back then, it was sort of like if you said no to the Godfather. Bad things could happen."

More than a year after Hamoui ignited the fuse, Apple Inc. blew up the status quo with the June 2007 introduction of the iPhone - which created a platform for applications chosen by users.

That has spawned more than 100,000 mobile "apps" for doing everything from bird watching to cooking poultry. The revenue from AdMob's ad network is one of the main reasons application developers can give the programs away or just charge a few bucks.

"Omar was absolutely the tip of the spear in this mobile media revolution," says Jason Spero, general manager of AdMob's North America operations.

If Google's proposed acquisition is approved by the U.S. Federal Trade Commission, Hamoui thinks he and AdMob's 150 employees will be in an even better position to turn mobile phones into moneymaking magnets.

Google is banking on it.

Drawing upon the more than $20 billion in revenue that it generates from Internet ads, Google has been investing aggressively in mobile technology. The Internet search leader has developed a free software system, Android, that runs mobile devices and is experimenting with its own phone, called Nexus One, that could be sold directly to consumers.

Google believes explosive growth in mobile advertising will justify its spending. For now, the market remains relatively small, with U.S. mobile advertising revenue expected to reach $416 million this year, according to the research firm eMarketer Inc.

AdMob has delivered nearly 140 billion ads on mobile Web sites and applications since its inception. That has helped AdMob double its revenue this year after tripling it last year. Hamoui won't be more specific, leaving it to analysts to estimate that AdMob's revenue this year will range between $45 million and $60 million.

That's less revenue than Google generates in a day. Nevertheless, AdMob's early lead in mobile advertising could trouble antitrust regulators already concerned about Google's growing power. The Federal Trade Commission has asked for more information about the deal - a sign that regulators want to take a closer look at how it will affect competition in the mobile ad market, which is expected to quadruple in size during the next four years.

Only two of Google's acquisitions have been bigger than the proposed AdMob deal. Regulators quickly approved Google's $1.76 billion acquisition of the Internet's top video channel, YouTube, in 2006 but took a year before signing off on the $3.2 billion purchase of another Internet ad service, DoubleClick Inc., in 2008. (By coincidence, AdMob is headquartered across the street from where YouTube started in San Mateo, Calif.)

Google contends its AdMob acquisition won't hurt competition. Among other things, Google points to other mobile ad networks from rivals such as Jumptap, Mojiva and AOL and argues that mobile ads still don't generate attract enough spending to be considered a distinct market.

Hamoui started AdMob out of frustration a few months after he enrolled in graduate school. He was building a phone-friendly Web site to make it easier for people to share photos with their family and friends, but he couldn't seem to attract much traffic.

To get the word out, Hamoui bought ads that would appear alongside certain search results at Google, Yahoo and other engines. That ended up costing him about $30 per referral, which he couldn't afford. So Hamoui decided to try advertising his site on other mobile Web sites, which are specially designed to work with the small screens and technological restraints of mobile phones.

Hamoui found a mobile Web site willing to run his ad for dramatically less money and wound up paying just 10 cents per referral. The experience resonated with Hamoui's studies on efficient markets, and inspired him to build a network that would make it easier to advertise on mobile devices.

If nothing else, he thought he might be able to turn the ad network into a project that would let him get out of having a conventional internship during his summer break in 2006. As it happened, AdMob created enough buzz that Hamoui dropped out of Wharton in the spring.

One key element of his system is that it lets programmers specify when and where ads can show up while their apps are running on a phone. Advertisers, which range from mass merchants to other app makers, can aim their messages widely - for instance, to everyone with an iPhone. Or ads can be aimed at a particular demographic. An ad for the movie "Fast and Furious" might show up on a mobile game such as "Tap Tap Revenge" that's popular among young men. The targeting frequently hits the mark: Users tend to click on mobile ads five to eight times more often than they do on PC ads, Hamoui says.

Jim Goetz, who joined AdMob's board after his firm, Sequoia Capital, put up the first $4 million of the $47 million in venture capital raised by AdMob, likens Hamoui to some of the other successful entrepreneurs that Sequoia has backed. That group includes Apple's Steve Jobs, Yahoo co-founders Jerry Yang and David Filo, and Google co-founders Sergey Brin and Larry Page.

"Omar is a lot like them," Goetz says. "He has the ambition, the intelligence and that special sparkle."

By selling his startup to a larger company, Hamoui is doing something those other entrepreneurs didn't. His investors say he didn't do it for the money - AdMob still had plenty in the bank, and Hamoui doesn't seem to be driven by striking it rich. He still drives a lime-green Toyota Camry that elicits good-natured gibes around AdMob's offices. When he splurges, he does so frugally. AdMob's holiday party is being held next month when the prices are cheaper.

"It just seemed like we would be able to do the things we want a lot faster and a lot better with the resources we will have at Google," Hamoui says. "We already have achieved a big part of what we wanted to do - getting mobile seo advertising going and making it possible for people to start a mobile company without having to do a deal with a carrier first."