Editor’s Note: This discussion about mobile economy is one of the five themes we will be focusing on at the VentureBeat Mobile Summit, on April 25-26. We’ve carefully invited the top executives in mobile to discuss the biggest challenges of the day, which, if solved, can lead to much faster growth in the industry. And at our mobile “economy” session, we’ll talk about how monetization of mobile needs to move beyond just advertising, and we’ll have executives at table from the most important players, including Verizon, AT&T, Google, Zynga, Facebook Yahoo, Microsoft, Qualcomm, and many more.
Much has changed in the last few years, as mobile devices have shifted from a niche product to mainstream necessity. Along with the growth on the product side, monetization has followed, as Google’s recent earnings call demonstrated. We were fortunate to join the team at AdMob that pioneered some of the first mobile smartphone banners, which have driven results for advertisers and publishers alike for years.
However, now that smartphones are increasingly consuming users’ attention and discretionary purchasing dollar, we are starting to see a shift in how advertisers and publishers think about monetization in mobile. This is resulting in a new wave of mobile advertising innovation – “mobile ads 2.0” – and with it, a wide range of novel approaches.
Evolving from “set it and forget it” to “take control”
The key theme of mobile ads 2.0 is publisher control. We see publishers monetize successfully in three primary ways: through selling engaging rich media ad formats directly to advertisers; merchandising virtual goods and cross-promoting other apps in their portfolio to drive them up the rankings; and finally, leveraging ad networks.
Pandora is an illustrative example of the first strategy. They monetize by signing deals with companies like LivingSocial directly. These ads target users based on their location and deliver them a customized, relevant message with a clear call to action. If the user responds to this promotion, they can share their information with LivingSocial with a single tap and no complicated lead-gen form. Pandora can track how this impacts the user experience and limit the ads to some small time interval. Since there is no middleman involved, Pandora and the advertiser can get a better deal by working together.
Smart publishers are using fine-grained tools to execute and refine their strategy
Mobile monetization is not just about ads though. In fact, aggregate revenues from direct end-user spending still dwarf advertising revenues on mobile and are projected to continue to do so for quite some time. An example of how you can leverage this is OurGroceries who uses an in-app purchase on Android to allow users to remove advertising from their application for a certain amount of time. Or take PocketGems, which not only uses an offer wall to drive revenue but also periodically uses interstitial cross-promotions of new PocketGems releases to drive them up the rankings quickly.
The best part about these activities in mobile applications versus their traditional counterparts on the web are the transactional capabilities inherent in the Android and iOS platforms. Publishers can measure exactly how effective their merchandising efforts are in sometimes unprecedented ways. They can determine how often an interstitial leads to a purchase or install vs. a banner ad, and the optimal number of times a user sees an ad creative before it is rotated out.
Mobile ad networks are a component of successful monetization but can’t be everything
It is tough for the small to medium-sized publisher to deliver the level of reach that a large, brand advertiser needs to communicate their message. This is where ad networks have traditionally come in, and it is likely that this will be no different in mobile. These companies range from established networks like iAd and JumpTap to new entrants like Kiip and Qriously with entirely new approaches to advertising on mobile. Even for large publishers, these ad products can complement the rest of a publisher’s ad targeted strategy to achieve optimal monetization with modest effort.
Friendly, the popular Facebook application for the iPad, uses this strategy to great effect. By leveraging ad networks in particular geographies where they have deep sales expertise and contacts, Friendly’s overall eCPMs can outperform just using a single network. Then they can layer the more sophisticated strategies on top of their steadily growing inventory to drive more revenue without being dependent on a single partner.
Publishers can now be in the driver’s seat
As we’ve seen above, a single monetization strategy doesn’t fit all in mobile. The capabilities of the platform are too rich and diverse for that to be the case. Mobile Ads 2.0 will be characterized by publishers increasingly taking control of their monetization strategy to drive more revenue and create better experiences for users.
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