As 2012 draws to a close, mobile advertising remains somewhere between here and there. Inventory continues to explode, but lag on the demand-side drives down prices, making targeting — and specifically location targeting — a key differentiator. Earlier this month, real-time bidding exchange Nexage said that publishers and developers were seeing a 3.8x lift in eCPMs for inventory that included location data. And a big part of the growth on the revenue side will likely come from local advertisers. BIA/Kelsey projects that mobile local advertising revenues will jump from $644 million in 2011 to $5.8 billion in 2016. That’s an 8x increase in five years.
For hyperlocal publishers, mobile may or may not be an imminent priority today — but it’s critical that they have a plan for tomorrow. Street Fight caught up with Victor Wong, CEO of local ad tech platform PaperG and former co-chairman of the IAB local committee, to discuss how local publishers can best tackle mobile in 2013. Wong will be giving a presention titled “Form vs. Function in Hyperlocal Advertising” at the Street Fight Summit in New York in January.
PaperG came out with a survey last month that showed a big jump in the amount of mobile inventory being created by publishers. How does this affect the market dynamics for local publishers?
There’s certainly a lot of inventory being created now. Monetization of that is improving, but it’s starting from a low point. For the most part, the CPMs that people are getting on mobile inventory aren’t great, but with news publishers in particular, that can vary. There’s this weird curve where the more constrained your inventory is, the better your CPMs tend to be. That’s mostly because news publishers can sell out their mobile inventory to a single advertiser. As publishers get bigger and bigger on the mobile side, the CPMs start leveling out because it gets harder and harder to fill out the inventory.
We have seen a lot more creation of mobile inventory on the whole, and as a result there’s more interest in selling mobile advertising. Inventory is going up; interest is going up, but compared to desktop, CPMs tend to be much lower when when you go up in size. But, there’s definitely a big opportunity for the smaller guys.
From an advertiser’s perspective (or that of a publisher selling to an advertiser), what’s the big advantage for local players in mobile?
It has to be location data. The degree that display ads can utilize location data, and the value drive from that, is incredible, especially from an advertiser’s standpoint when you couple it with the back end. The costs are so low for the inventory that you’re able to get larger reach, for cheaper, with more targeting on mobile. It’s a great value in that sense; it’s just been hard for them to execute the campaigns.
Mobile remains very small part of the revenue breakdown for most hyperlocal publishers. How do you see the breakdown between mobile and desktop evolving in the coming years?
That’s the trick: Where do you as a publisher dedicate your resources both on the publisher’s side as well as the sales side? On the supply side, it just depends on how swift the publisher is pushing their audience toward a mobile format.
Mobile is sort of the next step down from print and desktop on the revenue scale today. You make less money from mobile than you do from desktop, and so you’re likely less inclined to push users toward mobile because you can sell volume at a better rate online. My take is that you’re going need to get a mobile-first publisher, or natural push from readers, to really start to drive the audience toward mobile. When, and if, any of those happen. mobile will become increasingly important to the bottom line but will remain smaller than the overall desktop sector.
What are some of the common mistakes publishers make that diminish the success of a mobile campaign?
The problem is generally when they aren’t designing the creative or campaign around mobile versus the online piece. With mobile, you’re using it on the go, so call-to-action messaging works extremely well, and the messaging can be much more immediate and driven, pushing consumers to either make a phone call or a visit. The emphasis is much more on getting a consumer to do something right now, [rather] than general brand awareness.
Also, publishers haven’t explained the value of mobile to the best of their abilities and that’s part of the reason that CPMs haven’t been as high. For a lot of advertisers, it’s either been experimental as far as their ad budget, or, for the smaller guys, not well explained or well sold. It’s probably a function of how much demand there is.
The inherent locality of mobile and the success of more call-to-action campaigns seems to make mobile particularly effective for smaller advertisers. Between the national and local spend on mobile, what’s the breakdown today and where do you see that breakdown heading tomorrow?
In terms of a breakdown between large and small advertisers, I think the spend [from smaller advertisers] is going increase over time. Right now, it’s starting from a very small base just because the local sophistication is not as a high as the bigger guys who have been experimenting with it for a while. I think you’re going to see that exploding over the next couple of years. The smaller guys should make up about a third to half, whereas right now they account for about a quarter.
One of the transformative qualities of mobile is the ability to separate location targeting from local content. Where does context fit into a mobile environment in which all inventory has the ability to reach a local audience?
There’s definitely a value for local context. We did a study a few months ago and found that the performance of an ad as measured by engagement was far higher on local publisher websites. I imagine that holds true for online as well. Context does matter. It seems to me that users that consume local content are much more predisposed to explore for more information about their local area than if you’re doing something that’s completely out of context. It can still drive action as long as its audience targeted, but that’s an extra layer implicit in content.
Steven Jacobs is deputy editor of Street Fight.