Edward Tessen Tanaka
Jun 6, 2012
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Mobile ROI: Show me the money

Despite the popularity of social media sites like Facebook, online and mobile advertisers have had difficulty showing that investments in mobile advertising are worth the return.It's no secret that mobile is huge right now. With smartphones, tablets, and other mobile devices becoming so widespread, businesses, entrepreneurs, investors and advertisers alike can all see the potential benefits of entering the mobile market. Unfortunately, mobile is turning out a lot like social media; the usage and adoption stats paint an amazing picture, but because of these same variables, the return on investment for mobile initiatives is difficult to quantify and qualify. Interestingly, but not surprisingly, many social media platforms are tightly integrated with mobile technologies. Both work together and form a synergy that increases usage, but neither has provided a sustainable business model in which profitability -- an archaic word to many in the technology space -- is obtained.

Mobile Monetization: The Emperor Has No Clothes

Recently, these monetization deficiencies were highlighted by GM when the company elected to GM recently decided the $10 million it planned on investing on digital advertising was no longer a worth investment.withdraw -- in a very public fashion -- the $10 million they had allocated for contextual advertising on Facebook. Apparently, contextual advertising, which serves up online adverts based on a user's behavior and personal information, wasn't selling any automobiles, so GM pulled the account. Not surprisingly, most mobile business models frequently reference contextual advertising as being a critical component on their "road to profitability." While many are quick to question the financial figures that such organizations provide, not as many are quick to question the success of the adverts themselves. The problem is that everyone seems to operate on the premise that mobile advertising works and thus can be monetized and projected. According to a lot of customers like GM - who have a bad taste in their mouth called buyers' remorse -- it doesn't.

Mobile and Social Media: Sacred Cows Make the Best Hamburgers

The monetization of mobile is an elusive goal for a lot of different reasons that need to be addressed in order to gain a holistic understanding of the market. Why do some entities -- both governmental and corporate -- focus so much effort on the mobile space?

On one side of the spectrum you have organizations that are adopting the mantra of "Mobile First." Mobile First -- as the name implies -- is both a design philosophy and a to-market strategy that prioritizes the needs of mobile users (and customers) by having the sponsoring organization focus their attention on creating websites and applications that are optimized to function on portable devices. If you think that Mobile First is just a passing fad -- based on the marketing appeal of mobile devices -- consider that both Eric Schmidt and President Barack Obama have recently spoken on the importance of a Mobile First strategy. Several large entities, including Google and the Environmental Protection Agency, have adopted Mobile First.

This is a big problem. Mobile First, for a government agency, makes sense because of factors around the digital divide. The digital divide exists in that some citizens do not have the financial means to purchase a desktop or laptop system, meaning that they use their phones as their primary communication devices. Therefore, in this case, Mobile First does make sense due to the social mission component of many governmental agencies, which are usually taxpayer-funded.

Mobile First makes less sense for corporate entities because the very adoption of the strategy means that more popular mobile devices -- like smartphones -- will be optimized upon for budget if nothing else. This means that "lesser" portable devices will be ignored or designed without the ability to access full site/application functionality. Ultimately, this means that the audience that uses mobile most -- as a replacement for their desktop and laptop systems because of economic considerations -- will also be the audience to least benefit from a mobile move. Have you ever been forced to wait to use another system to finish something you were doing because you couldn't access a necessary function on your mobile device? While it has happened to nearly everyone, there is a large segment of the population that doesn't have "another system."

Outside of technological complications, context is another issue to address. The problem with mobile ads is that when people see them, they are usually just that: mobile. When people are out and about, using their smartphones, they typically don't like to be bothered with ads because whatever they are doing is more important. Mobile ads also don't take into consideration that people who are not paying for unlimited plans absolutely do not want to pay to receive an advertisement - and these unwanted messages are notoriously difficult to opt out of. Finally, there is the context of physical activity. What happens when a driver gets into an accident because of a text message advert that he never signed up for?

Mobile Monetization: A Pragmatic Approach with No Silver Bullets

Despite these issues, there is the reality of continued growth in mobile usage. So, if the return on investment for mobile advertisements is questionable, how can organizations best capitalize on this trend? There are a number of approaches that are worth exploring outside of traditional context based advertisements. The first is sponsorship of content that is directly in alignment with the brand of the sponsoring organization. A few months ago, Patexia covered the partnership of the band Ok Go with the Chevrolet Sonic. In this specific scenario, the band was given full creative freedom, but Chevy owns the rights to the content produced into perpetuity. This means that their advertisement, cleverly embedded in a music video, has a very long horizon to generate an online return, so it can be monetized in numerous ways over time.

Another method, outside of direct sponsorship of content creation, is that of placement advertising. Location is everything. Many mobile applications developers are selling virtual locations - within a game world for example -- as billboards to place real world products. This is similar to the brand enhancement strategies used by large agencies and "niche" high end lifestyle products to create buzz around their products when utilized in movies or television shows. Once again, the placement requires a long-term perspective because immediate action may not result from the observation of the placed product. This means that the seller of such advertising -- unlike Facebook with GM -- has to be candid on this being a long-term investment for the sponsoring organization that can only be monetized over a long-term horizon.

The mobile landscape as related to the monetization of applications, social media or otherwise, has questionable immediate benefits. Conversion -- a term used by so many in the online advertising space to articulate a sale -- is difficult to obtain in the mobile space and therefore such initiatives have a questionable return on investment. However, if a mobile company wishes to explore the benefits and release the true value proposition of its products or services, it will have to use a hybrid advertising approach that explores different venues simultaneously. This long term approach requires an acknowledgement that the current mobile metrics are somewhat broken and based on fallacies that put adoption rates ahead of monetization factors. In turn, better investment decisions can be made which account for a slower return on investment, less buyer's remorse and a more realistic perspective regarding monetization. Simply put, as far as mobile is concerned, the continued growth in usage is irrefutable. What is less clear is the monetization component for both developers and users, and how companies can maintain immediate growth despite the fact that mobile requires a long-term investment perspective.