If mobile is going to generate any meaningful growth for the online ad industry, it has to actually be incremental, and not just cannibalise Web advertising with postage stamp-sized ads.
Henry Blodget explains this thoroughly in a post this morning, titled, “Enough Empty-Headed Puffery About The Huge New Opportunity In Mobile Ads.”
One of the ways that mobile can be incremental, and not just cannibalise Web advertising, is via location-based and local advertising, which the Web has not done very successfully.
Here’s one of Google’s first attempts: A sponsored link on the iPhone’s Google-powered Maps app. When you search for “department stores” in New York, you see the usual sea of red pins signifying search results. But you also see a Sponsored Link pop up — an advertisement for a JCPenney location near NYU.
One huge, REAL-LIFE problem here, which we noticed after we first posted this: There is no JCPenney at this location! That is very bad, and Google could harm its reputation by sending people to places that don’t exist. (See follow-up post here.) But let’s ignore that for a second and focus on the ad platform at the moment.
The pin itself is a JCPenney logo, and unlike the normal search results, the name pops up automatically, with “Sponsored Link” below the name. Like other pins, if you click on it, it takes you to a page (but with a Sponsored Link header and a slogan) with the store’s phone, address, URL, and directions.
This could be a nice opportunity that is actually incremental. While some mobile maps searches are just cannibalising desktop searches, we believe that many mobile maps searches are new and incremental.
The key here is not ruining the experience.
One sponsored link is not too intrusive, but Google would be foolish to stack the map with more. (Two, maybe. But not three.) We assume that the one that shows up would be determined by an algorithm that includes the size of the advertiser’s bid, the user’s location, and perhaps other factors like time of day (if a store is open or closed) or even past search history.
How are these priced? We assume they are on a cost-per-click basis. It makes sense that Google would collect a payload if a user clicks on the store tag for more information. It also makes sense that Google might collect a second payload if the user clicks to make a phone call, clicks through to the store’s URL, or requests directions. We also think there is some brand value to having the store’s logo as the pin, and having its name pop up in the first place, so perhaps there’s room for a third, impression-based revenue stream.
It’s too early to tell how big of an opportunity this is for Google or the industry. But this is certainly an example of location-based mobile advertising beyond the “stupid (and theoretical) Starbucks-coupon-to-your-phone variety,” as Henry Blodget describes.