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. This past week on its company blog and a webcast broadcast yesterday Google provided a peek into how it could, in turn, monetise product searches on mobile phones, specifically through location-based features tied to product searches:
- Following a mobile product search a subtle blue button enables users to find out what stores carry the product nearby and whether or not the product is in stock.
- The company is currently experimenting with different monetization models to drive revenue from location-based product searches on mobile phones.
Mobile revenue at Google is still tiny at less than 1% of overall revenue. However, mobile advertising is largely expected to surpass $1 Billion in the US over the next 2-3 years so it is a compelling long-term opportunity. In addition to enabling the company to capture share in the growth of mobile advertising we believe location-based features could enable Google to increase revenue-per-search (RPS) on product searches performed on mobile phones versus some desktop searches. The company’s statement on its webcast yesterday that it is experimenting with different monetization models for this inventory suggests it agrees.
Here is how the feature works, for a search on “Wii Fit,” in this example:
RETAILERS ARE SEEING SIGNIFICANT INCREASES IN MOBILE SEARCH TRAFFIC AND WILL FOCUS MORE ON SEM IN THE NEXT FEW YEARS
Calls to industry executives indicate retailers are seeing significant traffic being driven to their sites via mobile phone searches. Some larger retailers have seen mobile search referral traffic increase nearly 200% the past year. In addition, we’ve heard from some of these larger retailers that mobile e-commerce is already driving annual revenue in the eight-figure range despite minimal resources being put toward improving mobile offerings. In some cases mobile is approaching 5% of total e-commerce revenue.
As a result, we expect retailers to significantly increase their mobile search-engine-marketing (SEM) efforts over the next few years, which only benefits Google as the company attempts to lead this market as it has for the PC.
MANY OPPORTUNITIES TO DRIVE INCREASED RPS
Google’s Product Ads are currently charging advertisers only when a consumer buys a product on their site after clicking through an ad (cost-per-action). We believe this leads to increased revenue in some cases versus traditional CPC ads. However, location-based mobile product ads would present an opportunity for Google to increase its revenue-per-search in additional ways, including:
- Targeting – Advertisers always pay a premium for targeting and location-based advertising is incredibly targeted. Now participating retailers can not only reach consumers that are interested in their products, but can target them near their stores.
- Preferred Placement – Retailers would likely pay more to have their listings placed higher in the list of stores nearby after a user clicks on the blue “in stock nearby” button (essentially a “Sponsored Link”).
- Premium Rates For Custom Features – Knowing the location of the consumer being reached relative to an advertisers’ store presents opportunities for Google to charge premium rates for special services. For example, a logical next step to pointing a consumer to a store nearby is to enable them to hold the item until they get there by clicking on another button placed in the ad. Retailers would likely pay a premium for this kind of additional feature, in our opinion.
MOBILE PRODUCT SEARCHES COULD HELP DRIVE FACE-TO-FACE BRICK AND MORTAR PURCHASES
We believe advertisers will find additional value in mobile product ads if they help drive brick and mortar purchases at their stores since consumers may be driven to make spontaneous in-store purchases in addition to their intended buys.
In addition, the growth of face-to-face mobile commerce over the next few years (the ability to use your phone to pay for goods at a store) could help drive increased adoption of mobile product ads, usage of mobile search for buying products, and subsequently overall mobile ad revenue.
Still, mobile is growing rapidly, but it will take years for mobile revenue to contribute a meaningful portion of Google’s overall revenue.
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