Enough Empty-Headed Puffery About The Huge New Opportunity In Mobile Ads


Online analysts would like you to know that there’s a great new industry growth engine revving up — mobile ads.

  • “We’re optimistic about mobile ads.”
  • “We’re bullish on mobile ads.”
  • “Google’s Verizon deal is evidence of the huge new opportunity in mobile ads.”


Analysts have been saying the same thing since 1995… and mobile advertising is still a rounding error. 

Specifically, just about every chart we’ve ever seen of mobile advertising since the mid-1990s has looked like this.


If every one of them had actually been accurate, meanwhile, it would have looked like this:


So it’s time for analysts to stop just blathering about the huge new opportunity in mobile ads and address some specific questions.

To begin with, we need to be clear: We think what most analysts mean when they rave about “mobile ads” is regular online ads that happen to be viewed on tiny mobile screens instead of big laptop or desktop screens. We do not regard regular online ads (search or display) that happen to be viewed on a mobile device instead of a laptop or desktop as “mobile ads.”  We view them as regular online ads that happen to be viewed on a mobile device.  And we note that the value of these ads to the advertiser is generally far less on a tiny screen than it would have been on a big screen.

And now on to the debate…

First, we can all agree that in the past two years, some things about mobile have finally changed:

Thanks to the iPhone, the mobile Internet experience no longer sucks.  iPhone users spend a lot more time online than non-iPhone users, so as more people get iPhones (or the equivalent), people will spend more time online.

We are starting–just starting–to see some emerging mobile applications that use location without being of the stupid (and theoretical) Starbucks-coupon-to-your-phone variety.  The technorati is bananas about FourSquare, for example, which shows you where your friends are. There’s some buzz about Loopt, Latitude, etc.  Eventually someday, maybe normal people will use these services.  That doesn’t mean they’ll be great platforms for mobile ads–far from it–but at least they represent location-based mobile apps that aren’t dead on arrival.

So we can all agree: Better mobile Internet means more usage of the Internet, albeit with a much smaller screen (this is important, so don’t just scoff and roll your eyes).  And we can all agree that someday there will likely be mobile apps that use location that don’t suck.

But here’s where most analysis of the allegedly huge new mobile marketing opportunity becomes empty-headed blather.  Why will this translate into huge new growth of online ad spending?

Some specific questions for you huge mobile advertising bulls:

  • Will all the Google search paid-clicking that mobile users are doing be incremental paid-clicking?  Or is it just going to be paid-clicking that used to happen on the desktop and now happens on the mobile phone?  If it’s the latter, “mobile search” will not be a huge new opportunity–it will just cannibalise desktop search.  We suspect a lot of mobile search will just cannibalise deskptop search.  Not all of it, but a lot of it.
  • Is consumer spending and GDP going to grow faster because consumers can shop on their phones?  If not–and we have a hard time believing it will–then, again, we’re talking about an ad share spending shift, not a huge new pot of ad spending.  Remember: The number of “clicks” consumers generate is irrelevant to the growth of search ad spending (if there was ever any doubt about this, the recession has proven it).  What IS relevant is the amount advertisers spend.  If consumers start clicking all day because of their phones, but they don’t buy any more stuff, the price per click will just go down.  Again, this sounds to us like a share shift–away from traditional media and desktop, toward mobile–than a gigantic new advertising medium.
  • On the display side, do you think advertisers will jump for joy at the ability to place a quarter-inch by half-inch unreadable banner ad in front of someone who is already squinting?  We don’t.  The fact that advertisers now have an opportunity to reach people 24/7 regardless of where they are is good.  But the fact that they can only reach them with ads the size of paint chips isn’t going to get Madison Avenue all hot and bothered.

When we think through these and other questions, the conclusion we reach about mobile ads is this:

  • The improvement in mobile devices will expand the opportunity to reach consumers when they’re mobile–and, thus, expand potential advertising inventory.  This will not necessarily expand spending much, though, because the online industry is not suffering from an inventory problem.  Thus, we do not regard online ads that happen to be viewed on a mobile device instead of a desktop PC as a huge new incremental spending driver.
  • We have been waiting 15 years to hear of a single compelling advertising application that takes advantage of location-based information–and we’re still waiting.  The best minds in the business have been striking out on this one for a decade and a half.  Maybe one day they’ll connect.
  • The mobile ad opportunity is interesting and exciting, but it is vastly overhyped.

We’re always glad to hear alternate conclusions.  Just please try to persuade us by doing something other than spreading your arms wide and saying “This is going to be HUGE.”