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Pandora is an interesting company for those interested in mobile business models because it saw its usage shift from overwhelming majority desktop to overwhelming majority mobile in a year.That’s one of many fascinating tidbits we learned from this Business Insider Q&A with Pandora VP of mobile advertising Brian Colbert today.
- Pandora booked $100 million in mobile advertising last year, and claims that makes it bigger than iAds, second only to Google.
- Pandora is seeing mobile ad performance that is as good as on the desktop, in terms of click-throughs, engagement and so forth.
- Pandora says it is happy with the prices for mobile ads it is seeing.
Many people are bullish on mobile advertising because they note it is the medium where there is the widest disconnect between “time spent” and “ad spend.”
There is a reason why ad spend never quite caught up to time spent on the desktop internet, and it’s not because ad agencies are stubbornly stuck in the 1980s, at least not anymore. The reason is that, unlike with TV or newspapers, when people use the internet (and smartphones) they do many other things than consume media, which is when they’re receptive to advertising. They work. They text. They interact with friends on social networks. They play games. They do email (where there is advertising, but the performance is usually terrible–Yahoo, Microsoft and Google provide free email as a way to lock in users, not because they make money from advertising). And so on.
The problem with thinking that mobile advertising is a “next huge thing” is that advertising spending is actually not driven by eyeballs. What drives advertising spending is the ROI that the advertiser gets. This is one reason why Google is seeing lower CPCs now that mobile is surging as a share of its search queries: because there is a certain amount of purchasing that people do with their internet-connected devices (the “return” part), which is chased by a certain amount of ad dollars (the “investment” part), now spread over many more impressions because people are spending tons of time on their smartphones on top of their computers, leading to overall lower prices. Those mobile advertising budgets have to come from somewhere.
The way that mobile advertising can become “huge,” therefore, is not by attracting a very large number of eyeballs, but by becoming the best way to drive some new form of commerce that isn’t already being driven by online advertising. Whether it’s coupons for local venues as Groupon hopes or something else, that is what will make mobile advertising into a market of tens of billions of dollars, as opposed to a market of single-digit billion dollars, as we currently forecast in our mobile advertising report.
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