Conversations at Ad Week supported our thesis that the mobile ad market will remain tiny for years.
Although there is a lot of excitement around mobile ad startups, we also think larger players with legacy digital businesses will also likely collect most mobile ad dollars for the foreseeable future–because the big players already have the ear of ad agencies.
CONSUMERS DON’T LIKE MOBILE ADS
At Adweek this morning, two publishers spoke about the challenges mobile app developers face selling advertising:
- MLB Advanced Media (MLBAM) CEO Bob Bowman said he was getting major pushback on mobile ads from consumers. Even a small ad placed within MLBAM’s mobile iPhone app led to furious response – so much so MLB stopped running ads on the app. Most of the feedback was driven by the fact that users have gotten used to cluttered ads on the internet, but see mobile apps as a place where they don’t have to “deal” with ads. Obviously advertisers were not happy with this feedback.
- Yahoo! Mobile head Adam Taggart found some success with ads on its Fantasy Football app, but only by making the ads “unobtrusive.” Yahoo gave sponsors Subway and Toyota a single unobtrusive ad on certain pages without placing ads above the fold. Yahoo tried to make up for the “unobtrusive” nature of these ads with increased frequency: It placed the ads on team and trading pages where users spend a lot of time, versus general league or news pages.
SMALL COMPANIES WILL HAVE A HARD TIME COMPETING FOR MOBILE AD DOLLARS
In our opinion, the negative reaction of consumers to mobile ads will make it harder for startups to compete for ad dollars, even though (or perhaps because) anyone can build an app in a fairly short period of time. The market is small now and players like Yahoo, with strong tech legacy businesses and agency relationships are going to get the media buys as agencies test the new medium.
In addition strong brand names enable these app-makers to grow their audiences much quicker than smaller companies, giving them the valuable scale advertisers are looking for.
For example, just 48 hours after Yahoo launched its Fantasy Football, Finance, and Flickr apps, each became the most downloaded app in its respective category. It will be tough for smaller app makers, even MLBAM which has a very big online audience, to compete with that.
This is not much different than how the online video industry has evolved. As the number of online video sites grew exponentially the agencies were interested but were still just dipping their toes. Because of legacy relationships and the ability to reach scale quicker than smaller startups, the larger players collected the majority of ad dollars being spent on online video. Now advertisers are more comfortable with online video and are asking agencies to find smaller, more targeted sites to include in their buys.
The head of a venture-backed online gaming company summed up the issue nicely when describing the challenges his company was having getting advertisers to sign on. He likened the challenge to telling someone how green tea (small gaming company) can fight colds just as well if not better than Vitamin C (big online publishers). People listen with great interest and believe that it does work, but at the end of the day when the cold starts to come on they for now will always go for the Vitamin C.
For now smaller mobile players will probably find the same thing in conversations with agencies while the larger players will have an easier time getting them to try green tea.
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