Apple's Next Disruption: Advertising

The Wall Street Journal

 

If anything is clear from the punches being thrown by Google at Apple over mobile advertising, it is that the search giant understands what is at stake.

As mobile advertising comes into its own, Google should be well-positioned to grab a big piece of it. Prospects for other large media companies, online or traditional, are less sure.

It is easy to underestimate the importance of mobile Internet and advertising. ComScore estimates 48 million people had smartphones in the U.S. in the three months to April, of whom only 5.4 million searched the Web on the devices on a near-daily basis. In contrast, the firm counted 214 million people searching the Web generally in April.

Estimates from eMarketer put mobile advertising at $593 million this year, compared with about $25 billion for total online advertising.

But eMarketer's numbers were issued last September, before the release of the iPad. The Apple tablet's strong sales so far confirm consumer demand for tablet computers and suggest consumers' online behavior is likely to become a lot more mobile. That is likely already the case for owners of smartphones with robust Web browsers like iPhones or Android-powered devices.

Android and iPhone devices commanded 37% of the smartphone market in the first quarter between them, according to Nielsen, against 35% for Research in Motion's BlackBerry. Nielsen's data also show that close to 90% of iPhone and Android owners used the mobile Internet in the previous 30 days, compared with 73% for all smartphones. Browsing the Web on a BlackBerry can be a frustrating experience. So as RIM's market share declines and iPhone, iPad and Android devices become more common, mobile Web use will take off.

Data are scarce on how mobile browsing affects online behavior at a PC. But the ability to do Web searches anywhere likely reduces those done at a desk. Searching could become less important as people rely on apps for certain functions.

All this should spark an ad shift to mobile, particularly to apps. Admittedly, advertisers can take years to respond to changes in consumer behavior. But Apple's plunge into the ad market with iAds, which serves advertising inside apps, is likely to accelerate the change. That it drew $60 million in second-half 2010 commitments from such marketers as General Electric, Unilever and Nissan Motor indicates mobile-ad estimates are too low.

Who will suffer from the advance of mobile advertising? TV networks, potentially, if the caliber of big-brand advertisers snagged by Apple continues. As the mobile audience is likely to fragment among applications, big Internet portals also may be at risk. Regardless, mobile likely will cause a bigger, faster disruption to the ad world than is generally appreciated.

Teaching Young People How to Read Advertisements

NY Times

A federal agency is undertaking an effort to school youngsters in the ways of Madison Avenue.

 

 

The initiative seeks to educate children in grades four through six — tweens, in the parlance of marketing — about how advertising works so they can make better, more informed choices when they shop or when they ask parents to shop on their behalf.

The centerpiece of the effort is a Web site called Admongo (admongo.gov), where visitors can get an “ad-ucation” by playing a game featuring make-believe products closely modeled on real ones, among them Choco Crunch’n Good cereal, Cleanology acne medication, Double Dunk sporting goods and the Smile Meals sold at Fast Chef restaurants.

“Advertising is all around you,” the home page declares in urging youngsters to always ask three questions: “Who is responsible for the ad? What is the ad actually saying? What does the ad want me to do?”

The initiative is being sponsored by the Bureau of Consumer Protection of the Federal Trade Commission, which polices deceptive, fraudulent and unfair marketing and advertising practices. The bureau is enlisting Scholastic, the educational publishing company based in New York, to help distribute materials to teachers and classrooms.

The idea that children need to better understand how commercial speech differs from other forms of communication is not a new one. Many schools have courses in what is called media literacy, intended to help students analyze various methods of persuasion, among them sponsored messages.

The goal is generally “to help kids start to understand the commercial world they live in and to be alert to, and think critically, of advertising,” said David Vladeck, director of the bureau in Washington.

The belief that youngsters ought to be given additional tools to assist them in deciphering sales pitches has been gaining support as the Internet, and social media in particular, are used more for marketing.

“We’ve had some consumer-directed ads, directed to children, on advertising,” Mr. Vladeck said, “but nothing of the scope, depth and complexity” of the new effort.

As for the tone of the materials, they are meant to be “nonjudgmental,” Mr. Vladeck said, rather than presupposing there is nefarious purpose inherent in ads and that marketers continuously try to trick consumers into buying things they do not want or need.

“The vast majority of marketers sell lawful products to people who can lawfully buy them,” Mr. Vladeck said. “The game says advertising is pervasive and it’s good to know what it is, it’s good to think critically and think whether purchasing a product is in your best interest.”

On the other side of the coin, the bureau was also careful in developing the materials, he added, to avoid giving anyone grounds to complain that the effort “promotes commercialism by teaching kids advertising techniques.”

That tack was praised by C. Lee Peeler, president and chief executive of the National Advertising Review Council, which is the ad industry’s voluntary self-regulatory system. The council operates under the aegis of the Council of Better Business Bureaus, where Mr. Peeler is also an executive vice president.

The bureau’s effort will “teach kids how to swim in the ocean of advertising,” Mr. Peeler said, yet takes “a straightforward approach that does not go a step further and demonize advertising.”

“We were pretty impressed by what we saw,” he added, and the council intends to link to Admongo.gov from its own Web site (narcpartners.org).

Fleishman-Hillard, a public relations agency owned by the Omnicom Group, helped the bureau in developing the Admongo Web site, the online game and the teaching materials.

Asked if the participation of Fleishman-Hillard presents a conflict because the agency is part of the Madison Avenue marketing machine, Mr. Vladeck replied that persuasion is “what Fleishman-Hillard does, and they do it well.”

“They also know the tricks of the trade,” he added. “We’re tapping into their expertise.”

Likewise, the division of Scholastic that is handling the distribution of the materials to teachers and students works with corporations as well as government agencies and nonprofit organizations.

For instance, the division, known as Scholastic In School, teamed up with the Lexus unit of Toyota Motor for the Lexus Eco Challenge, a curriculum meant to teach teenagers about the environment.

“We help teachers explain the world around them to the children,” said Ann Amstutz Hayes, vice president at Scholastic In School. For the bureau, “we’re informing the kids about advertising,” she said, “because it’s so important they understand what it is and make informed decisions.”

The reason the curriculum is being aimed at students in the fourth through sixth grades is because that is when “they’re at the stage they’re developing their critical-thinking skills,” Ms. Amstutz Hayes said.

Mr. Vladeck said he hoped that with Scholastic’s assistance the bureau would be able to “get into a couple hundred thousand classrooms” around the country. The effort is being financed by “a little over $2 million,” he added.

The bureau is especially pleased with the online game, Mr. Vladeck said, adding that he has played it himself. “I was not able to get past Level Two,” he said, laughing. “My 12-year-old nephew, in 45 minutes, was already on Level Four.”

The bureau will announce the initiative on Wednesday at a news conference and on the “Today” show.

Perhaps the effort comes not a moment too soon. Adweek devotes this week’s issue to “Kids” and “How the industry is striving to conquer this coveted market.”

Mobile-Ad M & A to Continue

Business Week

Michael Bayle has been fielding a lot of phone calls in the two months since Google bought mobile-ad company AdMob for $750 million. Bayle is a vice-president at Amobee, also in the business of placing ads on wireless handsets. "Our phone has been ring-ringing off the hook," Bayle says. "We are speaking to a number of parties."

Startups that specialize in mobile advertising are getting a lot of phone calls these days. Possible acquirers are gunning for a slice of an industry that according to ABI Research may generate $1.14 billion in sales this year, almost four times the $297 million spent in 2008. "Mobile ads are [one of] the hottest areas in technology right now," says M&A expert Tom Taulli.

There's especially high demand for so-called mobile-ad networks, such as Amobee, which act as middlemen between advertisers and wireless service providers to broker the placement of ads in games, videos, and other mobile content. Then there are mobile-ad exchanges, such as RingRing, which often get involved earlier in the process, helping connect advertisers with mobile-ad networks.

On Jan. 20, mobile Web browser software provider Opera bought ad exchange AdMarvel. Earlier this month, Apple snapped up mobile-ad network Quattro Wireless for $275 million to $300 million, according to published reports. AdMob was Google's third-biggest acquisition to date. Other mobile-ad companies may fetch far less than $250 million, Taulli speculates. Still, the dealmaking is far from over.

Analysts say potential targets include ad networks Millennial Media, Jumptap, Greystripe, and Tapjoy, and ad exchanges such as Mobclix. "The AdMob acquisition blew the roof off [valuations]," says Sunil Verma, co-founder of Mobclix, which soon expects to close a funding round. "It validates the market size and potential, and that's sparked a trickle-down effect on others." Verma declined to discuss funding details. To date, Mobclix has received $4 million to $5 million in angel funding from investors, including Verma and three other founders.

De Rigueur for Many Advertisers

Millennial Media is the largest of the potential targets. It received a $16 million funding round in November and aims for an initial public share sale in 2011 or later but would consider a buyout sooner for the right price, Millennial Media CEO Paul Palmieri says.

After years of overoptimistic projections, advertisers are finally boosting spending on mobile ads as consumers step up purchases of smartphones that are better-equipped than cell phones for Web surfing. Jumptap's revenue last year increased five times over its 2008 figure, says CEO Dan Olschwang. "More [advertisers] now treat mobile as a must-have component in their media mix," he says.

In November 2009, 61.5 million U.S. users accessed the Internet via mobile devices, up from 46.6 million a year earlier, according to Nielsen Mobile. Within five years, more people will access the Web via mobile devices than personal computers, Morgan Stanley analyst Mary Meeker said in a recent report.

Mobile ads may also be more effective, researchers say. Mobile ads have a higher so-called click-through rate, a measure of the rate at which an ad is clicked on by a person who views it. The rate for mobile ads is 2% to 5%, compared with 0.2% for PC-based online advertising, according to Chetan Sharma, an independent wireless industry analyst. Mobile ads are also less expensive, costing as little as $1 to $6 per 1,000 impressions, while a PC Web banner costs closer to $10, Sharma says.

Exponential Growth

Coca-Cola, Honda, Intel, Motorola, and National Geographic are among companies now advertising on mobile phones. "The number of advertisers doing mobile programs has grown exponentially," says Paul Kultgen, a director at Nielsen. The researcher's November survey showed that more than 1,000 advertisers now put out mobile display ads, a fivefold increase over a year earlier.

AOL, Microsoft, Yahoo!, and Nokia  have acquired mobile-ad companies in the past several years and may make more purchases, analysts say. Representatives of all four companies declined to comment for this story. Handset makers such as Samsung and Motorola may also join the buying, analysts speculated. Representatives of both companies declined to comment. Online retailers Amazon and eBay are also potential acquirers, says Olschwang of Jumptap. An eBay representative declined to comment, while an Amazon representative declined to comment.

Meantime, even potential targets are turning into acquirers. On Jan. 13, Amobee bought London-based RingRing Media for an undisclosed sum. Bayle says Amobee may make other purchases.

Rapid Changes, Expansion Of Mobile Industry

Reuters

AdMob, the world`s largest mobile advertising platform, examined the rapid and global growth of mobile Web and application usage over the past two years in their September 2009 AdMob Mobile Metrics Report. This month marks the second anniversary of the Mobile Metrics Report and the growth in traffic since September 2007 demonstrates that mobile data usage is a truly global phenomenon. In September 2009 AdMob received more than 100 million ad requests from 14 countries, and more than 10 million ad requests from 64 countries.

The report also highlights the rapid growth in usage of mobile Web sites and applications on new devices in the past year. In September 2008, the Motorola RAZR was the top device in the US, and the iPhone was the only touchscreen device in the Top 10. In September 2009, the list of the top 10 devices includes five with touchscreens, six with Wi-Fi capabilities, and six with application stores. These devices are responsible for a much higher percentage of mobile usage than their share of handsets sold.1 However, feature phones like the
Samsung R450 and Motorola RAZR V3 still represent 60 percent of ad requests in the US. The strong mobile Web usage on these feature phones is likely driven by unlimited data plans.

Highlights from the September 2009 AdMob Mobile SEO Metrics Report include:

* In September 2007 AdMob had 1.6 billion ad requests, in September 2008 5.1 billion, and in September 2009 10.2 billion.
* Nearly every region of the world experienced immense growth in the past two years, with North America, Asia, Western Europe, Oceania and Latin America seeing a six-fold increase in traffic since September 2007.
* Worldwide iPhone and iPod touch traffic increased 19 times from September 2008 to September 2009 in the AdMob network.
* In September 2009 42 percent of requests in the US were made from Wi-Fi capable devices. 18 percent of actual US requests were made over a Wi-Fi connection in September 2009 compared to only 5 percent in September 2008.
* Devices running on the Android Operating System (OS) accounted for 17 percent of smartphone traffic in AdMob`s network in the US in September 2009, up from 13 percent in August 2009. The HTC Dream (G1) was the number three device and the HTC Magic was the number 10 device in September 2009 in the US.

As with the iPhone OS, much of the Android traffic in AdMob`s network came from applications.

This data is based on usage of handsets and smartphone devices during the month of September 2009 in AdMob`s network of more than 15,000 mobile Web sites and applications. AdMob market share is calculated by the percentage of requests received from a particular handset; it is a measure of relative mobile Web and application usage and does not represent handset sales. Additional details and regional data are available in the full September 2009 report.

AdMob stores and analyzes handset and operator data from every ad request in its network to optimize ad serving. Each month, the AdMob Mobile Metrics Report aggregates this data to provide insights into major trends in the mobile ecosystem. Visit AdMob`s Metrics Report site (http://metrics.admob.com) to access the full September 2009 report, view past reports, or sign up to get an email notification when future reports become available.

About AdMob

AdMob is the world's largest mobile advertising platform, serving more than 8.5 billion mobile banner and text ads per month across a wide range of leading mobile Web sites and applications. AdMob helps advertisers connect with a relevant audience of consumers on mobile devices and gives publishers the ability to effectively monetize their mobile traffic. Incorporated in April 2006, AdMob provides the tools, data, and business models fueling the explosive growth of mobile media in more than 160 countries and territories worldwide.

Beezag - The Reinvention of Advertising

Reuters

Beezag® has officially launched its NEW exclusive invite-only online and mobile advertising platform that is revolutionizing the world of advertising. Beezag benefits both the "Beezagger" (user) and the advertiser by providing the user with monetary returns while giving advertisers a direct and targeted medium to interact with the most attractive segment of the Web 2.0 and mobile market, educated adults ages 18-24, which tallies 72 million strong in the U.S.

"Our strategic vision at Beezag is to capitalize on an opportunity to create digital advertising distribution that works in today's environment, where traditional advertising models are becoming more fragmented by the changes in technology and consumer behavior," said Richard Smullen, Co-Founder of Beezag.

Beezag is the brainchild of entrepreneurs Richard Smullen and Laurent Alhadeff (the young founders behind South African media, technology and fashion market leader SouthWinston Investments). They have created an impressive team of business-savvy technologists, including six-year Google veteran Brian Dick to manage worldwide revenue; Steven Spencer, the former-Upoc/Dada Entertainment(TM) CEO/CTO as Beezag's CTO; and Ex-Forbes Digital VP Nicholas Ricci as the Beezag USA Sales VP.

Beezag's target audience is tech-savvy 18 to 24-year-olds, typically college students, who know every trick to avoid ads. Knowing that this demographic constantly needs extra spending money, Beezag has developed its invite-only service in which members login and watch a full ad from start to finish. Beezag then rewards them with discounts and cash which can be paid into accounts like iTunes, PayPal(TM), their favorite charity or even their personal bank account.

Advertisers see Beezag as the solution to technology like DVR and online "banner-blindness," which is the root cause of this massive fragmentation that we are experiencing.

Through Beezag's Proprietary Profiling Engine, Beezag ensures delivery of a brand's full message to loyal, hand-raising customers, not prospects. When Beezaggers login to view ads (online, on Facebook or on their mobile phones), they discuss the specific brands/products they use (and are looking for) - whether it's the coffee they drink, sports team they follow or airline of choice. The secret behind Beezag is its patent-pending technology, which guarantees a complete view of each commercial, and if Beezaggers don't absorb the ad in its entirety, the advertiser does not pay and the user does not earn. 

Within a study issued by the DVR Research Institute in 2008, "77 percent of agency higher-ups said that DVR usage will prove to be the greatest challenge to the current ad model," (Ad Week, June 2009). Within this traditional advertising model, advertisers pay hundreds of billions of dollars for consumers' attention, but with new technology like the DVR, statistics are showing that "90 percent 'always/almost always' fast forward through commercials," (2008 Starcom USA-Tivo custom study). Advertisers see Beezag as the solution to technology like DVR and online "banner-blindness," which is the root cause of this massive fragmentation that we are experiencing.

Beezag provides a new online and mobile model for advertisers to directly target these consumers. The Beezag guarantee is that advertiser dollars are going towards ads that will be 100 percent viewed - start to finish.

Beezag is the game-changer in the advertising industry and is changing the way  consumers interact with brands and view ads so that instead of avoiding them, they will want more.

Through digital and affiliate agencies, some of the country's biggest brands have joined Beezag as advertisers. Two of the most recent include Dr. Pepper and Dentyne.

About Beezag:
Beezag is a privately funded company headquartered in New York City's bustling Chelsea neighborhood. Its founders had an epiphany when they set out to create a revolutionary philosophy for the only effective way to advertise in this info-laden age: through the targeted delivery of customized video ads to vetted and invited individuals in real time through any Internet-capable device.