Boasting about double- or triple-digit mobile growth is a staple of every ad platform earnings report.
But peer deeper and actual mobile revenues for advertising companies differ widely, ranging from 20% to nearly 90% of total revenue. But mobile revenue – and revenue growth – doesn’t neatly correlate to success.
Sometimes mobile revenue growth reflects natural audience shifts. The same consumers might be accessing content via mobile, not desktop. It doesn’t mean these companies are conquering new territory.
When Brian Wieser, senior analyst at Pivotal Research Group, looks at breakouts for mobile revenue, he wants to know if that’s new revenue or if it’s just coming from existing customers.
For example, Yahoo likes to show strong growth in its “Mavens” revenue (mobile, native, video and social) as the CPMs from its desktop display business decline. But that growth has come from natural shifts in the business to different formats. “The game Yahoo played had very little incremental revenue associated with it,” Wieser said.
Plus, because the mobile web is a similar environment to desktop, ad tech and platforms can sometimes grow mobile revenue without making investments to serve that environment best.
“A lot of these companies are having the advantage of mobile happening to them,” said Jordan Greene, principal at Mella Media, a mobile consultancy and agency.
Marketer Lag
Although marketers are spending more on mobile each year, they aren’t ramping up spend fast enough to keep up with time spent. According to comScore, mobile accounts for two-thirds of time spent, and desktop the other third. But mobile accounts for just 35% of total ad revenue, according to the 2016 IAB Ad Revenue report.
“Try to identify the number of marketers that have a true mobile strategy,” Wieser said. “There are not many of them.”
Greg Stuart, president of the Mobile Marketing Association, agreed: “Marketers know the role of TV, the internet, magazines. They don’t know mobile.”
Some mobile revenue accrues simply because agencies or advertisers are forced by publishers, which often have 50% mobile audiences, to buy cross-screen. But advertisers buying those mobile impressions aren’t necessarily investing in mobile tracking, creative and mobile sites.
Because of this discrepancy, many ad tech companies haven’t strayed too far from their desktop origins.
Even though “these companies know they need to have a presence in mobile,” said Wieser, “there is so much desktop inventory to work with.”
Making investments in cross-platform technology too far ahead of the market is also risky for these companies. But to be successful in mobile, vendors must invest in technology. Consider the difference between app and mobile web environments.
“For desktop-first companies, mobile web vs. mobile app is a very important question, because they could have done no technology investments and hid under the guise of mobile web,” said Anne Frisbie, inMobi SVP and GM of global alliances, who’s looked under the hood of a lot of ad tech. “If a company is 25% mobile and 5% is in-app, I would know they are in trouble. They are behind in business execution or something else because that number should be half mobile, and half of that in-app.”
Developing technology that works in web and app environments – which require different ad units and different tracking techniques – is tough.
“It’s not a cookie world. It’s a unique device ID world. That’s a big switch and not simple to execute against,” said the Mobile Marketing Association’s Stuart.
Mistakes are a given. “Companies making the migration from desktop to mobile tend to be pretty poor at it and hit a lot of speed bumps along the way,” Greene said. “They try to treat it as a different screen, but there are a lot of variables.”
Yet, early movers to mobile are seeing outsize benefits, said Peter Hamilton, CEO of mobile analytics firm Tune. “My belief is that there is a strong correlation in the success of the companies over the past two years and their investment in engaging people with mobile devices.”
Tune weathered a slow few years after it was founded in 2011, until it saw business from app developers and, eventually, advertisers in travel and ecommerce.
The Facebook Effect
Facebook has been punished and rewarded for its mobile revenue. It’s also seen the greatest benefits from its investments there.
When it went public in 2012, investors hammered the company. Its users had gone mobile, but revenue lagged behind. Issues stemmed from a focus on mobile web-like hybrid apps, which are easier and less expensive to build but require performance trade-offs.
Both Stuart and Forrester senior research analyst Jennifer Wise pointed to Facebook CEO Mark Zuckerberg’s decision in 2012 requiring all product development to focus on mobile first.
“Facebook got it. They knew the world had shifted underneath their feet. It turned out they were right in spades,” Stuart said.
Other companies are following Facebook’s lead and investing to accelerate mobile monetization.
“Criteo is doing a lot of investment to make [mobile app] work,” said Frisbie. “They could sit back for a year because there are so many problems with retail in-app. But they are investing in it because they have that luxury.”
Of course, a high percentage of mobile revenue isn’t a sign of success any more than it is of growth. Twitter’s mostly mobile revenue increases at a healthy clip year over year, yet investors worry about stagnating new user acquisition.
Rajeev Goel, CEO of struggling PubMatic, noted how his company’s mobile CPMs exceed desktop CPMs (and that 65% of its impressions are mobile, with two-thirds coming from apps), but it’s unclear if mobile’s majority share is due to audience shifts, mobile investment or even declines in its desktop business.
Ultimately, just because Facebook is successful, with growth rates over 50%, that doesn’t mean others will be. Recall last year’s Forrester survey that showed that most consumers spend their time in only five apps, with Facebook far in the lead. Facebook could be sucking up all the mobile spend such that even giants like Google are on their toes.
“Facebook has done an incredible job [on mobile],” Greene said. “Google is behind, and knows it.”
Behind or not, Google, like Facebook, has mobile advantages because of its vast scale and strong data.
“Google and Facebook will continue to take an unfair share because these folks [marketers] need to solve end-to-end,” Frisbie said.
The big names also feel safe to marketers. “As a whole, marketers are skeptical of mobile advertising, so they aren’t investing as much as they should be,” Wise said. “Where they are investing, they are going toward the sure thing.”
But eventually, Wise expects marketers to invest based on time spent, which could open the door to other platforms getting their fair share of marketer spend. And this also gives ad tech vendors an inroad.
“As the ability to track consumers and combine consumer data to enhance targeting across devices begins to level out as an industry,” Wise said, “what gives Facebook and Google that initial advantage today will be less.”
