Changes afoot for iAd

According to reports in the digital media press, iAd is contacting UK agencies about changes in their pricing policy and structure. In the US, the minimum spend has already been reduced from $1m to $100k, but it seems there will be even further developments. Currently iAd uses a ‘hybrid’ (or double) pricing model of both CPM and CPC for its advertising, which is a major barrier for advertisers. Apple are also expected to increase payouts to developers in order to create further distribution of ad content.

The expected changes come at a time when the mobile advertising market is hotting up. Google’s Admob has moved closer to the Adwords model and Facebook are likely to launch a major mobile ad initiative before the spring. Back in June 2011, I wrote that Apple seemed to be losing interest in iAd and a report by The Digital Times suggested that the recent moves are a last-ditch attempt save the project. Apple have driven the consumer market in mobile, but have failed to ignite the world of advertising. With the amount of profit they’re making, I suspect they’re not too worried about it.

‘No Ads’ says Jobs. So where does that leave iAd?

Interesting to see that amongst all the figures showing Apple’s mobile dominance at the developer’s conference, there was no mention of iAd. Although Steve Jobs didn’t dismiss iAd as such, when he was speaking about iCloud he said:  “We build products that we want for ourselves, too, and we just don’t want ads.” Hmm. OK, so it’s a different channel to iAd, which is focussed on rich media advertising delivered via apps. But it isn’t exactly an endorsement of it.

Apple as an advertising network doesn’t seem to sit comfortably with their great product design/user experience philosophy. Having had some conversations with iAd in the UK last week, they still seem to be finding their feet with it. The minimum spend has been reduced, but it is still more than most brands total mobile marketing budget. Neither is there is an ad management platform or automated reporting – something that many brands and agencies would want in order to book and refine their campaigns.

Another update to iOS, the Safari Reader will remove ‘clutter’ from browsed sites. That could well include ads, but in spite of enquiries from the marketing press, Apple failed to shed any more light on it. If it does strip out advertising though, then the new update could scupper the rapidly growing mobile advertising market. iPhone users are important to this channel as they tend to be more affluent and browse the web more than anyone else. Without that market, what are the implications for Google’s Admob, Millenial and InMobi?

Both the lack of mention for iAd and the possible change in Safari could be a really big deal for mobile advertising.
More on the iAd snub here. 

More on the Safari update here.

Mobile Predictions for 2011

How accurate were the 2011 predictions? As a review of the year in mobile, I have added comments in italics. 2012’s mobile predictions are here.

1.       The rise of Contactless (or NFC).

2011 will be the year that contactless technology comes to mobile in the UK (and Europe).

In the UK Orange and Barclaycard launched a (not very good) NFC phone. More significantly both the Google Nexus, higher end BlackBerry and a number of other devices included contactless. The real potential for growth will be in 2012. In the UK it will be spurred on by the need for fast payment etc at the Olympics and growth will be also be significant elsewhere, especially if the iPhone 5 includes an NFC chip.

2.       mCommerce – where the retailers lead, others will follow

Whilst 2010 saw retailers establish themselves in the mobile web space, 2011 was where they consolidated it. From eBay to Amazon, from M&S to Halfords, mobile represented 10% or more of their digital sales. Whilst there hasn’t been exactly a charge towards mobile web from other brands outside retail, during the year most of them created some kind of offering. Interestingly retailers are seeing the potential of mobile and moving beyond just a mobile site with initiatives such as augmented reality pop-up shops.

3.       Mobile Search – the next big thing in mobile marketing?

From the user perspective, 2011 saw mobile search continue to grow. More smartphones means more search from mobile, especially in stores. Research from Google showed that over 70% of smartphone owners were searching and comparing product information whilst in store. Not only that, but most mobile search is about immediate intent – people are looking for something because they want (or need) it now. Sadly brands have not really caught on to mobile search marketing in any significant way as yet. 

4.       Mobile Advertising gets Exciting

2011 saw HTML5 take off in mobile, and particularly mobile advertising. Besides iAd, Google also started to offer HTML5 banners through their ad channel. There were some creative campaigns – Nissan Duke for iAd, Tuborg and Magnum Ice Cream and Auto Trader in the UK – there is still a lot of untapped potential. Mobile is now 8% of our ‘media time’, more than in print, yet the spend on advertising is less than 1%. Print? More than 20% of the total spend.

5.       Location, Location, Location

Whilst location is the backbone of most mobile media, social location didn’t quite live up to expectations in 2011. Although Facebook incorporated location into status updates, they ended their Places and Deals, failing to become a leader in social location. However, Foursquare continued to see their numbers rise to 15m + users. Along with the likes of SCVNGR and Instagram, they engaged both users and brands. In the meantime, Facebook hired the Gowalla crew to rethink their offering. Social location remains important.

6.       The End of Unlimited Data Plans

It happened in the UK, US and elsewhere thanks to too many iPhone users. The biggest problem has been video. More and more mobile users are accessing it but it uses tremendous amounts of bandwidth. The only long term solution is 4G, which is beginning to roll out in some countries. In the UK, the government put the licence bids back into 2012, which means 2013 will be the earliest. Developing countries may well get into 4G sooner and leap-fog the UK. The mid-term solution is in rolling out more WiFi. O2 are working on that right now … hopefully there’ll be enough data bandwidth by the time every0ne arrives for the Olympics.

7.       New Interfaces

There were announcements of 3D screens, gesture control, and electrovibration to create the feeling of textures in mobile and tablet screens. The biggest impact on the consumer came in the form of voice interfaces, notably iOS5’s Siri. After Apple upped the ante, Google are looking to implement something better than Siri into Android in 2012.

8.       Fad Gadget?

Not everyone is convinced by the iPad. It made the top 10 list of worst gadgets of 2010 in one magazine, whilst also making the top 10 best gadgets in the same publication.

This prediction was entirely wrong. The tablet device, or the iPad (others sold very few), sold at a faster rate than the iPod or iPhone.   In many territories they were outselling PCs. 

9. Moblogging

This hasn’t taken off as such, but other forms of social media activity on smartphones increased. When Twitter was incorporated into iOS5, their sign up rate went up three-fold. Now nearly half of all Tweets come from mobile devices. It’s not just writing though. Mobile users say it through photos, as demonstrated by Instagram and Flickr (the iPhone 4 was the most used camera on the site).

10. Bada

I predicted that from a very fast start, Bada would become an important OS in 2011. It didn’t happen. Samsung have not released any figures about the operating system, but they would appear to be low, and the company is likely to drop the OS. In a way, it’s not surprising when you consider that Bada was for lower end handsets but consumers have moved towards smartphones. Not only that, but Android is open source and can be put on most handsets.

Review of Mobile for 2010

Last year (and the year before) I made a number of predictions about mobile and mobile marketing for the year ahead. 2010 was a good one for mobile marketing. Mobile advertising came of age with AdMob and Apple’s IAd. Many retailers got into mCommerce. And Foursquare showed the potential of location-based marketing with their check-in offer. That’s just a few examples. Looking at last year’s predictions is also a chance to review the year as a whole. So how did the predictions fare? See below – I’ve marked myself out of 10 for accuracy.

Predictions from 2010

2010 will be the year of mobile advertising
8/10 a number of things happened to make mobile advertising a significant channel this year. At the end of 2009 Google acquired AdMob. Big. In June, Apple announced IAd. Very Big. OK, you may say, IAd has a tiny reach, but Apple announced that they had secured a number of brands, and significantly 21% of the mobile advertising market. Add to that the operator DM channels such as O2 More and Orange shots, and you can see that there was significant marketing activity. However, there’s still a long way to go – so I drop two points for that.

Mobile payments will become more common place
8/10 this was a pretty good prediction. I’ve taken off a couple of points as in-app payments haven’t taken off as expected, although the ‘freemium’ model has taken hold. Significantly, the number of mobile retail sites grew rapidly throughout the year. At the start of 2010 no high street UK retailer had a transactional mobile site. By the end, M&S, John Lewis, Tesco Direct and Debenhams all had full mCommerce sites (not to mention Barney’s in the US), with other brands such as Argos to follow very soon. Tesco’s did a study which showed that 10% of people will use their mobile for their Xmas shopping this year. In the world of apps, the likes of Ocado established themselves fully. At the start of the year they took 5% of their orders through their mobile app. By the end of the year it was 10%. Ebay and Amazon expect mobile commerce to overtake the fixed internet within the next few years.

More commercial and branded apps
9/10 with a few notable exceptions, they’re all at it. It seemed like every brand launched an app whether their customers needed it or not!

Behavioural targeting will be on the rise
5/10 it all depends on what you count as behavioural targeting. If you look at the mobile operators, there is very little targetting going on. The direct channels are opt-in to selected sectors, rather than targeted at consumer behaviour. That’s probably a good thing, as the public are very wary of this type of advertising. Still, I drop 5 points for getting it slightly wrong. However, it is strong and growing strong in other ways. Facebook is the ultimate behavioural targeting, and their ad revenue rose significantly. IAd is also a form of targeting, although it is through the apps they use rather than their actual behaviour online.

Privacy
10/10 it’s an issue that won’t go away. Facebook came into major conflict with their users over changes in their privacy policies. There was the Openbook controversy, which showed how much people allow the world to see, and not forgetting the Foursquare inspired, Pleaserobme.com. Although Facebook seem to have placated most of their users for now, it will run and run. Then there was Google’s legal problems over their storing of personal WiFi data … I could go on! When it comes to mobile in particular, the personal-ness of the device will always require careful consideration on the part of brands.

Android will become a major player in mobile OS
10/10 Easy! It’s strange to think that 12 months ago Android was nowhere. By Q3 it had overtaken the iPhone and BlackBerry to become the second biggest mobile OS. Much of that came not from Google’s phone, but a couple of excellent handsets from the likes of HTC and Samsung.

Mobile content and social media aggregation
7/10 I was correct in the intent – we want our social media and our content in one place. However the results weren’t quite as expected (hence the 3 point drop). For example, Vodafone’s 360 was poorly executed and even more poorly advertised. By the end of the year they had quietly dropped it. What happened was that the aggregation went on in the places that the users were already in. The main place is Facebook. With the addition of their email, Facebook are telling people ‘why go anywhere else?’

Apps will still grow – the mobile web cannot replace them
9/10 apps have grown massively this year in large part through Nokia’s OviStore, Blackberry World and Android Market. The mobile web has not replaced apps at that level. What has happened is that the mobile web offers a different user and brand experience. Many brands are developing both web and apps.

Augmented Reality and Image Recognition will not significantly take off
8/10 arguably it’s easy to predict things that won’t happen, but there was a lot of talk about these two in 2009. We’ve seen some great stuff with Layar on the AR side and Google Goggles on the IR side (hence the two points I’ve taken off). However, they are far from mass market. Most mobile AR apps are little more than location services. There were a couple of exceptions, such as the excellent Berlin Wall project. These show the direction it could go to make AR more exciting. Google’s Goggles is a great concept – image based search – but have you tried it? It simply doesn’t work very well. Whilst the possibilities are there, Forrester predicted that it would be some years before AR takes off on mobile.

Mobile social networks will not go it alone
10/10 yes we saw Foursquare and Gowalla, as(almost) pure mobile social networks, but Facebook is THE place for mobile. In the UK 50% of status updates come from mobile phones, and over 150 million of their users update via mobile. Foursquare, on the other hand has a tiny number of users, not only that but it has had to allow status updates straight into Facebook. And anyway, Foursquare isn’t social media, it’s a game. So yes, 10 out of 10 for the prediction!

Apples iAd takes biggest slice of mobile ad market. Should Google be worried?

According to a report in Business Week, iAd are set to take 21% of the mobile advertising market in 2010. Given that Apple went from a standing start (the acquisition of Quattro aside), that’s pretty good going. The looser seems to be Google, who in spite of buying AdMob earlier this year, have lost share not only to Apple but other third party mobile advertisers. I have blogged previously that iAd is niche and will only take a small market share. Have I now been proved wrong?

Well not exactly, no. For starters the mobile advertising sector is currently very small, although it’s value is increasing rapidly. Apple’s iAd requires a minimum spend of $1m. With such a large revenue requirment then it’s hardly surprising that their slice of the market is so big. In fact, if you look at Steve Job’s claim that iAd would take 50% of the mobile advertising market, Apple still have a way to go. Ultimately iAd will remain niche in terms of audience size simply because of it’s reach to iphone, ipod touch (and eventually) ipad users. Just as the iphone makes the most profits of any handset, I expect that iAd will follow the same route. It’s audience will be relatively small, but advertisers will use it if it continues to deliver results. And Apple will reap the profits.

Still, if I was Google, I’d be thinking hard about the next move. Having acquired AdMob, they have not yet realised the vast revenues that Google’s search advertising has. To date, they’ve pretty much run AdMob as it was previously. If they want to challenge Apple then they will need to develop new approaches to mobile advertising.

Ad Agencies like iAd (some do, at least)

Whilst I have been a bit sceptical about both the cost and reach of iAd, it seems that some ad agencies and clients think its pretty good. In an article in emarketer, the overall conclusion was that iAd was good for business. This is not in terms of response rates, but more in terms of branding, mobile media and mobile advertising as a whole. One interesting point was that iAd offers a ‘return on innovation’. Apple is currently the coolest brand out there, certainly in the techie sector, so if you want to be seen as a cool, cutting edge brand, then iAd offers an opportunity to associate with that.
iAdThe other key point is that Apple has brought mobile advertising and in-app ads especially, up the agenda and shown the possibilities of mobile as a branding channel. Even iAd’s (indirect) competitor, AdMob, have said that the awareness of the channel is good for business by raising mobile marketing’s profile.
I previously blogged about comments from a Publicis director who felt that iAd had a tiny reach, was too expensive and will ultimately fail. I agree there are issues, but if you want to appeal to a particular, option forming tech savvy audience then iAd offers some real possibilities. As long as you have the budget.

iAd’s ‘tiny reach’

In spite of all the noise from Apple about iAd changing mobile advertising, six months down the line, it still doesn’t look like ad agencies are convinced. At a panel conference in New York, execs from ad agency Publicis claimed that iAd couldn’t deliver the numbers that brands were looking for. Jami Lawrence, associate director of mobile marketing at Publicis Modem said ‘it’s a really small audience—from a scale perspective not really there’. Whilst the iphone is popular it only represents a few percent of handsets at best. What’s more, for many brands those users are not their target audience. Look at retail, and the supermarkets in particular. For most of them their customers are mainly women, and for some, mainly older women. Yes, men shop in supermarkets these days, but typcially the main buying decisions are made by women.

Lack of reach is one problem for brands, but the other is the $1 million entry fee limits the network to major brands. And major brands who are willing to risk that amount in the mobile space. Publicis pointed out that typical spend on mobile campaigns is $20-$50k, which is consistent with the UK experience.

There is also a barrier to developers including iAd in their apps: the 60% payout rate from Apple may not be enough of an incentive. Added to that are the limited metrics provided by Apple. Click through rates are not enough of a measurement for today’s digital advertisers, they want to see a full run down of customer behaivour. Something that iAd cannot give. I previously blogged about Apple ditching Quattro Wireless and putting all of their eggs into the iAd basket.
Whilst iAd offers a great, interactive experience (that doesn’t take the user away from the app), that simply isn’t enough for brands. Apple have pitched their network at too high a level to make it a success. In all likelyhood Apple will make money from iAd, but it will remain a niche product. Unlike the claims from Steve Jobs, it will not do for mobile advertising, what the app store did for the iphone.