Mobile Advertising Growing Quickly

Mobile Advertising Skyrocketed 111% Last Year

Mobile advertising is quickly becoming a major factor as evidenced by the recent IAB report profiled in the following article.  Since we first published our original estimates of mobile ad growth back in November, 2011 (whttp://stevenrosenbergmedia.com/?p=23), ad spend on mobile devices has more than quadrupled growing at an annual rate in excess of 100%.  We projected that mobile advertising could easily capture about 10% of total advertising of about $70 billion or about $7 billion before the next decade.  But as mobile smartphone penetration balloons past 50% of all handsets and the devices significantly alter the way consumers and brands interact, mobile advertising will likely pass the $7 billion threshold within the next four years.

 

IAB report also reveals big growth for digital video

  • April 16, 2013, 11:00 AM EDT

Mobile advertising spend jumped 111 percent to $3.4 billion during 2012, per an Interactive Advertising Bureau report today, accounting for 9 percent of all digital ad revenue last year. It marked the second consecutive year of dramatic mobile growth, after seeing a 149 percent year-over-year increase in 2011, according to the IAB.

A more mature ecosystem of mobile ad exchanges deserves at least some credit for the niche’s continued explosion, said David Silverman, a partner at PricewaterhouseCoopers, which prepared the trade org’s report. “They have certainly made the buying experience easier—similar in what we’ve seen with online [exchanges],” he said. “But there are a whole host of other factors that have created the growth of mobile. Really what’s happened is everybody is staring at their cellphone now. Marketers are trying to reach them where they are at—on elevators, at coffee shops, etc. The inventory is there, and the people are there. You combine those elements with localization, and mobile presents a great opportunity.”

Moving forward, the study found that 2012 digital ad revenue overall hit $36.6 billion—a 15 percent lift compared to 2011’s $31.7 billion. In addition to mobile, digital video had a huge year, marking a 29 percent increase ($2.3 billion total) over 2011.

The report also found that search ad sales were up 14.5 percent, totaling $16.9 billion, compared to the year prior—more good news for Google as well as Bing. Display ads lifted by 9 percent to $12 billion year over year during 2012, the IAB said.

“I think [display] will surprise some people given some low-level noise in the marketplace about where money may be going,” said Sherrill Mane, IAB’s svp of research, measurement and analytics. “It was a really strong showing among banners.”

Silverman addressed how Facebook, Twitter and other social media entities fit into the 2012 findings. “We think the growth of social media has had a tremendous impact on sellable inventory, particularly in the display category,” he said.

Lastly, retailers accounted for 20 percent of total Internet advertising during 2012, followed by the financial services category at 13 percent.

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Geo Fencing: Exploring the Power of Mobile Marketing

Geo Fencing:  Innovative and Game Changing

One of the truly innovative and game changing attributes of mobile smart phones is the ability to actively target consumers on the go in strategic locations to influence behavior, specific purchase decisions and generate high quality brand loyalty.  While still in its infancy, the industry term for this type of marketing is called geo-fencing which we profiled in a previous blog post (stevenrosenbergmedia.com/?p=150) and early indicators suggest this approach could profoundly transform consumer expectations and buying decisions.  There are really two main factors inherent to geo fencing.  The first and most pivotal is the knowledge of the consumer’s current location which sets the stage for targeted marketing to promote proximity to a particular store or venue.  But combining geo fencing data with a mix of demographic and psychological profiles, credit card purchase history, loyalty programs and preferences enables marketers to dramatically increase the effectiveness and relevancy of these targeted messages, discounts or special products to individual consumers now and into the future.  Moreover early feedback suggests, as mobile smart phones become ubiquitous, these hi-tech equipped consumers learn to expect and depend on this new marketing outreach and will reward the increased relevancy and personally targeted GPS guided messaging by increasing usage or purchase of highlighted products and services over others.

Geo Fencing:  Grows in value over time

A recent Harris survey commissioned by mobile marketing firm, Placecast underscores the notion that geo fencing driven text messaging is not only effective but gains more value for consumers over time.  Aggregate data from 2009-2012 unequivocally shows that possessing a smart phone heightens consumer’s attitude and usage towards mobile text messaging, access to the internet, search for a retail location, access to local information and activities by three to four times that of feature phone (non-smartphone) owners.

geo fencing

Smartphone owners use their devices to communicate and search in more ways than owners of plainly featured phones as well as enhance these capabilities by downloading apps and opting in to games, loyalty programs and offers. 77% of respondents reported they were more likely to visit a store when prompted and in one branded campaign for Kiehl’s skin care stores, 73% made a purchase after receiving a geo fenced driven SMS text message. Much can be made about the fact that the phone is always with us and we can be targeted by the GPS functionality. Consumers also reported that mobile discounts and special offers were far more useful and easy to act on vs. paper coupons, emails or letters because these offerings were digitally stored in their smart phone.  The most impactful finding was the fact that consumers enjoy the experience of being marketed to via their smartphone.   Almost 50% of those polled felt that these messages get more valuable because a) consumers expect offers to arrive based on where they are and b) as the messages become more relevant to their personal interests.

geo fencing

Geo Fencing:  Relevancy is a key factor

Granted, these are only one set of experiences, but the polling data suggests that expectations are changing for customer service over time and as a result, brand loyalty will be affected positively by combining location aware promotions with more relevant and personalized targeting.  But marketers must be careful not to bombard consumers with spam like messages.  Placecast advocates frequency caps of three times per month for any geo-fencing campaign to insure attention and protect brand loyalty.  And consumers report that they are more interested to be prompted about specific discounts and exclusivity rather than generic messages about similar products or services.  Placecast suggests geo fencing promotions should be combined with other media to increase purchases.  Consumers were twice as likely to purchase items prompted by geo fenced text messages when those messages were tied into a broader campaign consisting of other out of home media advertising.

There is another interesting development with geo fencing that bears a mention and that involves finding location relevance.  That is targeting people not only in proximity of the sponsoring brick and mortar store but in seemingly unrelated very public venues such as train stations, airports, sporting events and concerts which provides avenues to encourage and influence future behavior.  While these are the early days of geo-fencing, it is not hard to imagine a world in a few years where competitive geo-fencing will dominate public landscapes such as airports and ballgames with two or more aggressive brands fighting for placement and top of mind on a spectator’s Smartphone.

geo fencing

Geo Fencing:  Most effective as it becomes more aware

Placecast primarily uses double opt-in programs to determine who receives these geo-fenced prompts and suggests giving customers choice in order to let users know why they will get an offer and that privacy will be respected.  The key is also to enable customers to set preferences for targeting such as desired categories, frequency and time of day.  This not only promotes engagement and usage but provides valuable metadata information for the marketer to improve relevancy which in turn increases activity.

In conclusion, geo fencing has the potential to become one of the most powerful and effective marketing tools to influence consumer behavior because the mobile smartphone is so personal and immediate.   Geo-fencing per se, promotes a type of symbiotic engagement between brands and their customers that, if used creatively, promises to grow exponentially with our dependence on our smart phones and alter our expectations about customer service as well as our future purchase decisions.

 

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Data Mining and the Election of 2012

Data Mining and the Election of 2012

Taking a page out of Google, political advisors are now using data mining and sophisticated algorithms to achieve targeted results this election cycle.  To wit, a recent article in USA Today entitled “Romney uses extensive data-mining to find donors, money”, by Jack Gillum of the Associated Press (http://www.usatoday.com/money/economy/story/2012-08-24/romney-money-hunt/57268154/1), caught our eye.  Quoting an anonymous source, the AP reveals the Buxton Company of Ft. Worth, TX is using data mining to help Romney identify rich and previously untapped Republican donors across the country.  Putting aside for the moment, which presidential candidate you support, the interesting thing to note is that with so much personal data legally available to identify and target potential donors, why isn’t this practice more commonplace?  Contextual data including details about credit and debit transactions, families and children, voter registration, charitable contributions, property tax records, social media activity and survey responses is apparently being used by the Romney campaign to effectively target potential donors even in traditionally blue states and cities.

Data Mining:  Effectively identifying donors for Romney

“An early test analyzed details of more than 2 million households near San Francisco and elsewhere on the West Coast and identified thousands of people who would be comfortably able and inclined to give Romney at least $2,500 or more. An AP analysis this week determined that Romney’s campaign has made impressive inroads into even traditionally Democratic neighborhoods, collecting more than $350,000 this summer around San Francisco in contributions that averaged $400 each. High-dollar donors have been essential to Romney’s election effort, unlike Obama, who relies on more contributors giving smaller amounts.”

Data Mining:  Can contextual data influence an election?

Whereas digital media companies collect and synthesize contextual data to serve more targeted advertising and content, politicians should be able to use similar means to effectively deliver their message not only to supporters and donors but to target and influence the large group of independents or undecided’s (estimated at 8% of registered voters) who will invariably determine the winning candidate this coming November.  There is ample evidence to support the notion that delivering contextually targeted ads or content raises click rates and responses, so why not a contextually driven outreach campaign that delivers customized messages from the candidate to appropriate or pre-disposed voters?  In 2008, the Obama campaign successfully used social media to construct a grass roots movement which helped raise millions of dollars in small individual donations.  Maybe 2012 will be remembered as the election that Romney’s team effectively utilized data mining and contextual information to win the White House.

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Mobile Payments: The Battle to Control Money and Data

Mobile Payments:  The Battle To Control Money and Data

The battle over mobile payment solutions like GoPago, Square, Isis, Sail and Google Wallet is shaping up to be a much more defining event than competing formats, revenue models and investors. It is more about who will control the 2 trillion dollar per year credit card market in the US and potentially trillions more dollars in purchases conducted via debit cards, electronic transfers and checks. That’s why all the big retailers, financial players and digital media companies will eventually have a dog in the fight. In addition to the sheer size of the money and billions of transactions involved, companies like Mastercard, Visa, EBay and Google are focused on the aggregation and the ability to leverage the vast amount of data generated by these mobile financial transactions, which is becoming an extremely valuable contextual asset in the ongoing effort to understand and influence consumer buying behavior and brand loyalty.  At the center of this battle royal is the ubiquitous mobile smartphone which is profoundly changing consumer retail experience and will likely transform the entire electronic payment landscape as well.

Mobile Payments:  Part of the larger trend towards non-cash transactions

According to the most recent (2010) Federal Reserve Payments study of non-cash trends in the US 2006-2009, the country is moving inexorably towards electronic and digital transfer of money and mobile payment solutions like mobile wallet, chip and pin and mobile card swipes a la Square and Sail,  is the most recent outgrowth.   ACH payments (automated clearing house) which encompasses wire transfers, supplier deposits, wire purchases grew 9.3% per year from ’06 to ’09 while at the same time, check writing has been declining by about 7% per year.

In 2009, there were about 22 billion credit card transactions worth about $1.9 trillion. Average value per transaction was about $88.  That’s where the battle for mobile payments is taking place.  Interestingly, there were almost twice as many debit card transactions (37.9 billion) valued at $1.5 trillion dollars annually.  Card swipe technology like Square and Sail can also handle debit cards so the market for mobile payments in the US is approaching a potential $4 trillion annually. Quoting from the report: “Since 2006, the debit card has eclipsed the check as the most used noncash instrument. This was not only because the number of debit card transactions increased at 14.8 percent per year from 2006 to 2009 but also because the number of checks paid declined 7.1 percent per year.”  Just as a reference, about $32 trillion of checks were written in 2009.  That number is declining by about 7% per year or about $2 trillion annually which is the size of the entire credit card market.  Those non-cash transactions presumably will continue to shift into debit cards and credit cards especially with the added convenience of mobile payment solutions.  In addition, approximately 13 percent of checks were deposited as images in 2009, a percentage which will dramatically increase as many banks offer customers the ability to deposit an image of their check via a smartphone.

Mobile Payments:  Not shifting the power base

There are over 180 million US cardholders with an average of almost four cards per person in the system.  Mobile payment solutions will likely not shift the balance of power in the credit card processing market per se.  Visa, Mastercard and American Express control too much of the payment processing business which is totally dependent on scale and volume.  That is, skimming a small amount of money on billions of transactions with millions of merchants and businesses.  Even a company the size of Google, whose market cap is larger than Visa, Mastercard and American Express combined, is not likely to want to end run the current credit/debit card infrastructure by offering a special new Google credit/debit card.  Rather, Google can “monetize” the credit/debit market through its mobile wallet, without having to take so much risk.  An argument can be made that Visa and Mastercard will be the ultimate beneficiaries of the mobile payment innovations because it will dramatically expand the market in two fundamental ways:  by making it easier for consumers to pay by credit or debit card and offering an inexpensive technology option like Square or Sail to attract the 25 million small business owners that don’t currently accept credit or debit card payments.

The natural competitors of innovators such as Square are the payment processors like Verifone and NCR which control credit and debit card processing cash registers across the country. Verifone has already fired back at Square with its own mobile card swipe Sail which sports features tied to 3rd party marketers, CRM, customer loyalty programs and social media tools.   It remains to be seen if these mobile devices actually unseat VeriFone or NCR or simply act as a catalyst for the POS industry to leverage mobile smartphones, iPads and the cloud to further entrench their businesses by offering more convenient and  economical options to their customers.

 

Mobile Payments:  Mobile Wallet is a trojan horse data machine

So if mobile payment solutions are not going to bring Visa and Mastercard to the ground or truly disintermediate VeriFone and NCR, what is all the excitement about?  In short, changing consumer buying habits and behavior is the huge disintermediation.  And then there is harnessing transaction data to serve better ads and influence future purchasing decisions.  Putting aside enabling technology for a moment, the objective for a company like Google is the opportunity to insert itself at the exact nexus of an emerging consumer habit shift, in between consumers and merchants and the financial institutions, aggregating consumer credit and debit card transactional data and all the ancillary sources of context around and connected to these transactions.  For Google especially, this rich and comprehensive treasure trove of information about consumer behavior, connections, location, purchasing choices and the social graph can help Google generate a new level of revenue based on serving more targeted advertising and services at a place and time that is optimally suited to the mobile consumer.  As the chart below illustrates, contextual data through usage of a mobile wallet, is the real Trojan horse.  That’s why all the financial institutions, big retailers, media giants are focused on mobile payment solutions.

mobile payments

Mobile Payments:  Simplicity and Convenience

It is still too early to pick winners and losers among the mobile payment providers.  The market is being driven by the consumer’s insatiable desire for more convenience and simplicity in terms of shopping, obtaining information and payment, on the go.  Companies that adhere their pitch to optimum convenience and simplicity and can tie-in other functionalities (personal or commercial) into the food chain without those functionalities becoming a nuisance will succeed.  In other words, I’m not convinced that an electronic email receipt is the right place to market goods and services or those immediate announcements to Facebook contacts about a purchase is really going to resonate with consumers.  But a simple one step ability to tap a mobile device on a merchant’s register and select electronically which method of payment to use and then having access to a unified record of all my transactions that day, or week or month, is going to become the norm in our culture in a few scant years.  What is also certain is that the growth of mobile smart phones and the introduction of mobile payment solutions will profoundly affect the balance of cash and non-cash transactions in the future.

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Location Data: The New Frontier


Location Data:  Opportunity or Challenge

With the growing availability of location based GPS data from smartphones, the quest to gain a more granular and context aware understanding of consumer behavior has gotten more fascinating but at the same time much more challenging. On the surface, location based intelligence creates a dynamic real time window on consumer movement.  But location based data alone is neither the Holy Grail nor the key to understanding your customer’s purchase intent or advertising matches. The key to creating a beneficial data model is behavioral and demographic context.   Without this basis, mobile analytics leading to geo fencing (having knowledge of where a customer is at the moment) can be misleading.   For example, simply knowing that a person is passing by a Starbuck’s Coffee store, does not guarantee that person wants or is ready to buy a cup of coffee. Did that person already purchase a cup of coffee today? Is the women pregnant and not imbibing coffee? So if you keep sending them digital coupons for a free cup or discount, will it please them and build brand equity or simply frustrate them by the continuous prompting? Obviously, context makes the difference.

Location Data:  Where does it fit?

CIOs and Marketing VPs in this age of smartphones must carefully design and develop an approach to collect and analyze consumer information on a number of levels simultaneously.  The primary goal is to gain a deeper more robust understanding of customers using various data sources such as demographic profile, social graph, purchase behavior and search history, among other things.  The goal initially should not be directed towards gaining insight about a specific project, product or strategy.  The goal is to create a base case dynamic foundation which is the necessary cornerstone for all future contextual mining.  This cornerstone behavioral fencing is necessary before considering the inclusion of temporal factors such as time of day, weather, etc. or targeted input like location centric data.  The landscape can be seen in the chart below:

Location Data

Location Data:  Adding more context

Building this model requires time and a good bit of trial and error.  It needs to be agile and flexible enough to be directed depending on the project, product or goal. In many instances the cornerstone behavioral components will be enough to gain understanding into client attitude and in some cases predicting general consumer behavior and activities.  Adding GPS type input helps enrich the data base but location directed technology can be used, in turn, as an effective means to reach consumers with targeted information, offers/discounts or utilities, at an opportune or appropriate moment.  The growing population of smartphone users and the massive adoption of mobile applications, opt-in programs and transactions are forcing every consumer driven company to get much more serious about this pivotal area of data mining. With a good foundation of behavioral and demographic data, the algorithm can be programmed to learn from the continuous and steady input of geo related information thus expanding the iterative capabilities of the model for the business or client.

Location Data:  Opening for New Businesses

Help is needed to design the right approach. To be sure, there are numerous companies, large and small, touting software tools, recommendation engines and algorithms all under the heading of providing contextually aware predictive models.  Due to the various demographic, behavioral, temporal and location based data available, there probably is growing business opportunity for savvy start-ups to provide expert consulting and procurement services.  Someone that can listen and understand a company’s business, long range strategic goals and products and then pick and choose from a myriad of software providers, the right tools, best in class teams and approaches to build and  maintain a custom tailored agile and contextually aware data resource will be coveted.

Location Data:  Helping to secure the Holy Grail

The Holy Grail in all this is transforming this massive amount of behavioral, contextual and geo related data into an accurate ability to serve highly targeted content or advertising to a mobile consumer at the precise moment he/she is looking to buy, search or locate something.  Correctly anticipating customer needs and wants is the next Big Thing worth billions of dollars for companies that develop the tools and for enterprises that can use these tools to accurately assess their customer’s needs and desires on a real time basis.

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Mobile Advertising: The Glass Half Full

 

Mobile Advertising:  Poised For Growth

Blog reaction to Mary Meeker’s recent slide presentation  at the D10 conference focused a lot on how feeble mobile advertising revenue stacks up against the perceived value of internet advertising.  Even though she had a number of slides showing global mobile usage growing quickly and that mobile is contributing an increasing share of the e-commerce market, attention was paid to the huge disparity between mobile usage and ad investment.

Her slide 17 (see below) points out that the large negative differential (10:1) between the amount of time people spend with their mobile devices and the respective advertising dollars, suggests a huge billion dollar opportunity.

mobile advertising

Mobile Advertising:  CPM rates not tracking usage

But what got attention was the statement that mobile CPM rates were five times lower than internet CPMs which was viewed by the mobile “doubters” as further evidence that mobile is still a minor league attraction for advertisers.

mobile advertising

 

Mobile Advertising:  Efficiency & Performance Will Win the Day

But I viewed this part of Mary’s slide presentation as extremely positive news because given mobile’s overwhelming efficiency compared to every other kind of media, the gap in CPM and usage should equalize quicker than cable TV or perhaps even internet advertising. As I wrote last year in a blog entitled, Mobile Advertising, The Next Big Thing http://stevenrosenbergmedia.com/?p=23, mobile advertising is 4X more effective in recalling brands than online, 5X more effective vs. online in promoting purchases and over 50% more effective promoting purchases against a combination of TV, print and online.

Cable TV advertising has been around 30 years, but for the first fifteen years or so, cable networks struggled to convince Madison Avenue that cable’s growing share of the viewing pie heralded a disintermediation in viewing habits worthy of higher CPMs and larger advertising investment.  In the early to mid 1990’s cable TV nets were capturing almost 25% of the eyeballs but less than 15% of the total ad spend.  In contrast, the value of internet advertising was recognized a lot earlier than cable and as a result its trajectory was a lot steeper.  While it took 30 years for cable TV to reach $30 billion in annual ad spend, internet reached that mark in about half the time.   But given the massive uptake in mobile smartphone technology (almost 50% of US mobile users), coupled with the development of mobile wallets, NFC, Square, etc., and the explosion of mobile apps and location based search, mobile advertising’s arc is poised to equal or even surpass the growth curve of  internet advertising over the next fifteen years.

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Data Collection: Essential for Success

Data Collection:  Essential for Business

Companies are gradually waking up to the fact that in the age of digital technology, social media and smart phones, the ability to collect and effectively analyze data about customers and their friends is becoming an essential tool for success.  In some circles, the quest to utilize data to develop competitive strategy, design new products or fine tune brands is becoming the Holy Grail.  For internet and mobile businesses, it is an absolute must because knowing as much about what the consumer wants and when he/she wants to see it is the key to generating future advertising growth.

Data Collection:  Businesses react differently

Recent studies suggest that companies are reacting differently to the competitive challenges in this era of big data.  Even so, there is a widely held belief that developing the ability to collect and collate data and then develop action plans based on that data is a competitive necessity for all companies, whether B to C or B to B.  And the challenge in this era of big data is not only determining what data to collect but how to prioritize that data.  Countless companies, from giants like Google down to small VC backed startups, are working to contextualize data because the development of effective and imaginative algorithms will ultimately lead to billions of dollars of additional ad spending and investment as well as sophisticated new management tools.

According to a study by David Rogers of the Columbia Business School, Marketing ROI in the Era of Big Data, there is a general acknowledgement about the connection between data and success.  49% of the companies surveyed believe successful brands use data effectively but 39% say that their company collects data too infrequently or not in real time.  The study also points out that only 19% of large firms were likely to collect new forms of digital data such as from mobile phones and these same large companies continue to put their emphasis on more traditional and simple forms of customer data based on demographics. This Rogers lists four main recommendations: 1) collect meaningful data from a variety of sources, including real time; 2) link data to metrics developed for measuring ROI; 3) share data across the organization and 4) utilize shared data to effectively target and personalize marketing efforts to consumers.

Data Collection:  Contextual

I don’t think there has ever been a time in history when businesses have the potential access to so much raw personal data on their customers.  Consider the granular depth of knowledge that can be developed on consumers when you can collate Google based search analytics with cookies, social media metadata from Facebook and Twitter tweets, transactional information on purchases with location based mobile telephony patterns, opt-ins and search.  The metadata from Facebook theoretically can provide a deeper level of engagement based on a person’s social index of activities and profiles cross referenced against the social graph of their friends and the activities and contacts of their friends.  From a purely entertainment point of view, the more contextualized data you have on a person and his/her group, the greater chances of serving more relevant content and targeted advertising which leads to higher engagement and CPMs.    The graphic below illustrates the organization:

Data Collection

 

Data Collection:  Power to transform

Data has the power to transform hypothesis or intuitive business decisions into those that are supported by or in fact driven by contextualized data.  But data collection and synthesis is only a means to an end, not the end itself.  Measures need to be taken to insure that decision makers don’t pick the data to match the hypothesis because that makes for bad business decisions.  Anyone that has dealt with raw data or built business models knows that giving more importance or weight to one set of projections can skew the findings of the entire model.  One thing to keep in mind is that in building models or algorithms, the goal should not be predicting whether a product will work or who will win an election.  The goal should be to give marketers, product designers and chief executives the data tools to better understand and predict consumer behavior and to anticipate the needs of their customers.  I agree with Douglas Merrill, former CIO/VP Engineering for Google who wrote: “I’m certain that the advancements and triumphs in both science and business will come from cool minds developing imaginative models and theories and testing them with the help of new big data tools and technology”.  For companies competing for consumer’s hearts and minds in this age of big data, having too little data is a far riskier proposition than collecting too much data and struggling to develop proprietary models to understand its meaning.  The difference can be quite stark as between trusting business decisions and strategies based on informative data or flying blind.

 

 

 

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Mobile and Internet Advertising: Fastest Growing Sectors

Mobile and Internet Advertising:  Fastest growing Sectors

 

Statistically, two interesting points jump out of IAB’s report last month on advertising and marketing activity for 2011. One has to do with mobile advertising which is growing exponentially and the internet business which will soon become the largest advertising market surpassing traditional broadcast television.

Mobile Advertising:  Grew by $1 billion in 2011

Percentage-wise, mobile advertising grew by almost 150% to $1.6 billion, far surpassing performance of all other formats.  I discussed that type of explosive growth late last year, Mobile Advertising: The Next Big Thing, http://stevenrosenbergmedia.com/?p=23, predicting that within 10 years, mobile will represent $7 billion annually.   Smartphone adoption is cresting above 50% of all cellular customers in the US and growing and its higher in markets like the UK and Korea.   I fully expect mobile advertising to jump by at least another $ billion in 2012.

Internet Advertising:  Will become the largest market before too long

Internet advertising (search, banner, etc.) achieved over $9 billion in Q4 2011, the highest run rate for any quarter in its history.  Internet advertising grew by over $5 billion or 22% in 2011 and now is the second largest ad market behind broadcast television.  With its current trajectory, and barring any serious economic downturn, internet will surpass broadcast television sometime in 2013-2014 time frame.

mobile and internet advertising

 

mobile and internet advertising

 

 

IAB provides another chart showing historical growth of internet advertising by quarter, since inception which graphically illustrates the continued and dramatic upward annual growth.

mobile and internet advertising

 

Of the $31.7 billion of internet advertising, almost half or nearly $15 billion is search which grew a healthy 27% in 2011.  Banner/Display which accounts for less than half of search grew by about 15% year over year.

mobile and internet advertising

Mobile and Internet Advertising:  Contextually aware and growing

The next leg up for internet growth is the ability to serve more contextually aware advertising and content.  Simply put, search advertising is generated by the customer looking for something.  Contextually aware advertising is generated by companies who can serve a highly targeted ad or a piece of content based on the ability to predict what a consumer would like to see next based on the metadata of past viewing, searching and social activities on sites like Facebook.  Many companies are chasing this holy grail with proprietary alogorithms and formulas.  Interestingly, the growth of mobile smartphones, which combines search, content and GPS customer location information, is an important factor in this growth.

 

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Success or Failure: Five Simple Things

Success or Failure:  Its the little things

Success or failure in business is sometimes determined by circumstances and timing out of our control, rather than expertise.  But many realize that within our control, we can determine success in some part by doing a bunch of things which individually may not seem all that important.  Operating a consulting business, I get to see a wide array of small to midsize companies who need to improve their performance and a fair number of early stage businesses struggling to obtain needed capital to grow.  For the most part these are private companies trying to get to the next level.  Inevitably, there are more failures in this space than success stories, and over time, I’ve come to realize that upon first encounter, there are signals or telltale signs which provide insight directionally in regard to strengths and weaknesses or whether the problem is the management team or a dysfunctional board of directors.

There are a myriad of specific reasons for failure or underperformance in this sector and it often takes a close examination to really pinpoint the problem.  In my business, paying close attention to little things that a key executive or board member says, does or doesn’t do is critical. When first assessing a situation, inevitably one notices certain small details in a conversation or in preliminary information, which more times than not are ignored or excused.  But over time, one learns to pay attention to these passing observations because invariably, upon review, they provide a valuable piece of the profile of that business way before having the opportunity to dig deeper into the numbers or the operational performance.  The uncanny thing is how, more often than not, these early indicators are accurate in drawing a ring fence around a particular problem or in identifying a propensity for success or failure within an organization.  Here are five common sense items to keep in mind.

Success or Failure:  Show up on time

I know this may sound like a little nit to some but you can tell a lot about a person if he/she can’t make meetings on time or chronically has to reschedule.  Woody Allen is credited with saying, “85% of success is just showing up” and that is particularly true in business.  It is not about time management per se but about respect for yourself and the individual you are meeting.  And it goes a step deeper into organizational skills and attention to detail.  If it happens consistently, it’s a red flag of sorts because it implies an inability to keep commitments and that reflects directly on the business.  More often than not, that executive cannot be depended upon to achieve results or perform in a crucial situation. Or if you are contemplating a venture with someone that is chronically late, know that you may be in for some drama along the way.    And tardiness particularly is not a good trait to observe within start-up management teams where most things are being fashioned out of whole cloth and the next meeting might be the one chance to meet and impress a key investor or potential client.

Success or Failure: Respect your commitments.

This is the companion piece to the previous point.  In the process of forming a relationship, whether hiring someone to analyze your business or choosing to enter into a joint venture, it is important to follow through on commitments.  I’m talking here again about little things. Following up on a promise to place a phone call after the first meeting on a certain day and time or to send some information overnight is important because it conveys a sense of seriousness, purpose and a commitment to the person on the other side of the table.  Forgetting to call or send that information generates a negative feeling about you and by extension, your enterprise.  By meeting expectations you underscore the initial impression, paving the way for a more substantial relationship. But if you routinely don’t keep these seemingly unimportant commitments, a negative perception begins to form in the other person’s mind, which if not directly addressed will more times than not scuttle your desired result.  Unfortunately, many people in business, some quite successful, don’t treat these commitments seriously.  Maybe they don’t have to because others in their organization cover for them.  But for those executives in companies that want to improve performance or attract needed capital, following up promptly and doing what you promise will always be good for your career and business.

Success or Failure:  Don’t focus on the glory.

This is endemic in the digital space where you encounter many entrepreneurs, still in pre-revenue stage, who seem more consumed with news about all the companies that have been sold or IPO’d in their space and how much money potentially their venture could be worth down the road rather than concentrating on how to gain traction and prove out their revenue model.  It is always curious to meet these people because it is so quickly evident that they really don’t have a clue about what they are doing. And in almost all cases with serious people, talking in this way turns people off.   For every Facebook or LinkedIn success story, there are hundreds or even thousands of startups that have burnt through hundreds of millions of dollars because they failed at the hard work of implementation.  It is essential to be optimistic and visionary but the real successful startup teams stay focused on their SWOT analysis and establishing the key metrics of their business.  And they leave the business gossip to others.

Success or Failure:  Avoid getting defensive. 

This problem usually occurs in the process of problem solving, primarily with CEOs and CFOs, particularly in companies that miss their budget projections.  Companies miss numbers all the time and most skilled executives deal directly with their boards about the reasons for underperformance.  Steps are taken and the business moves forward.  But frequently, I run across a company whose CEO or CFO reacts poorly in these critical situations by getting defensive in response to questions or requests for further information.  Either in words, attitude or lack of objectivity, these executives do a great disservice to themselves and their company by putting barriers between the management team, their board and the solutions. This makes a tough situation that much tougher and in some extreme cases, can lead to the replacement of that executive.  I always tell my clients, if there is a problem, deal with it quickly and openly.  Accept responsibility but don’t own the problem exclusively by getting defensive.  If you need help to solve a problem, ask for it.  The skilled executive knows how to place the problem in the middle of the table and solicit suggestions, realizing his/her job depends on arriving at the right solution, regardless of the source for the inspiration.  The weaker executive gets defensive or tries to obscure facts, which creates the unintended perception among peers or the board that he/she is the problem.

Success or Failure:  Pay attention

 Weak management teams can kill any chance for success.  But by the same token, dysfunctional board of directors can also add problems especially when they fail to pay attention to results or delay making decisions in a timely manner.   I’m not addressing the specific challenges of managing public company boards.  But in the private market, I frequently find a company whose board, usually made up in some part by funds or individual investors lose a lot of time and money because they don’t pay attention or place more importance in words rather than actions.  Again, it’s simple things that provide clues to a business.  How and when information is presented.  Do the books close each month by a set date?  Is the information in the board packets easy to follow and does it provide a clear basis of comparison between projected business and results?  If the answer is no to the majority of these questions then there are bound to be major problems with the business.   Furthermore, is the board organized so that members can easily communicate with the CEO and each other?  Again, a simple thing which if not structured correctly, can lead to costly problems.    In one recent situation, I was asked to look at a struggling business and was provided the current board package.  I knew going in the company had problems but a quick review of the CEO’s explanation and numbers provided to his board told me volumes about the inefficiency of the business and the lack of expertise of the management team.  In less than an hour reviewing the information, I had already formed an opinion that most of the management team had to be replaced.  It wasn’t that they missed budget by 40% but clues came from the way they laid out the information.  It was disorganized, obscure, hard to square and filled with general industry platitudes rather than specific observations about their business.  This five year old company had never come close to its original 5 year projection and yet the original group of investors still let themselves be lulled into inactivity by the CEO’s baloney.   It wasn’t too difficult to determine where the problems resided, so why hadn’t the board taken actions sooner to reduce costs and find someone else to run the business? Why couldn’t these investors, who had regular access to information and presumably were far more familiar with the problems, figure things out sooner especially since the business was losing millions annually?  This was a situation where the board made a bad situation worse and wound up losing a lot of money.       With a different client, this one with a VC dominated board, the management team had been overpromising and underperforming from the start.  The board was financially adept but lacked operating expertise.   24 months into it, the board still hadn’t found its way to replace these executives even though they knew the young management team hadn’t performed as expected and had obscured the extent of the problems and missed opportunities. The CEO and COO were eventually replaced but it was too late to right the ship and within 9 months the business shut down leaving the investors in the hole for $11 million.  The point being, investors, even the seemingly savvy ones, do silly things.  Utilizing common sense and a discipline like paying attention and making decisions expeditiously can mean the difference between success and failure for a new or struggling business.

Running a business is difficult but success sometimes depends a great deal on luck and timing as much as skill.  And more often than not, in business, luck is manufactured to some degree by the little things, in our control that we do or fail to do, each day.

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Mobile Commerce: eBay Sees The Future

Mobile Commerce: eBay doing half its sales via mobile

EBay recently announced that it is expecting to generate $5 billion through mobile commerce in 2011, 25% more than originally projected.  That in and of itself is newsworthy but what is truly surprising is that $5 billion in mobile commerce represents more than half the total revenue the company is likely to generate this year.

Mobile Commerce:  At an inflection point

We have been writing about the galvanizing impact of mobile smartphones on customer service, consumer engagement and advertising, but these mobile devices are without a doubt, irrevocably blurring the lines between on-line and off-line consumer purchase habits and activity.  To that point, John Donahoe, CEO of eBay is quoted as saying:  “We’re now seeing a profound change in how consumers are behaving, and we’re going to see more changes in the next three years than we’re seen in the previous 20 in terms of shopping and payments. We believe we are at an inflection point.”

Mobile Commerce:  EBay, PayPal and Facebook

EBay recently has taken a number of steps to enhance and facilitate mobile shopping.  As reported in Mobile Commerce Daily, the company is migrating to an open e-commerce system, called X commerce and encouraging developers to create additional services and apps for their mobile shopping platform.  Additionally, eBay is allowing consumers to use their PayPal accounts to pay on retailer’s sites.   By the way, PayPal is on track to register $3.5 billion in mobile ecommerce payments in 2011 which is a significant increase from the $2 billion originally anticipated. Additionally, eBay and Facebook are further integrating their efforts that will inevitably impact mobile ecommerce business.  Facebook is giving eBay developers access to its Open Graph map of Facebook users’ connections, which provides an index into the on-line activity, tastes and trends of you and your Facebook connections.  This Open Graph metadata has always been considered the mother lode of monetizable information powering Facebook and its preferred partners, for example, to serve hyper-targeted advertising or in this case, ultra- personalized shopping experiences.  Combining a pay system like PayPal with a ubiquitous social network platform like Facebook and mobile smart phone’s sophisticated browsers, GPS and always on capabilities and you have the wire frame structure of a very innovative, personalized and highly targeted shopping  experience.

Mobile Commerce:  Changing Retail Expectations

EBay’s CEO Donahue is right on point when he said:   “It’s a consumer that is coming back more frequently and shopping more because now it can be done at any time of the day. We know it is driving consumer engagement and customer value.”

EBay is an on-line company, but personalized mobile smart phone technology combined with an agile payment system, be it from a PayPal or Visa or Mastercard, is a transformational tool for any retailer but especially brick and mortar retailers and brands who want to improve margins, attract new customers and retain loyal consumers.  And what brick and mortar retailer wouldn’t love to do 50% of their business next year from mobile commerce?  EBay is a mobile commerce approach that others should study and emulate.

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