Mobile $$$ Is Exploding! For Six Companies

This post originally ran on NetNewsCheck.com.  Including it here today to help keep our fellow startup companies grounded in reality.  Yes, mobile is exploding.  Yes, mobile revenue is exploding.  No, you are not guaranteed a piece of that pie.  75% of the loot goes to only 6 companies.  Read on.

The latest article from eMarketer trumpets a huge surge in mobile ad spending. Great news, right? But wait …

The article elaborates that only two companies drive that growth: Google and Facebook.

What does that mean for everybody else?

eMarketerAdSpend2014The article posits: In 2013, the top six companies garnered 75% of all mobile ad spend, or $13.5 billion of $18 billion. Let that sink in for a moment. That leaves thousands of publishers competing over the remaining $4.5 billion. The overall pie will grow, and conventional wisdom has it that a rising tide lifts all boats, but that math leaves little left over for everyone else looking to grow mobile ad revenue.

This isn’t the 80/20 rule, this is a 99.998/0.002 rule.

A closer examination of the data reveals that Facebook’s mobile spend leads this growth. It grew 224% between 2012 and 2013. Its flood of mobile ad spend makes for a great “Mobile Ad Market Soars 105%” headline, but omits the downward pressure this has on banner CPMs in mobile. There’s no end in sight until demand for mobile advertising catches up with supply.

The massive scale that Google and Facebook bring make it difficult for any other publisher to compete on scale and audience. If you’re contemplating a national sales play, you’ll be sitting in the lobby waiting to present to an ad agency. The Google guy is on your left. The woman from Facebook on your right. But you’ve got a unique, super-hyperlocal audience, right? Ever built an ad on Facebook? Its targeting capabilities are about as super-hyperlocal as you can get.

If Google and Facebook perform scale and audience targeting better than anybody else, how should publishers attempt to compete and sell at the national level? Here’s what they need:

Creativity. Creativity means new mobile ad units that are unavailable anywhere else. They must be not only pleasing to the eye, but also deliver some form of emotional, physical or retail value to the end user. Dressing up the banner with rich media, spins and swirls is putting lipstick on a pig, even if we all do it.

Execution. Companies build long-lasting relationships by delivering upon their promises. The mobile advertising industry still struggles with this on many levels. Over-hyped targeting capabilities plague almost every sales presentation, while the technology to execute is still developing. Any reader who has spent time trafficking ads in mobile, managing networks and troubleshooting knows just how difficult that execution can be. The challenge we present ourselves is to execute consistently for our customers, and it’s hard, but we try harder.

Data. Just because the big dogs do data better than you ever will, this isn’t an excuse to write it off. Get smart, and fast, about your audience. Find the right tools for you, be they Google Analytics, Flurry, Chartbeat, BlueKai or something else.

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Location. Hyped as the next cookie, I’m not yet convinced. Approximately 40% of StepLeader’s customers disable location-based services. That means your audience is asking not to be targeted by location. In a survey of over 2,100 news app users, location tied for last place in advertising relevance in the eyes of the consumer. Location targeting will play a role, but a limited role until user behavior and preferences change.

Native advertising will be no savior. It is just another bow in your quiver or another product in your portfolio. Native will perform very well until everyone runs its effectiveness into the ground. We’ll then jump on the next big thing and repeat the cycle.

Upon reflection, I am reminded of a difficult lesson I learned when running a previous mobile startup. Don’t believe anyone’s numbers but your own. I believe that increasing mobile spend is much, much better than the alternative.

Google and Facebook leading the charge will expose more brands to mobile advertising more quickly. This will in turn drive more overall interest in mobile ad spend. As the 25% of mobile ad spend leftover for everyone grows from $4.5 billion to $7.8 billion, don’t wait for it to trickle down. Be laser focused on creativity, data and killer execution.

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