Monetising the mobile Internet

We’ve all heard the big numbers: there are more than 4.6 billion mobile phones in the world, many countries have more cellphones than people and there will be more smartphones than PCs in most countries by 2013. Despite this, mobile advertising has not taken ofs as we have all expected and RICHARD MULLINS, director at Acceleration has his reasons as to why.

The fact however remains that mobile advertising in 2009 accounted for a paltry $1 billion to $2 billion of the $460 billion global advertising market, even if growth rates are impressive at 20% or more per year in most markets.

The single reason that mobile advertising hasn’t yet exploded as we have long expected, is that mobile Internet browsing is not yet a mainstream activity in most countries. While mobile display and mobile search will grow, their reach and the time users spend with them remain relatively low and the payoff for marketers simply isn’t that great yet.

The end result is that it is still difficult for most marketers and publishers to monetise the mobile channel. Perhaps one reason that we are battling so much is that we’re overemphasising the importance of mobile display ads and ignoring the real advantages that the mobile channel offers today, whether you’re a publisher or an advertiser.

One of the most important of these is the fact that the mobile world offers a robust infrastructure for distributing mobile applications as well as a culture of paying for online content that is largely lacking in the traditional Internet.

Consider the booming mobile apps market, which is expected to grow from seven billion downloads in 2009 to over 50 billion downloads in 2012. The total value of this market by then will be more than $17 billion a year – a number that will be larger than the projected total global CD sales for 2012.

Interestingly, a massive proportion of mobile apps are paid-for rather than free, with massive disparities between the different device platforms. For example 75% of all apps downloaded through the Apple iPhone app store are paid for, as are 85% downloaded from the Nokia store and 76% from the BlackBerry App World.

Android-based phones buck the overall trend – since 57% of apps downloaded are free. This is hardly surprising, considering that the Android platform is more open than the tightly controlled app stores of the competing handset operating systems.

What this does show us is that the mobile market is still quite fragmented and complex, which makes it hard to achieve the scale one needs to be truly successful. You can’t simply develop an app that works for the BlackBerry platform and also works for the Android operating system.

The problem of inconsistent operating systems will fade away over time as smartphones become more like small computers that support cross-format standards. Already, devices such as the iPhone and iPad play nicely with older online standards, like animated gifs.

The opportunities in the future could be immense – for example, the potential of melding social content from location-aware applications such as foursquare with advertising and rich content. It will allow advertisers to deliver content to users relevant to their location or profile.

What this means is that marketers need to be thinking about how they could be engaging with their customers using mobile in a more sophisticated manner.

The mobile advertising opportunity will grow considerably in years to come, but we should not ignore the way that people are already using apps on their smartphones to engage with rich and location-aware content. What the devices and integration will look like, only time will tell.