Tuesday, 30 September 2008

Debunking two US myths

So, the US is behind on mobile web adoption. Right?


So, the US is the home of advertising. Mobile advertising must be flying. Right?


The two are interrelated. First, let’s look at the market.

During my recent trip to the US I felt like an evangelist for the US mobile market which was a strange position to find myself in: persuading Americans that use of the web in the US is actually stronger than the UK and Europe.

Over the years, the general perception is that the US is behind and that thought has stuck. It is not true however. If you look at the off-deck market (that is services which are promoted without the operator’s marketing aid but simply using their network backbone) you will find a large number of US publishers generating significant page view numbers. The New York Times, Sports Illustrated, Reuters, ESPN and others are all generating page view numbers which would make their counterparts in the UK blush (with the possible exception of the BBC).

While it is true that the American market is larger and therefore you’d expect higher numbers, there is a scaling factor on US traffic which means that it punches above its weight. There are four times as many people using the web from their phones to find news and information (Source: M:Metrics) but these US publishers are often generating over 1m page views per day. Their UK counterpart is driving a tenth of that volume.

What are the differences which explain this result. Brainstorm mode here:

- Pricing. All you can eat bundles are prevalent in the US. Nobody is constrained when using the browser.

- The use of the browser is much more ingrained in the US than in the UK – see the traffic generated through Google search as an example (similar to the publishers, a ratio of 10:1

- The persisting skew in the UK market towards ringtone, wallpaper and games downloads rather than internet browsing.

- A more open market in the US where the operators already command far less market share in internet browsing

- More devices with big screens: BlackBerry, Treo and now the iPhone.

Whatever the causes, the fact is that a number of publishers have cracked the mobile web (as they call it) and are looking for more innovative ways to further grow their traffic. BTW, this is where Mippin plays a role for these more advanced players by acting as another distribution channel – and one which is free to use, enables branding and monetisation.

So, onto the second issue:

Their only frustration is the inability to be able to monetise this traffic. It stands to reason that if you have a lot more inventory that you have a job to do to sell that inventory to achieve a decent sellthrough (the amount of ads served as a percentage of your inventory).

However, it is deeper than greater supply. There is a structural issue in the advertising market in the US which means that this extra inventory is an oversupply, depressing sellthrough and revenues. As a good counter-illustration you need only look at the UK where there is a multitude of smaller mobile advertising agencies (a number of whom are being bought – Screentonic and Enpocket).

For these smaller players a deal of £2,000 is a big deal and they are willing to fight to get it. In the US, such players are few and far between leaving the market dominated by the larger online agencies. For these players the extra effort required to understand mobile coupled with the smaller deal sizes - compared to online - means that it is always more convenient to place money in online rather than mobile.

It is not all bad news. There is a sense within the industry that mobile is now on the agenda as a channel – it is playing a part, being considered, in the high level planning.

And, this is a real advance.

That said, do not expect there to be a turnaround in the short term. An unstable financial system and the prevailing gloom in NY (the centre of the advertising industry in the US) will ensure tighter budgets and a flight away from experimentation. The money flowing to mobile will continue to grow but slowly until the shackles come off. I think the realisation of the industry that mobile is a channel where real impact can be made with top brands in significant volume will not be long in coming once confidence returns. Until then, wait out the storm.


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