“Data Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Mahi de Silva, CEO of Opera Mediaworks.
Marketers have always felt confident in search advertising’s return on investment. There isn’t any better indicator of purchase intent than someone typing what they want into the search box. Even as we slowly migrated to mobile, search still dominated, capturing 61% of all mobile spending in 2012, according to IDC.
Mobile display ads are becoming increasingly popular with advertisers, leaping by 8 percentage points last year to 39% of total mobile spending, IDC also noted. Gartner predicts mobile display will grow and eventually take over mobile search by 2016.
I think it’s going to happen a heck of a lot faster. Here’s why.
Mobile Users Rely Less On Web Browser-Based Search
On a desktop, users tend to overuse the search box in their browser, typing in the name of a brand or publisher and then just clicking on the top search result. This common Web habit drives an incredible amount of requests and page views on search pages.
On a smartphone or tablet, however, our behavior changes dramatically. The way we search, discover, find and navigate is much more app-based than browser-based. Of the 158 minutes spent on our mobile devices every day, 80% takes place within applications, according to Flurry.
This includes apps, such as Facebook, Twitter and Instagram, as well as favorite content apps, including WSJ, CBS News and ESPN. This is a fundamental shift in how users consume content and see advertising.
You can’t spend much time on a mobile site without being asked to download or use the app version, where publishers will do their very best to keep you. When a user searches for something within an app, very rarely are they sent elsewhere to satisfy the query. Publishers like Yelp will even use their own maps to avoid sending users to Google.
More Ad-Supported Apps Equal More Display Ad Inventory
One of the possible limitations for mobile display is the relative lack of ad inventory within apps. Advertisers often must use mobile Web impressions to attain the level of reach they typically achieve with online campaigns.
But that is also shifting at a supercharged rate. The average cost of iPhone and Android apps is 19 cents and 6 cents, respectively, and is driven lower each year by the surge in free apps.
As of April 2013, 90% of all apps were free. While some of these, including games, are based on the freemium model, which monetizes via in-app purchases or upgrades, most are ad-supported. The number of sponsored apps is growing at a faster rate than freemium ones.
Screen-Size Difference Squelches Search
You can’t get very far in the desktop vs. mobile discussion without running into the comment: “But the screen is so small.” It’s true — the screen is smaller. But for display advertisers, this is a good thing. With less clutter on the screen, their ad gets 100% share of voice each time it is served. For search, however, this creates severe limitations.
Desktop provides a lot of real estate for paid search results (sponsored links on top, plus the pane on the right), but mobile screens do not render them that way. As a result, Google sells a different kind of inventory for mobile to its customers, which are mostly businesses that rely on leads from click-to-call or click-for-directions.
Even with the much anticipated — or perhaps dreaded — mandatory shift to mobile that came with Google Enhanced Campaigns, the mobile search market will still have fewer buyers, lower CPMs and will lose market share over time.
Mobile Display Ads Are More Effective
There is a very simple reason why mobile display ads have become so popular with advertisers: They just work better.
From my experience, the average mobile click-through rate for a standard banner is between 0.32% (Web) and 0.39% (in-app), which is far better than desktop’s average of a paltry 0.1%. If we start looking at mobile display, the click-through rate skyrockets to 1.12% (Web) and 1.53% (in-app).
Going beyond CTR to engagement rates, mobile display ads are the best way for advertisers to give customers the immersive brand experience required for deeper engagement. As they shift budgets to mobile, it makes sense to allocate a higher percentage of spending to display.
For performance advertisers looking for the fast conversion, desktop search will still rule because of the maturity of cookie exchanges. Everyone is so well-profiled on the Web that direct-response advertisers have a highly sophisticated understanding of their customers, as shown by their conversion rates on form signups and e-commerce checkouts.
Due to the lack of cookies in mobile, we are nowhere close to having that kind of knowledge, so conversion rates suffer. Thus, even as budgets inevitably shift to mobile, DR advertisers simply won’t spend on mobile search.
Whatever Happened To A Blended Buy?
In mobile, the idea of a balanced mobile buy that incorporates both search and display is simply unrealistic. The core difference in how mobile users seek and consume content, coupled with mobile search’s poor performance and inventory limitations, squashes the idea of a mobile search strategy.
If you look at how Google’s mobile revenue fell short of analyst expectations in the second quarter of the year, it is clear that mobile search’s future isn’t as bright as we once thought.
In mobile, display will rule — and it will happen faster than you think.
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