Claim that apps could 'absorb' online display advertising spend don't meet with unanimous approval
The amount of advertising inventory within mobile apps in the US has exploded in the last year, but does that mean developers and publishers are making a killing from ad-supported apps? New research from mobile analytics firm Flurry raises more questions than answers.
The company published its research on its blog, based on data from more than 100,000 iOS and Android applications using its analytics tools. Flurry calculated that the average app session lasts 4.2 minutes, during which an average of 4.3 adverts are shown.
It then assumed a "conservative" cost-per-thousand impressions (CPM) rate of $2.50 for mobile application inventory ? remember that assumption ? to calculate a potential US mobile app inventory value of just over $1bn by the end of 2011, poised to overtake net monthly revenues from online display ads. By the end of 2012, Flurry's chart predicts US mobile app inventory to the value of $4.5bn.
Or, as Flurry put it in its blog post: "US app inventory is not only growing at a staggering rate, but also poised to absorb the equivalent of the entire US Internet display advertising spend by the end of this year... Another way to look at this is that, in approximately two years, mobile app inventory is growing so aggressively that it could easily meet the demand of a mature, 15-year-old form of online advertising."
Flurry cites as key factors in this growth sales of more than one million new smartphones a day; rapid growth in the number of available apps and the time users spend using them; and more publishers integrating ads into their apps.
Well then. The first thing to say about these calculations is that they are comparing app inventory ? the slots available that could potentially be used for ads that could potentially be worth a CPM of $2.50 ? with actual online display revenues. Those ad slots might be filled, but they might not, and if they are, it may not be at those rates.
Second, isn't there a concern that the explosive growth in mobile app ad inventory could be a bad thing, if demand isn't keeping up with the supply?
I asked some mobile advertising companies for their views, and encountered a range of views. Millennial Media is the largest independent mobile advertising network, and its senior vice president of global monetisation solutions Matt Gillis was fairly positive.
"We think inventory growth is great, and developers should be excited that consumers are seriously gravitating towards content consumption on mobile platforms versus others," he says, before delivering a warning.
"In terms of pricing, all impressions are not necessarily equal, and the developers that can continue to drive premium value will attract the richest campaigns. This should continue to be the case, no matter how much inventory is out there. In the meantime, whenever possible, developers should focus on adding some of the key factors advertisers are often looking for, such as rich media capabilities."
In the UK, 4th Screen Advertising managing director Mark Slade suggested that the stats and positioning in Flurry's blog post are "slightly misleading" due to the comparison.
"Advertising is driven more by demand than supply, ie, looking at the growth of supply of inventory and immediately connecting that to the demand for advertising is a stretch," he says. "As an ad network, if all we had to do was increase inventory to increase spend everyone would be in this space. If you applied the same methodology for online ? assumed all page impressions were monetised at $2.50 ? online would be gigantic."
Slade also thinks that $2.50 is "way too high" for the majority of mobile app inventory, which is characterised by a long tail of apps that rise and fall quickly in the app store charts (or never rise at all).
"The Shazam app commands a premium CPM, however a novelty random talking cat is less appealing to top advertisers," says Slade. "Very few applications reach sustainable scale on an individual basis."
James Connolly, managing director of UK mobile advertising buying and planning agency Fetch Media, also points to the variety of apps on offer.
"Because mobile inventory is hugely fragmented, the quality and therefore the value of in-app traffic varies greatly, with game inventory differing hugely from that of a premium publisher," he says, before suggesting that the huge growth in US app ad inventory has a lot to do with the growth of Google's Android OS.
"With Android now leading the US smartphone market, it is much easier for a one man band developer to create an app , integrate an ad serving API and launch into the Android Market without too many difficulties, equalling new inventory which therefore drives the value of the inventory down," he says.
"The real indicator will be how app stores position applications and how important the usage of an app will play within this. The explosion of app inventory shouldn't therefore have a universal effect on all mobile inventory. However, low cost inventory, typically sold through blind networks or incentivised programs will become more available and therefore less valuable per unit."
Slade claims that in the US and Europe alike, premium publishers and big applications are "pulling out of the blind networks" to either sell in-house or work with specialist mobile agencies ? yes, that would include 4th Screen Advertising.
Flurry's research is still useful in trying to gauge what's happening in the market: the company's analytics are used by a wide enough sample of apps to make it useful data. That said, the success of the mobile advertising market is clearly not about the amount of available inventory, but about how efficiently and profitably that inventory is filled.

Advertising Agency: Leo Burnett, Chicago, USA
Global Creative Director: Mark Tutssel
Executive Creative Director: Susan Credle
Creative Directors: Dave Loew, Jon Wyville
Art Director: Rainer Schmidt
Copywriter: Tohru Oyasu
Executive Producer: David Moore
Producers: Christopher Cochrane, Stephen Clark
Production Company: Psyop
Typography: Siggi Eggertson
Editorial: Whitehouse
Editor: Tim Warmanen
Music Company: Human
Business cards of ten famous people: Gates, Jobs, Zuckerberg, etc.
Created by brazilian agency Loducca, Twipsum is an experimental website that generates filler text based on tweets. It works as the 'old' Lorem Ipsum, used in graphic design to demonstrate font and typography on the layout before putting the real text content. To get a custom Twipsum filler text, just type a Twitter account and the system will pull all words from the latest tweets and create the paragraphs for you to copy and paste into your comps. If you don't use Twitter, the website suggests the accounts of famous people for you to play around. You can also hear parts of the filler text through Google Translate.
Advertising Agency: Loducca, Brazil
Creative Directors: Guga Ketzer, André Faria, Cassio Moron, Marco Monteiro
Creatives: Mariana Rocha, Mauricio Machado, Raphael Franzini
Designers: Gustavo de Lacerda, Dude Tallia
Published: September 2011
Business cards of ten famous people: Gates, Jobs, Zuckerberg, etc.
The search engine giant takes on rival Groupon with Google Offers discount deal for New York museum
Google has introduced adverts for daily deals to its famously clutter-free homepage for the first time, in what appears to be a bid to challenge Groupon, the hugely successful discount and offers service.
The world's number one search engine offered US users a deal on Wednesday, a rare instance of the internet giant using its prized online real estate for advertising.
The advert linked to its Groupon-style service, currently available in the US only, called Google Offers, and offered users tickets for the Musuem of Natural History ? which would normally cost $25 (£15) ? for $5.
The daily deals move comes just eight months after Groupon rejected a $6bn takeover offer from the company amid fears that it would have drawn an anti-trust investigation. Groupon has now filed for a flotation which could happen as early as next month.
Placing adverts on its homepage is a rare step for Google, which regards the clutter-free user experience as one of the key elements of its success.
Google only ever breaks with this rigorously guarded format to promote services it considers strategically important, such as its Chrome browser or its now defunct Nexus S phone.
Groupon is one of the stellar technology start-ups of the last three years with more than 115 million subscribers and has an estimated 600-700 companies trying to emulate its success including its nearest rival, livingsocial.com.
All are vying for a slice of Google's local advertising business ? Google generated 96% of its roughly $29bn in revenue last year from ads that appear alongside search results.
"We occasionally include a link on the Google homepage that points users to important information, whether it be about a relevant cause, a new product or an offer," a Google spokeswoman said. "Users can benefit from learning about great deals from local organisations."
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