Give the people where they want

Mobile phone

Google’s third-quarter reporting fiasco last week certainly made for a juicy story.

Beyond the immediate news of the accidental early release of the report, what I found most interesting was the role of mobile ad prices in Google’s disappointing quarterly profit — and how this highlights a disconnect between the perceived value of mobile marketing by advertisers and the reality of consumer behavior.

As you may have read, Google’s ad sales were up 33% compared to the same quarter last year, but the corresponding profit dropped because advertisers on average paid less per ad click. These lower prices were largely the result of a shift in ad impressions from desktop computers to mobile devices.

Consumers are increasingly accessing the web and conducting searches via mobile devices, in particular smartphones. But there is less competition amongst advertisers for mobile ads so they cost less than desktop ads.

Why is there less competition for mobile ads?

For most companies, it’s probably some combination of the following:

  • Have not yet created a mobile-optimized site that they are happy with. (Not an app, but a site that can be seen via mobile browsers and to which ads can point)
  • Have decision makers/key influencers who believe a mobile site delivers a less powerful marketing impact than the company’s traditional website
  • Don’t believe they can sufficiently monetize mobile traffic

But companies must figure these things out

There’s no shortage of data points saying it’s imperative to develop a mobile plan.

Mobile’s share of Internet traffic is growing rapidly, and is up to about 20% in the U.S. and Canada in 2012. About ¾ of this is via smartphones, ¼ tablets (data source). This traffic will continue to increase quickly.

Mobile accounts for an even larger role in search queries.

I recently attended a conference co-sponsored by Google during which two of its executives referenced a research firm’s forecast that half of all U.S. searches would be made on a mobile device in 2013. Given Google’s knowledge of search data, I take its executives’ endorsement to mean the forecast is reliable.

Key point: consumers want and are looking for information via mobile. If they don’t find it from your company, they’ll look for it elsewhere.

Consumers are also getting comfortable with mobile transactions. According to Internet Retailer Magazine, in 2012 U.S. mobile commerce sales will increase 99% over last year, to almost $21 billion.

“In 2012 U.S. mobile commerce sales will grow nearly 10 times faster than U.S. e-commerce sales” and “will account for about 9.2% of all U.S. e-commerce sales compared with 5.4% in 2011.”

Meanwhile, mobile content has an even larger impact on in-person sales. According to a report from Deloitte, smartphones influence 5.1% of sales made in retail stores, and this influence will increase to 19% by 2016.

Mobile mindset

While some companies have embraced mobile marketing – from offering great user experiences and compelling content to achieving robust m-commerce sales – they are the exception to the rule in the U.S. market.

More typically, corporate thinking needs catch up with the new consumer reality.

In terms of comparing a mobile site’s branding impact to that of a traditional website, it’s important to understand that the users don’t expect the same experience with mobile.

What they want is a site that functions well – i.e., allows them to easily fulfill their objectives – on the platform they have chosen to use.

There is a brand benefit to ease of use. Just as customer service helps shape a brand’s image, in the digital world so does usability. A positive user experience is a positive brand impression.

On the flip side, 48% of people surveyed in July reported feeling “frustrated and annoyed when they get to a site that’s not mobile-friendly.” (data source)

Meanwhile, in terms of more ‘traditional’ web marketing activities, consumers do watch videos, look at photos and interact with content via smartphones when good content is offered in a mobile-friendly manner (for example, check out the user activity on Instagram).

It’s not necessarily easy

I can speak from experience in saying that creating a great mobile experience is not easy.

Most companies’ digital teams are already stretched thin trying to keep up with the growing number of platforms for which they need to create content.

Mobile adds complexity to that situation– for example, the need for mobile-optimized ad landing pages, the challenge of multi-screen analytics, figuring out how to enable transactions, etc., etc.

And of course there’s the challenge that doing mobile well requires securing additional resources. For example, the funding for additional call center agents since in many cases the best mobile call-to-action is a phone number (“click to call”).

But it’s undoubtedly necessary

It will probably take some testing and false starts, but more and more companies are going to figure out how to offer their users great mobile experiences.

The downside is just too great: customers and potential customers abandoning them for competitors.

It’s only a matter of time before enough companies embrace the mobile opportunity that mobile ads cost the same as non-mobile ads, especially search ads.

The Google earnings report with that news is likely to come in a not-too-distant fiscal quarter.

Google’s “win-win and win” situation

eMarketer, Inc. recently released an estimate that Google is on pace to take the top spot in US display ad revenue in 2012.

This would earn Google its first digital advertising triple crown: leadership in US paid-search ads, mobile ads, and now display ads.

According to the Wall Street Journal, “Advertising executives said the eMarketer estimates are something of a surprise given that Google is best known for its search ads.”

Not me — no surprise here. I oversee a digital ad budget and have seen the shift to Google mobile and display ads firsthand.

However, the news has made me think about why Google is outpacing its rivals.

Clearly Google has made large, well-known investments that are fundamental to its growth beyond search ads, such as the purchases of DoubleClick and YouTube and the creation of an ad network (enabling it to sell ads across a stable of third-party websites).

But from my experience there are also numerous things Google does at a practical level that are less headline grabbing but which are relevant to people who decide how to allocate digital ad budgets.

Google’s approach to video ads – a fast-growing segment of the display ad market – offers a great product-level example of many of these things, including:

1)   Easy to justify a test budget

While other video ad pitches were based on TV tradition, Google offered an alternative: ads that viewers can skip by choice and which advertisers only pay for when not skipped.

If I only have to pay when a viewer actually watches the ad, why not run a test campaign?

2)   Easy to advocate

The ‘no play means no pay’ model also makes it easier for digital ad managers to sell the relatively new concept of online video advertising to internal stakeholders.

“We only pay when someone chooses to watch our full 30-second ad” is a very convincing statement and allows the person saying it to speak confidently.

3)   Easy to implement

Campaigns are quickly initiated and implemented in the AdWords system, using the same log-in many advertisers already use for paid-search ads.

Google also offers a lot of ‘how to’ information – how to set up campaigns and define audience targets, etc. – including helpful tutorial videos.

4)   Easy to like the end-user experience

If users can select whether or not to watch your video ad, then those who view it are much more likely to do so in a positive and more receptive mindset.

Offering a better user experience is one-third of the user/advertiser/company “win-win-win” that Google first embraced when it introduced the notion of relevancy to paid-search ad rankings many years ago (as opposed to simply selling to the highest bidder).

Heaven help the yahoos

In my opinion it’s difficult to see how any competitor will slow Google’s growth in the major digital-ad categories.

The competitive advantages gained from owning and integrating ad technology’s murderers row – DoubleClick, YouTube, AdMob, etc. – are obvious.

It’s also obvious that the company is committed to, and invests heavily in, innovation.

And unlike many other examples in corporate history, there’s no sign that the access to resources and/or its past achievements engender complacency at Google.

In the case of video ads, YouTube is 20x larger than the world’s second largest video platform but that hasn’t stopped Google from offering innovative ad products and then continuing to tweak them for improvements (and recently increasing the number of format options from two to four).

Google’s competitors are, of course, beyond aware of these topics.

But in my experience as an ad buyer, there are important things Google does that its competition doesn’t fully grasp, such as how much better Google’s account teams are at partnering with large clients and selling new opportunities.

Nor this simple reality: how much easier Google makes it for me to give them more of my advertising money.