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Friday, April 19, 2024

Will Paid Search Conquer The Mobile Internet?

To say there’s a lot going on with mobile right now is to state something more than obvious. The carriers, the handset makers and the mobile content providers are in what amounts to a frenzy of competition and business development as they try and position themselves for what they see as the next really big opportunity: the mobile Internet.

Two articles that simultaneously appeared in the Wall Street Journal (subscription required) yesterday capture this mood and activity. The first article, “Companies Vie For Ad Dollars On Mobile Web,” was a broad survey of the state of the mobile marketplace and wireless advertising.

The article cites research firm M:Metrics for the statistic that only 15% of mobile users access Internet content on their phones. Earlier this week comScore said the number is 17%.

These figures at first blush appear to be relatively small, but when you step back they grow larger. Consider that there are more than 2.5 billion wireless phones in use around the world today. Just over 200 million of those phones reside in the U.S. So what’s 15% or 17% of 200 million? The answer is: between 30 and 34 million mobile Internet users.

These are the relatively early adopters who suffer with rendering problems, awkward interfaces and painful keypad-based entry systems. Given those challenges, 34 million is already significant — even impressive — usage and it’s only going to grow. The questions are how fast and how will it be monetized?

The WSJ article cites figures for current spending on mobile advertising:

In 2006, mobile ad spending was an estimated $871 million world-wide, according to data from research firm Informa Telecoms and Media. Most of the money went into text messages, the mobile equivalent of sending people ads by email. Spending on Internet advertising was about $24 billion world-wide in 2006, according to ZenithOptimedia, a unit of Publicis Group SA.

The sheer scale of the global mobile market makes it a potentially gigantic opportunity that is not lost on any of the U.S. search players. (Bill Gates, Eric Schmidt and Terry Semel keep reminding everyone how many more handsets than PCs there are in the world.) But mobile is not merely a small-screen extension of the desktop. It’s essentially a different medium that needs to be thoughtfully approached and treated differently. The idea that all the rules and behaviors of the Internet will automatically apply to mobile is simply incorrect.

For example, the WSJ article cites Harris polling data (October, 2006) that presents a complicated picture for mobile marketers. Harris pollsters asked:

“How willing would you be to watch advertising on your cell phone if in return you were to receive free applications for your cell phone?”

Approximately 26% percent of respondents (n=871) expressed varying degrees of receptivity, with 10% saying they would be “very willing” to watch ads. By contrast, 63% were negative, with 51% saying they were “not at all willing” to view ads.

The findings were even more skewed regarding text-based advertising: 7% indicated some degree of interest in promotional text messages (2% were “very” or “extremely” interested), while 92% indicated little or no interest. Within that second group 78% said they were “not at all interested.”

There are other studies in the market that support these findings and indicate consumer resistance to mobile advertising. This will likely mean that mobile banners, video pre-roll, unsolicited text messages and other forms of “push” advertising on mobile devices will meet with limited or no success in the U.S. in the next few years. (The WSJ article does talk about the success of mobile banners in Japan.)

By contrast, search-based ads or push advertising tied to consumer opt-in choices (e.g., mobile coupons) will likely fare better because of perceived relevance.

The long anticipated and hyped “location-based services” model where the restaurant or movie coupon is “beamed” to me while I walk past the business will probably never develop. But location sensitivity certainly will continue to develop and be a huge consideration in mobile marketing.

The point here is that consumers are likely to be receptive to ads or offers that are served in response to their formal queries or invitations. Thus the paid-search model is likely to be quite effective in mobile. There’s already evidence of that in the limited roll-out of ads by G, Y and M. In addition, ad-supported directory assistance provider Jingle Networks (1-800-Free411) indicates connect rates of 80% (pay-per-phone call) for “preferred listings” – relevant businesses given “top placement” on the call. And PPCall ad provider Ingenio indicates much higher call-throughs in mobile than online. Both of these are audio variations on the PPC search model.

The second WSJ article, “IPhone Fans and Foes Clash Online,” shows how the not-yet-released Apple iPhone is already shaking up the market. Indeed, there’s already an LG “iPhone clone” being developed. U.S. carrier Alltel is simplifying its content interface. And of course Yahoo Go 2.0 was announced at CES with the aim that it would make mobile Internet browsing and searching much simpler and less frustrating to users.

As carriers seek to make the mobile Internet more user-friendly and as handset makers move to match the perceived simplicity and innovation of the iPhone the net effect (so to speak) will be to draw more users into mobile data. So generally the stars appear to be aligning and we should see significant gains in mobile Internet adoption by consumers by late 2007 and 2008.

Established Internet brands (i.e., G, Y, M, MySpace) will have running start in mobile content (and mobile advertising) but the best user experience may be able to trump brand in these early days.

We’ll see of course. But at this point the mobile Internet is still relatively wide open.

Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.

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