The Sexy-Shocking Number from Nielsen's Mobile Path to Purchase Study

Earlier today xAd put out its quarterly insights report. There were a number of interesting findings and datapoints. The "headline" was that the number of national-advertiser campaigns using more precise geotargeting (more specific than DMA, city or ZIP) had more than doubled over the course of the past 12 months. 

In a very general way this mirrors the movement of the market and the growing sophistication and use of location targeting by marketers. 

There was also a nice case study involving Pinkberry's introduction of a new line of greek yogurt. Pinkberry's objective was to build awareness and drive visits to local stores. It used xAd enhanced geofencing to target users and show ads within 1 mile of store locations. The were a couple of discounts and incentives (coupons) associated with the product launch. 

The display ad clicked-through to a "dynamic landing page specific to the nearest location which features these offers as well as an option to save the coupon, obtain the address, phone number, map, directions and/or more information." According to the case study materials, in two weeks the campaign goals were exceeded by 2X. 

As you can see below, the ad creative was very polished. But the success of the campaign also illustrates how effective the combination of local relevance and offers can be. Indeed, xAd's reported average campaign metrics (for both search and display) outperform the industry averages. 

More interesting than the findings in the insights report were the findings released last week in the 2013 US Mobile Path-to-Purchase study, undertaken in cooperation with Telmetrics and Nielsen, which conducted the research.

The Mobile Path to Purchase study is in its second year. The findings are based on an online survey of 2,000 US smartphone and tablet owners and “observed consumer behaviors from Nielsen’s Smartphone Analytics Panel of 6,000 Apple and Android users.”

There were a ton of data that came out of this report, and will continue to be released over time. However the single "blockbuster" finding is that across a range of purchase categories (i.e., Finance, Retail, Insurance, Convenience/Gas) 46% of survey respondents said they relied exclusively on their mobile devices (smartphones and/or tablets) in conducting pre-purchase research online. 

Accordingly, nearly half of the respondents did not use or consult PCs -- at all. I was initially shocked by this. I don't have detailed demographic information about who these people were beyond the fact that they skew younger (18 - 34). But this is a huge finding and one that should scare the stuffing out of any brand or advertiser that isn't actively pursuing a mobile marketing strategy. 

Facebook's Q1 Mobile Ad Revenues: $373.5M

Facebook announced Q1 revenues of $1.46 billion and net income of $219 million. Most usage and engagement metrics were up: daily, monthly and mobile active users. On the latter point Facebook announced 751 million mobile active users, up from 680 million in Q4 2012.

Mobile only users were 189 million vs. 157 million in Q4 2012.

Total ad revenue in Q1 for Facebook was $1.245 billion, which was 85% of total revenue. Of that $1.245 billion ad revenue, 30% was mobile. That's up from 23% in Q4. What that means, as a practical matter, is that Facebook made $373.5 million in mobile ad revenue in Q1.  

Facebook COO Sheryl Sandberg characterized Facebook is a “mobile-first” company and offered several examples of the company's mobile success during the earnings call. For example, she said that "3,800 mobile app developers used these ads to drive nearly 25 million downloads."

Facebook's FY 2013 global mobile ad revenues will probably land somewhere between $1.6 and $1.9 billion.  

Report: Samsung Sees Almost 70% of Android Ad Impressions

Samsung is the undisputed ruler of the Android roost. On a global basis it's the dominant handset OEM and there's no real challenge in sight -- other than the iPhone. Samsung continues to eclipse fellow Android manufacturers LG, HTC and Google's own Motorola in terms of sales and market share. 

In that context one might expect Samsung to dominate Android-based advertising. Indeed it does. Mobile ad platform Velti has released data that show that Samsung mobile devices see nearly 70% of all Android ad impressions in the US market. This refers to display advertising but it probably extends to search impressions as well.

However on the tablet side, Samsung is second behind Amazon in the US market. There Samsung has had much less success and has yet to product a breakthrough device -- although its Note "phablet" has done well.

The following chart shows Android market share by ad impressions. 

Yet when it comes to ad impressions on tablets the iPad and iPad Mini control more than 95% of the market according to Velti's network data. Chitika, another mobile ad network, puts the iPad's traffic share at about 82%, significantly lower though still dominant.

There has been some "cannibalization" of the iPad by its younger and smaller sibling. The Mini is less expensive and has lower margins than the iPad. Indications that the larger iPad's sales have declined in favor of the Mini have, to some degree, contributed to investor anxiety about today's Apple earnings (coming up shortly) .

IAB: US Mobile Ad Revs $3.4 Billion in 2012

Consistent with what could be projected from the 1H numbers the IAB released, the trade group reported this morning that mobile ad revenues in the US for 2012 were just under $3.4 billion. This number is below what many other firms had projected but still represented more than 100% growth.

Overall, mobile ad revenue constituted 9% of total internet ad revenues for the year, which were $36.6 billion. Retail and financial services are the top two ad categories. And over time more of that digital retail ad spend should migrate to mobile. Within a few years, we should probably expect that about 20% to 25% of the overal digital spend should go to mobile. That will still lag consumer behavior but be more in line with it. 

The following are the breakdowns by category and format for US online advertising as a whole: 

There was no sub-category breakdown provided by the IAB for mobile. However search dominates, followed by mobile display. The full report, which isn't yet out, may provide further insight into the division of revenues. 

Mobile Display Ad Estimates: Social Sites Beat the Networks?

A week ahead of the actual mobile ad numbers from the IAB IDC has released its estimates of 2012 US mobile advertising, as well as projections for 2013. The company says that mobile ad revenues were $4.5 billion in 2012 and will reach $7 billion this year. Our view is that the actual 2012 number will come in just under $4 billion. 

According to IDC, search advertising represented 61% of mobile ad revenues in 2012 or $2.8 billion, while display brought in $1.7 billion or 39%. Directionally those numbers are right though the precise proportions may be off. For example, IDC's estimates of Google's share of search advertising is 79%, which is too low. It's more like 94%. 

The most interesting part of IDC's figures and analysis is its juxtaposition between social networks (publishers) and mobile ad networks. Here are IDC's 2012 mobile ad revenue estimates for the major social networks/publishers (Pandora isn't a social network obviously):

1. Facebook: $234 million
2. Pandora: $229 million
3. Twitter: $117 million

And here are the IDC-estimated mobile display ad-network revenues:

1. Google: $243 million
2. Millennial Media: $151 million
3. Apple: $125 million
4. Jumptap: $90 million

The argument is that publishers/social networks have beaten the mobile ad networks. Online publishers essentially lost out over time to the ad networks on the PC internet because of traffic fragmentation and limited reach of most publisher sites vs. networks. The question is: will this happen again as real-time bidding and mobile exchanges become established? Or will major sites/publishers retain their ability to capture and control significant mobile ad dollars? 

One point to be made here is that sites like Facebook and Twitter offer a multiplatform solution (and so does Google) that enables marketers to reach users on the PC and mobile simultaneously and usually with a single buy and single ad creative. That represents an efficiency advantage over most ad networks. 

Assessing Dueling Mobile Ad Forecasts: $27B vs. $16.8B

Two mobile ad forecasts were released last week almost on top of one another: one from eMarketer and another from BIA/Kelsey (BIA). (IDC is slated to come out with theirs very soon.) The figures they project for mobile advertising in four years are $10 billion apart. 

In one way or another most forecasts turn out to be wrong. Forecasts typically either fail to anticipate technology shifts or they have the opposite problem. They are often aggressive in assuming how quickly technology adoption will happen or change the market. Think about past predictions regarding the rise of digial advertising and the erosion of traditional media. It's happening but years after many thought it would.

I've certainly been guilty of incorrect predictions and aggressive forecasts in the past. So I now generally prefer the IAB's methodology, which reports on actual revenues after the fact.

Let's take a look at and compare the eMarketer and BIA mobile forecasts, which are strikingly different. BIA says that US mobile advertising in 2013 will be worth $5.4 billion and $16.8 billion by 2017. By comparison eMarketer is much more bullish, saying that US mobile advertising will be $7.3 billion this year and $27 billion by 2017. The 2017 number is almost certainly way too aggressive.

New York-based eMarketer pegged 2012 mobile ad revenues at $4.1 billion. However my view is that when the IAB numbers come out we'll see something closer to $3.5 - $3.8 billion. However it's possible that eMarketer has it right. Google told financial analysts several months ago that the company's mobile "run rate" was $8 billion globally (including non-ad revenue). 

BIA has raised the amount of its overall forecast from last year considerably but dialed back somewhat the portion allocated to local. That's because the firm began to recognize marketers weren't buying local fast enough. SMBs aren't buying mobile ads directly and brands have only recently started to explore local targeting in earnest. Depending on several variables that may accelerate in the next 12 - 24 months. 

YP said that it had $350 million in mobile-ad revenue today. It's not selling mobile advertising directly to the company's mostly small business advertiser base. Rather this is how the company is allocating or attributing revenue from ads that appear on mobile devices but are originally sold as part of a broader package. 

The local portion of BIA's forecast is dominated by search advertising, which has been the major contributor to local-mobile ad revenues. BIA maintains the assumption that search will continue to dominate local advertising throughout the forecast period. And mobile paid search is consistently expected to have more than 2X local ad revenues vs. mobile display in the BIA forecast.

Yet there are many more display impressions (in apps for example) than search queries. I don't know ratio off the top of my head but it's quite significant. If we're going to see billions in local-moble ad revenue it can't all come from search queries on Google. (Almost all paid search revenue in mobile [95%+] will go to Google for at least the foreseeable future, if not indefinitely.)  

Today paid search represents just under half of all PC-based ad revenue. It's likely that will track with mobile over time. 

I do believe that location will increasingly be used by mobile display advertisers, networks and exchanges. But it will also be used together with other variables as a way to reach particular audiences. Location will be both simplified for advertisers and incorporated into larger mobile ad-targeting concepts ("context"). Thus location will be a layer, among other variables, in mobile display and probably not remain a single targeting methodology -- except in geofencing and related "conquesting" scenarios.

Emarketer projects that the majority of mobile revenues will be controlled by a small number of companies: Google, Facebook, Twitter, Apple, Pandora, Millennial Media and "other." Other includes a large number of companies, including Microsoft, Yahoo, mobile exchanges/DSPs and still others. 

The collective "other" category above is probably much too small. However I do agree that a relatively small group of large companies with significant scale will control and collect the lion's share of mobile advertising in the US, just as on the PC. Google, Facebook and Twitter will certainly be among them. 

Google is accelerating the growth of mobile ad revenue with its recent introduction of Enhanced Campaigns, which will push more AdWords advertisers into mobile at higher CPC rates. And by bundling PC and tablet advertising together paid-search on tablets will also grow much more quickly. Location-based ad targeting on tablets is a bit of a wild card: location matters somewhat less on tablets than smartphones but the "ad canvas" is much richer on tablets.

Facebook has also been dialing up the amount of ad revenue it generates from mobile, simply by showing more ads in its apps. Home is a wild card and may or may not favorably impact mobile ad revenue for the company. 

What qualifies as a "mobile" ad may become murkier and more of an attribution question as in the YP example -- such as combined tablet and PC ads in search or Facebook ads that appear equally in mobile and on the PC. And what qualifies as "local" ad in mobile is also a bit of an issue. I would argue a local ad in mobile is one that includes an explicit location mention in the ad creative (or landing page). A "local ad" can also be one that has no location mention but uses explicit location targeting at a DMA level or "below." Ads that target by state, province or region should probably not be considered "local."

Google's Enhanced Campaigns and related simplification of media buying and location targeting will significantly boost ad spending attributable to mobile. I think however the eMarketer numbers for 2016 and 2017 are still too high. I also believe the BIA position that most mobile ads will be localized is also incorrect -- unless the definition of local is radically enlarged. 

The Outlook for 'Home' Screen Advertising

Yesterday Facebook introduced its homescreen Android makeover-takeover strategy: Facebook Home. It comes both fully integrated into a phone (HTC First) and as an app download. As you know it replaces the standard Android home and lock screen experiences with a proprietary Facebook environment. 

Mark Zuckerberg and others at the press event yesterday confirmed that there would eventually be ads in its "Cover Feed." Cover Feed is the new photo-centric dynamic feed that constitutes much of the experience of Home. It includes Facebook content and select "Open Graph" partner content (e.g., Foursquare, Instagram). 

Facebook stressed that it was working to make sure that any ads that eventually do appear (probably within a year, depending on adoption) would be consistent with the aesthetic experience and of sufficiently high quality. We're starting to see more ads in the mobile news feed that are of, shall we say, uneven quality. 

However Cover Feed ads have the potential to be quite effective. If they're scarce and if Facebook uses strict standards they could become the equivalent of "Super Bowl ads for mobile." That of course will largely depend on how widely Facebook Home is adopted. There's early survey data that suggests limited demand -- but surveys don't always tell the whole story and can be contradicted by actual behavior. 

In the past there have been several startups that sought to offer home or idle screen ads on mobile devices. All failed for various reasons (not enough scale, insufficient ad quality, limited advertiser demand/adoption). Today, to my knowledge, Amazon's Kindle (multiple devices) is the only place where such ads exist at any kind of scale. The picture above, at right is an example of a "Special Offer" on Kindle Fire. 

I could find no data about the general consumer attitude toward these ads -- though there is plenty of online discussion about opting out. I also was unable to find any discussion or data about the efficacy of these ads and whether they perform for advertisers. 

For many of the reasons already cited it's way too early to project how much Facebook could earn from Home ads. But if there are millions of users who adopt Home in the US and around the world, the ads could generate broad exposure (like TV advertising) and significant potential revenue for Facebook. 

An interesting secondary question arises: if the most active mobile users migrate to Home (and use the app less often), do ads on Home then effectively cannibalize ads on the Facebook app in the conventional news feed? 

Image credit: lovemyfire.com

PlaceIQ Introduces 'Place Visit Rate' Mobile-to-Store Metric

In what might be considered something of a breakthrough, AdAge is reporting that agency Starcom MediaVest will be working with location-data specialist PlaceIQ to document what "percentage of customers served a mobile banner ad for a retailer subsequently visited one of that retailer's stores."

This is part of a new real-world ROI metric PlaceIQ is introducing. The company's new measurement is called "Place Visit Rate." 

I spoke to PlaceIQ founder Duncan McCall about this several weeks ago but it was pre-case study release and so non-public at the time. PlaceIQ uses an unique but anonymous ID to connect users in the aggregate who've seen mobile display campaigngs with in-store visitors. Here's how the company explains its methodology:

PVR is measured by aggregating all of the devices that were messaged during a campaign and analyzing the number of those same devices that were later seen within a specific location or place footprint. Additionally, PlaceIQ can also set up A/B testing to measure PVR lift by identifying control groups or messaging additional PlaceIQ audiences. 

PlaceIQ emphasizes that it doesn't track individuals:

Place Visit Rate does not track individuals, but rather measures if a set of anonymous devices moved to a certain location. All location data, device data and histories are disposed of by PlaceIQ after the campaign completes.

The methodology is imperfect and can only identify a portion of users who seen an ad and then shown up in a store. An article in AdAge claims PlaceIQ is only able to track "15% to 25% of all mobile ad traffic it monitors."  Beyond this, as we all know, "correlation doesn't equal causation." However this is a big step forward in terms of being able to measure the efficacy of mobile display advertising.   

Historically, coupons have been the most reliable way to measure online-to-offline impact. And mobile payments may one-day make "closing the loop" on online or mobile ads fairly routine. However most ad networks and marketers have had to use proxy data (calls, map lookups) to determine the offline impact of mobile ads. 

Telenav/Scout can track users who see an ad and then navigate to a store location. It's not clear however how often someone sees a mobile display ad and then invokes navigation to a store. 

There are others such as ShopKick and Placed, which measure in-store visits. And there are a "2.0" group of startups working on various flavors of in-store vists and activity measurement. Among them are Euclid Elements and WirelessWERX. The latter uses indoor location to provide business intelligence and analytics services for retailers. 

Accordingly there are a range of methodologies now to try and track or capture online-to-offline ad impact. PlaceIQ's approach is a significant new entry into this arena and others may quickly try to match or approximate it. 

More than Half of Twitter Ad Revenue from Mobile

A new forecast from eMarketer estimates more than half of Twitter's ad revenues (53%) will come from mobile advertising this year, up from virtually no ad revenue from mobile in 2011.

In total, eMarketer estimates global ad revenue at $528 million for 2013, pushing upward to $1 billion for 2014.

But ads on mobile devices are driving incremental growth over the next two years. By 2015, Twitter is expected to pull in $1.33 billion in worldwide ad revenue, more than 60% of which will come from mobile advertising.

The rapid growth in mobile ad revenue is due in part because "Twitter has ultimately benefited from the increased focus on mobile by competitors like Google and Facebook, which have both expanded their own mobile ad offerings and worked to convince advertisers to shift dollars to mobile devices," says eMarketer. Advertisers are clearly showing more interest spending money on mobile ads.

The report shows Twitter ad revenue is slowly shifting globally with 83% of 2013 ad revenue from the U.S., down from 90% in 2012.

A Report for Those Who Doubt Mobile ROI

This morning Google released the results of an extensive study conducted among US mobile users with Nielsen in Q4 2012. The survey explores mobile search behavior in particular and uses a combination of interviews, online survey data, diaries and search query logs to get a holistic picture of search activity on smartphones. Tablets weren't part of this research. 

Among the many interesting findings there are two big ones that stand out: 77% of mobile searches happen at home or work, even when there's a PC nearby. And 55% of mobile-search related conversions (call, store visit, purchase) happen within "one hour or less" of query completion.

These two stats illustrate two larger "truths" about mobile. The first is that mobile devices are increasingly "primary" for people as a method of internet access. Speed and convenience were cited by respondents as reasons for substituting a smartphone for a PC in a search context. 

Marketers need to be cognizant of the fact that large numbers of people will be using their smartphones (and tablets) at home to search for things, whereas before they might have used a PC. At work people may be motivated by other considerations, such as privacy, to use mobile devices vs. corporate-provided PCs. 

The other "truth" is illustrated by the 55% figure: conversions often happen very quickly after a mobile search. This reinforces the notion of the focused, "need it now" mindset of many mobile search users. Mobile searchers take a variety of actions after completing their queries. They go to websites and do additional research, they make phone calls and they go into stores. They buy things. 

But marketers can't see most of that activity, hence the complaints about mobile ROI. Most marketers get confused and "lose the trail" when users go offline. You can track calls and site visits, you can capture email addresses and you can monitor e-commerce transactions via mobile. However it's challenging to get complete visibility on all the ways that mobile is influencing purchase behavior.

The slide above illustrates the range of activities mobile search triggers. But more importantly, Google and Nielsen found that 45% of mobile search queries were undertaken to help make a purchase decision -- so-called "goal oriented" searches. And most of these will result in a conversion, often offline. 

The totality of the data released in this study (download the pdf) show that mobile users are more focused and are typically farther down "in the funnel" than PC users. Mobile (search at least) is clearly driving lots of conversions. Marketers just need to open their minds about what constitutes a "conversion" and get creative about ROI and attribution. 

Otherwise, they're not seeing what's really happening with their customers and how critical a role mobile is playing in the overall marketing and sales process.

Report: Tablets Mostly Beat Smartphones for Ad (CTR) Performance

Many of the Q4 reports released by the ad networks and major agencies showed the growth of tablet-related ad spending. That's a trend that will further accelerate under Google's new "Enhanced Campaigns" regime in which tablets are grouped with PCs for paid-search advertising purposes. In other words, marketers cannot separate PC and tablet paid-search campaigns. 

Last week Adobe reported that tablets had passed smartphones for share of global traffic.  

In many ways tablets are the new PCs, taking their place for many at home use cases. Tablet owners tend to behave more like PC shoppers, including displaying a greater willingness to covert online. By contrast, smartphone owners typically don't convert on the small screen making ROI harder to track for marketers targeting those devices. 

Because online conversions are more likely and prevalent for tablet users, the "danger" is that marketers will neglect smartphones or that smartphones will be "ghettoized" and considered good for only a limited number of purposes. In fact mobile/smartphone advertising is great for both DR and branding purposes. 

Mobile DSP Adfonic now offers data that show, across most categories, tablet advertising appears to outperform smartphone ads in terms of CTRs (though ultimate influence on conversions isn't measured).

As the chart above reflects, "tablets achieve especially strong CTRs for advertisers in the Style & Fashion, Lifestyle & Health, Entertainment & Media, and Travel verticals." Smartphones are stronger in other categories such as retail and automotive. People tend to use tablets in the evenings and on the weekends. 

Over time marketers will determine which devices are better suited to which types of advertising. However companies need to have a comprehensive strategy that recognizes the "multi-screen" consumer, who will move from device to device before converting. 

Although Kindle Fire and Nexus 7 are gaining, Apple tablets continue to dominate web traffic. The following chart shows North American traffic over the past three months, comparing the top-three devices on Chitika's ad network.

Yelp Moves into Mobile Display Advertising

It has only been a few months since Yelp introduced ads at the top of search results in mobile. Now, according to AdAge, the company is adding mobile display ads to its mobile apps (and probably later its mobile website).

The first advertisers will be InterContinental Hotels (IHG) and Taco Bell. They will apparently have exclusive visibility in their respective categories throughout March. I was unable to find a live screenshot for either advertiser. However the left image below (via AdAge) shows a Taco Bell ad on the business profile page. On the right I've also captured a "search ad" and its presentation in Yelp's iPhone app. 

What's not clear is whether Yelp advertisers will be exempt from having these new displays ads on their profiles (they are exempt from competing ads online). It will also be interesting to see how these ads perform. Will they be more brand oriented or more direct response (including special offers)? 

While Yelp users in the restaurants category, I'm guessing, are less likely to change their plans and go to Taco Bell hotel category users could well respond to an offer or incentive from IHG as they plan a hotel stay.   

It will also be interesting to see whether Yelp will sell its own ad inventory exclusively or whether the company will take third party mobile display ads. My guess is that Yelp probably would be concerned about the quality and relevance of third party mobile display ads and will be unlikely to take them for at least the near-term (if ever). 

By Ignoring Standards Will Rovio Save Mobile Advertising?

Rovio (formerly known as Relude) was founded by three students in Finland in 2003. In 2009, as Rovio, the company released Angry Birds for the iPhone. To call it phenomenolly successful would be an understatement. 

Most people are aware the Angry Birds games have been downloaded more than a billion times. However many in North America may not recognize that the Espoo-Finland based company is now a global entertainment brand, with "activity parks" in Europe, an Angry Birds cartoon series and a feature film coming in 2016.

The company has expanded into publishing and character licensing. It claims more than 260 million monthly active users. Rovio's YouTube channel has more than a billion views. It also says that its retail products "are now generating a major part" of its revenue. 

Against that backdrop, last month the company annouced a new "Brand Advertising Partnership Team." Rovio hired a number of advertising industry and digital media veterans including Michele Tobin, Betsy Flounders Novak, Matt Pfeffer, Todd Tran and Raphaelle Tripet. Tobin is quoted in press materials saying, “Our new Brand Advertising Partnership Team in the US will enable us to now partner directly with other lifestyle brands." Tobin is the Head of North American Brand Advertising Partnerships. 

Just as Rovio is making a big push into advertising the IAB and MMA are seeking to lock down standardized mobile ad units in the hope that standards will drive more adoption and investment in mobile advertising. That assumption may or may not be correct but the consquences of standardization at this still-early stage may be to "institutionalize" lackluster ad creative.  

On the PC, display ad unit standards were partly responsible for the development of "banner blindness," which in turn led the Online Publishers Association years later to break away and create new, bigger ad units that were more like TV and encouraged deeper audience engagement. 

Rather than standardization what mobile advertising needs is radically improved ad creative. While there are some great case studies and pockets of progressive thinking about mobile, most mobile display is unispired and even perfunctory.

Rovio is taking a very expansive view of digital advertising and may be able to do some highly customized promotions and ad campaigns that are more analogous to TV than to conventional digital display. This was the original imperative behind Apple's iAd efforts.

Rovio plans to work closely with brand advertisers both in creating novel campaigns that it hosts and in lending its characters to third party advertising. The skill and vision of its new brand team should give us hope that the digital and mobile campaigns Rovio creates will operate as models or best practices examples for the broader industry.   

Sorry PC: Tablet Buyers Want Yet More Tablets

Beyond the pure sales numbers -- tablets up, PCs flat or down -- there's a fair amount of anecdotal evidence that people are substituting tablet purchases for PCs. Adding to that, mobile ad network JiWire put out a Q4 report in which it surveyed more than 5,000 mobile consumers in the US and UK on a range of topics.

Among the findings in the report was the intention of existing tablet owners to by a second or additional tablets. The survey found that almost three-fourths of the respondents (existing tablet owners) intended to purchase another tablet.

It should be pointed out that the JiWire audience is not necessarily representative of the general mobile user population. It tends to be a slightly more "early adopter" profile. However I would imagine this finding is a kind of leading indicator of broader consumer sentiment.

HP's announcement of a $169 7-inch Android tablet earlier this week (putting more price pressure on the entire segment) argues that tablets will become an affordable and mainstream PC alternative for a broad consumer population, not just "affluents." Indeed, this result above suggest that many households will have two, three and even more tablets: one for each family member. 

As I've argued before these devices (and smartphones) will be "primary," while the PC will be used for selected tasks and perhaps become a "secondary" Internet device in the home for large numbers of people. Developing markets may see even more dramatic patterns along these lines, with low-cost tablets simply taking the place of PCs in many instances. 

An interesting, related finding in the JiWire report is the hierarchy of tablet preferences. The findings below reflect the international nature of JiWire's results. The Galaxy tablets have not done as well in the US but have done relatively well in Europe. In the US or North America, Kindle Fire has been the most successful Android device, followed by the Nexus 7.

What's particularly interesting is the position of Windows Surface machines in the third slot, above Kindle Fire. This indicates there's healthy awareness and interest in the device. However, we'll have to see in several months whether this translates into actual sales.

Waze Picks xAd to Deliver Location-Based Ads to Navigation App

Social navigation app Waze and xAd announced a partnership at Mobile World Congress in Barcelona today. Waze intends to deliver ads to users "along [the] designated navigation path." The company is not the first to try and do this; Mapquest initiated something similar with national advertisers a couple of years ago but in an incomplete way. 

Waze has a very engaged audience and has benefitted from the initial stumbles and challenges of Apple Maps. It was one of the alternative mapping and navigation apps recommended by Apple. Telenav also mixes location-based ads and navigation in an app. 

According to the press release this morning:  

Through the use of xAd’s proprietary technology, ads can be further targeted based on context factors such as past anonymous search behaviors while leveraging the unique functionality of Waze to serve ads at the most relevant time along their route – when the consumer is likely to see and engage with the offer…. at zero speed. 

In addition to its own social data, Waze integrates social and location-specific content from Yelp, Foursquare, Facebook and YP into its app. Users can choose results from any of these sources when they conduct a local search via Waze.

According to the press statement xAd will be the exclusive provider of both search and display ads in Waze. I was unable to find any example ads this morning in the app. I'm sure the integration will be thoughtful however. Waze recognizes the need to preserve the integrity of the user experience. Too many or irrelevant ads would risk alienating its audience.   

How Damaging Would 'Do Not Track' Be to Mobile Advertising?

The digital advertising industry opposes "Do Not Track" (DNT). No surprise there. Indeed, the industry went "ape shit" (to use the vernacular) when Microsoft declared that IE 10 in Windows 8 would be set to DNT by default. Yahoo and the The Digital Advertising Alliance, a trade group comprised of the American Association of Advertising Agencies, the IAB, the DMA, the Association of National Advertisers and the American Advertising Federation, said they would simply "ignore" IE 10's DNT default settings. 

The rationale ostensibly was: "Microsoft is making a decision for the consumer; this isn't the consumer's decision." However another reason was that DNT fundamentally threatens behavioral targeting, profiling and retargeting.

A widely held view in the online advertising industry is that consumers, if they fully understood the benefits of targeting, would willingly accept it in exchange for more relevant ads. There's mixed evidence on this point.

In a Q1 2012 survey of roughly 2,000 US adults the Pew Internet & American Life Project found that 68% of respondents didn't want to be tracked and targeted while 28% were comfortable with it "because it means I see ads and get information about things I'm really interested in." Thus two-thirds of these people were explicitly rejecting the notion of trading privacy for more relevant ads. 

This morning the US Federal Trade Commission released a report on mobile privacy. It makes a boatload of recommendations to developers, OEMs/platform providers and ad networks. Without listing them out in detail, they mostly focus on education and disclosures. However the FTC also recommends that platforms (iOS, Android, Windows, etc.) adopt a global DNT capability that would block third parties from collecting information about them (including location).

Here's what the FTC says about DNT in the report:

Some consumers may not want companies to track their behavior across apps. Indeed, one survey found that 85% of consumers want to have choices about targeted mobile ads. A DNT mechanism for mobile devices could address this concern.

Accordingly, Commission staff continues to call on stakeholders to develop a DNT mechanism that would prevent an entity from developing profiles about mobile users. A DNT setting placed at the platform level could give consumers who are concerned about this practice a way to control the transmission of information to third parties as consumers are using apps on their mobile devices.

The platforms are in a position to better control the distribution of user data for users who have elected not to be tracked by third parties. Offering this setting or control through the platform will allow consumers to make a one-time selection rather than having to make decisions on an app-by-app basis. Apps that wish to offer services to consumers that are supported by behavioral advertising would remain free to engage potential customers in a dialogue to explain the value of behavioral tracking and obtain consent to engage in such tracking.

Apple has already begun to innovate with a DNT setting on its platform. Apple’s iOS6 allows consumers to exercise some control over advertisers’ tracking activities via the “Limit Ad Tracking” setting. Although the setting could be more prominent, this is a promising development, and we encourage Apple and other platforms to continue moving towards an effective DNT setting on mobile devices that meets the criteria we have previously articulated for an effective DNT system: that it be (1) universal, (2) easy to find and use, (3) persistent, (4) effective and enforceable, and (5) limit collection of data, not just its use to serve advertisements. We will continue to have discussions with stakeholders in the mobile marketplace on this important issue.

If such a platform-level DNT capability was available -- and obvious -- to smartphone and tablet users, I suspect that a majority of them would adopt it, as the Pew data above suggest. Perhaps a meaningful minority percentage of users would accept tracking/profiling as the price of more relevant advertising. But I still believe it would be less than 50%.

Of course one of the things that users don't understand is that they'll get ads regardless -- just lower-quality ads. 

Facebook Delivers Strong Quarter, Mobile Now 23% of Revenues

Facebook delivered the goods this afternoon. The company beat analysts' estimates and reported quarterly revenues of $1.56 billion and $5.09 billion for the year. Advertising revenue for the year was roughly $4.3 billion.

Despite the beat, Facebook shares were down after hours. 

Advertising revenue for Q4 was $1.33 billion, or 84 percent of total revenue. Impressively mobile advertising represented 23% of total ad revenue, which is up from 14% the previous quarter.Even more significantly Facebook said that mobile daily active users exceeded web daily users in Q4 for the first time. CEO Mark Zuckerberg characterized Facebook as "a mobile company" accordingly.

There were 680 million mobile monthly active users in Q4 (compared with just over 1 billion in total). Of those 157 million were mobile only users.

Yahoo Rebuilding in Mobile: Excerpts from the Q4 Earnings Call

Yesterday Yahoo reported Q4 2012 earnings and full-year results. In several respects company did better than expected in Q4, though display revenue was down 5%. Search revenue was up 14%. Display advertising is the single biggest source of revenue for the company. 

On the earnings call CEO Marissa Mayer discussed the company's strategy. Among other things, Mayer is focused on improving Yahoo's mobile sites, apps and products, branding them consistently and upgrading them in those areas where Yahoo wants to concentrate. Improved Yahoo Mail and Flickr apps were two recent product upgrades for mobile. 

Mayer is very focused on modernizing Yahoo user experiences and generating more usage and engagement accordingly. She believes that will bring more revenue opportunities including in mobile.  

Below are some of her verbatim remarks about mobile from the earnings call transcript:  

Yahoo! is focused on making the world's daily habits inspiring and entertaining . . . Essentially, we need to start a chain reaction . . . To start that chain reaction of growth, we've identified approximately a dozen products to focus on, each a daily digital habit. When taking multiple platforms into consideration for each product, desktops, mobile web, mobile apps and tablets, there's a lot of work to be done . . . 

Focusing more on the pure advertising and monetization standpoint, there's greater opportunity with the big 4: Search, Display, Mobile and Video . . .

In 2012, we saw our Mobile adoption grow to more than 200 million unique monthly users. From a monetization perspective, this is still a very nascent source of revenue for us. With any platform shift, revenue always follows users, and Mobile will be no different . . .

Obviously, we have a large mobile web offering and people tend to use things like Yahoo! Finance, omg! on their mobile browsers on their phone. They also tend to use some of our applications . . .[M]ost of our applications and our mobile web experiences have Yahoo! Search boxes . . .

In terms of having 50% of our engineering workforce on Mobile, I think that this is something that will ultimately happen. I think you start looking many years in the future, it's hard to imagine that there are going to be technology companies where that isn't true. To date, we have started to shift some of our engineering teams to be more focused on Mobile. We need to get to a critical mass on that.

Just a few years ago Yahoo was well ahead of Google in terms of mobile advertising and revenue. Today that's hard to believe. Cleary, however, Mayer "gets it" and is working with her team to address Yahoo's current mobile deficiences. And the 200 million monthly unique users is a very encouraging figure for the company. By constrast Facebook, Yahoo's biggest display rival, has 600 mobile uniques on a global basis. 

Even though Yahoo is building out its mobile assets, I would expect the company to make several mobile acquisitions -- perhaps on the consumer side but also of a mobile ad network or exchange.  In fact, I would be surprised if Yahoo didn't make a meaningful acquisition to bolster its mobile advertising business.