Online advertising is quickly moving toward cost-per-action models, but in the mobile world it’s all about the eyeballs. For now, at least.
A recent study by NetElixir and the e-tailing group inc. found that a majority of U.S. online retailers reported up to 40% of their orders come from pay-per-click marketing. Nearly 90% of those polled said they planned to step up their PPC spending next year, with 30% planning increases of 26% or more.
“Merchants have invested in PPC long enough for it to be considered an accepted and established marketing tool; the number of orders coming to sites as a result of PPC are increasing,” the e-tailing group report claimed. “A greater percentage of advertising budgets are therefore being invested in PPC marketing.”
The benefits of PPC or other action-based models are obvious. Consumers on a paid link have already expressed interest in the offering, and click-throughs are easily quantifiable, allowing for simple ROI analyses.
Seeing is believing
On the wireless Web, though, traffic is the key. Instead of forking money over each time a surfer clicks on a banner, advertisers are using the CPM model-cost per thousand impressions-and paying publishers based on how many people see their ad.
“What you’re finding, I think, is that CPM is starting to become the trend as opposed to a peraction basis,” said Michael Crane, senior director of strategic marketing for Mobile Content Networks Inc. A mobile search company initially based in Mountain View, Calif., MCN recently moved its headquarters to Tokyo to further its presence in the Far East. But Crane, who is still based in the Bay Area, said U.S. advertisers are having trouble finding enough appropriate inventory to deliver highly targeted ads. So instead of paying top dollar for click-throughs that aren’t likely to bear fruit, they’re opting to cast a wide net and try to get as many mobile surfers as possible to click on their links.
“The rates on a per-ad basis are dropping to a point where advertisers are hopeful” they can turn eyeballs into customers, Crane said. “But there are more ads out there than inventory out there to absorb those ads. . It’s a matter of bridging that gap. I think it’s a matter of getting a very specific ad” in the appropriate space.
Fighting fraud
And while online advertising has had more than a decade to establish viable business models and weed out fraudulent practices, mobile marketing is still in its infancy. So while CPM may be less measurable in a granular way than some cost-per-action (CPA) paradigms, the model is far less vulnerable to click fraud-the nefarious act of clicking a link simply to affect rates rather than learning more about the advertised offering.
“There are issues of click-farming; mobile doesn’t have the protections that are being used online,” said Rob Adler, CEO of go2 Media, a Boston-based mobile search company that claims to have delivered more than 1 billion page views since its 2001 launch. “There are some real challenges there in terms of legitimacy of what you’re paying for.”
Of course, mobile offers a few more potential business models than online advertising. 4INFO continues to gain traction with its sponsored SMS search service, and a few companies are just beginning to experiment with MMS-based efforts. And perhaps the most obvious model for mobile is click-to-call, which effectively delivers a wireless consumer directly to the doorstep of the advertiser.
But click-to-call, like most CPA models, is vulnerable to fraudulent activity that can falsely influence rates. So while advertisers continue to experiment with business models and technologies in mobile marketing, in the near future they’re likely to stick to the more conservative tack of paying for billboards on the mobile Internet and hoping enough consumers stop to learn more.
“Advertisers are always looking for an ROI model, and I think that’s what online has given them where it never existed in so many models before,” Adler said. “But at this stage, as things are developing, the approach they’re taking is more of an investment-and-experimentation spend as everything gets proven out.”
