I can't live without my smartphone. There, I said it! Are you happy now, Apple
But guess what? I'm not alone by any means. According to a study by the Online Publishers Association released in mid-August, more than two-thirds of smartphone users reported they "cannot live without their smartphones," and a whopping 93% access content and information above all other activities on their phone. Here are a few other staggering statistics that put the proliferation of smartphones into perspective, according to this report:
- 79% of smartphone users have taken action after seeing an ad.
- 54% of mobile-device owners prefer using their smartphone to other owned devices (i.e., laptops and PCs).
- 96% of smartphone users downloaded apps within the past year.
- 24% of smartphone users admitted to paying for content within the past year.
There are plenty of other highlights in this OPA report, but they all lead to the same conclusion: Our smartphones are becoming our preferred method of receiving content, and companies are severely underutilizing the opportunity to penetrate audiences through mobile advertising.
In June, information-technology research firm Gartner released a report that predicted mobile-ad expenditures would double each year from now until 2015. Gartner forecasted global ad revenue of $20.6 billion by 2015, up from $3.3 billion last year, and led most notably by Asia.
If you were to use Google
Signs of the mobile ad-ocalypse
Before you get in an uproar about how wrong I am, let me lay out my case why mobile advertising could be in line for more challenges than investors are currently anticipating.
To begin with, there's no consistent platform for mobile ads. Much the way that Internet-based companies popped out of the woodwork in the late 1990s but had no clue how to monetize their businesses, Internet-based companies now don't exactly have the formula figured out regarding how to monetize their mobile users. A few companies, like Google, which currently controls a little more than half of the mobile-ad market, and Apple, whose iAd service operates on its own mobile devices, have had moderate success in monetizing their mobile base, but the majority of enterprises have failed miserably to capture revenue and target their mobile audience.
Facebook is a prime example. It has 102 million mobile-only users as of its most recent quarter, but it has yet to enact a concrete plan of attack to target those users. Even Twitter, which has far fewer users than Facebook, is bringing in more mobile revenue than Facebook. Until this formula is unlocked, mobile-ad spending is unlikely to explode higher.
That leads me to my next point: Investors are terrible predictors when it comes to timing the success of revolutionary technologies. Investor aspirations for the success of the Internet, genome mapping technology, near-field communications, and a multitude of other game-changing technologies often peak well ahead of the success and adoption of these technologies. It takes time to spearhead change in the tech sector, and investors have shown, at least since the Internet bubble, that patience is a virtue severely lacking in the marketplace.
Another point worth mentioning: Advertisers aren't going to be willing to spend their money if there isn't a uniquely targeted audience involved. Even though the click-through rate on Facebook is incredibly low, Facebook's data-gathering cookies use your personal browsing data and friends' preferences to target ads to users. With regard to mobile advertising, this mobile targeted data just isn't there as of yet -- at least not enough to entice companies to shell out big money.
Then there's that little bit about profitability that's all-too-eerily similar to the dot-com bubble. Although I'm optimistic about the longer-term prospects of Velti
If you need even further proof that the monetization of mobile is still in its infancy, just look to mobile-app success as your guide. Strategic consulting company App Promo released a study in April that showed 59% of apps don't generate enough revenue to break even on development costs. Furthermore, more than half of all app companies had $0 set aside for promoting their apps, even as an overwhelming 91% of respondents noted that marketing was a vital part to an app's success.
The mobile-advertising sector hasn't even taken its first steps yet, and we're ready to sign it up for the Boston Marathon -- it just doesn't make sense.
Like other sweeping tech trends, it's likely to succeed, but it's going to take time and come with numerous hiccups. Velti and Millennial Media are valued reasonably given their inability to turn a profit, but I worry about the potential for investors to be blindsided by the irrational expectations of others and shoot these companies, as well as Facebook and other mobile-focused companies, into the stratosphere on the notion of booming sales only to be disappointed by tepid growth in the end.
What's your take on the evolution of mobile ad sales? State your case in the comments section below and let me and your fellow Fools know your stance.
Facebook CEO Mark Zuckerberg has made it very clear that his company is a mobile-focused business. Our latest premium research report on Facebook examines what opportunities and pitfalls could affect its mobile business over the long term and comes complete with a full year of regular updates. Claim your investing edge and click here to access this comprehensive report.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of Apple and Facebook. Motley Fool newsletter services have recommended buying shares of Apple, Facebook, and Google, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.