The excitement and attention paid to mobile local search continue to ratchet up. But we still haven't seen the equivalent ad dollars follow. Mobile local search is now $1.3 billion in the U.S., according to BIA/Kelsey, but that pales in comparison to the overall $132 billion local ad pie.
Panning back from mobile local search, the broader U.S. mobile ad market – including display, video, and SMS – is $5.4 billion, compared to a $40 billion online ad market. This slower than expected advertiser adoption is represented in Mary Meeker's famous slide that shows mobile share of media time spent (12 percent) outstripping it's share of ad dollars spent (3 percent).
In supply and demand terms, that has led to an oversupply of ad inventory (represented by the usage) relative to demand (ad dollars). This has kept mobile ad rates depressed, which is great for early advertisers who get undervalued ad inventory. But it isn't so great for mobile publishers and media companies looking to monetize mobile apps and sites.
This is one reason behind Google's enhanced campaigns, which have gotten lots of coverage here on SEW, including a few of my previous columns. Pushing more advertisers – especially SMB laggards – into mobile will improve these supply and demand economics that have erstwhile tempered mobile search's revenue potential. We're already seeing higher CPCs.
But there are other factors contributing to advertisers' slow adoption of mobile; and in publishers' sometimes disappointing results with mobile monetization. Equally in search and in other forms of mobile advertising (display and rich media), this results from mobile publishers, advertisers, and ad networks simply measuring the wrong things. In other words, campaign objectives, ad targeting strategies, even ad copy, are misaligned.
There's a certain desktop way of thinking that has plagued the mobile ad environment in its adolescence. That's opposed to the native and "ground up" thinking required for an inherently different form factor, use case, and content delivery paradigm.
It isn't the first time that's been said, but we're seeing new evidence of its effect, and a greater demarcation of campaign strategies. There are lots of KPIs supporting winning strategies such as ad performance and logical ROI assessment. But another correlation that hasn't really been explored is mobile company valuations.
Pre-enhanced campaigns, Google's stock price was shaky due to CPC declines. Those resulted from a continued user migration to mobile where bid pressure and CPCs are lower. Facebook faced something similar – at least before its recent Q2 earnings announcement when it proved that a more native mobile ad strategy was finally bearing fruit.
Others like Millennial Media have likewise faced investor unease due to doubts surrounding entrenched footing in traditional mobile display among other factors (and then there's Velti). A move toward a more native and intent-driven mobile ad formats like Facebook, Google, and a handful of others is how this could turn around.
More specifically, premium ads will result from higher performance. And one of the highest performance-driving factors will be effective location targeting a la xAd. That's not just geotargeting, but a holistic location strategy, including things like ad copy and tangible calls to action like phone calls and directions.
In addition to those KPIs proving out as we speak, another supporting point for location – back to valuation – is a proxy for sustained valuations in the more mature desktop space. There, we're seeing lots of growth, positive earnings, and strong market caps from local players like Yelp, Angie's List, and several others.
Could this be a leading indicator for where long-term value lies with mobile companies? If so, will the effect be even more pronounced in a such a medium where there are even greater ties to location?
So what are some examples of mobile local's growth? Mobile local ad network xAd has lots of good data.
From the campaign activity on xAd's network, geo-precise ad targeting increasing 27 percent to 58 percent year over year. Geo-precision includes granular geo-fencing and geo-specific behavioral relevance.
As mentioned above, things such as ad copy and calls to action are also growing in prominence and showing clear performance deltas. This continues to be joined by emerging mobile-first tactics from xAd and other innovators in mobile local advertising, such as geo-conquesting.
A recent Pinkberry mobile ad campaign showed some of these tactics in action. The campaign's foot-traffic objectives aligned with a 1 mile geofence strategy, promotion-rich creative, and action-oriented analytics. The result was a 2x increase in the Pinkberry's benchmark, achieved within just two weeks (more details here).
As this all develops, winning strategies will be native to mobile and oriented around user intent. In that way, they'll have lots of parallels with search. But instead of clicks, it will be about things like store visits – which Google is working on in lots of ways (i.e., local extensions, Wallet). Foot traffic is the new traffic.