Of all the topics in the hot mobile location space, mobile monetization seems to be the biggest question mark.
Though ad networks and search engines like Google see real revenue, mobile local leaders like Foursquare and Yelp haven’t done much direct monetization. That’s despite building large communities of mobile users – or perhaps because of it, as they’re averse to stunt user growth with premature monetization.
Take Yelp: It’s done a great job migrating its usage and brand equity into mobile. Its mobile apps accounts for about 10 percent of monthly unique users. But interestingly, that 10 percent accounts for a disproportionately high 40 percent of searches Yelp sees across the board.
That says a lot about its monetization opportunity. Looking at it a different way, as more users engage the service from an access point that isn’t monetized, revenue per user will theoretically go down. That’s the same challenge Facebook now famously faces (more on that in a bit).
So how will mobile local monetization materialize? Because I can’t speak directly for Yelp, Foursquare, Facebook, I’ll outline a few foundational elements for mobile monetization which many players could (as some already have) build on.
Since the mobile device, is after all a phone, the progression from high-intent driven search, to qualification, to placing a phone call is a natural one. Pay per call is something that will therefore find a home in mobile much more than it did on the desktop.
Google and others have already gone down this path, while showing strong performance for both call and click rates when localized content (including phone numbers) are present in ad copy. xAd and Duda Mobile meanwhile report high call rates from mobile ads and landing pages.
Another monetization model will involve what Foursquare provides for free; a dashboard for businesses to launch and manage local deals and loyalty programs. The goal here is to drive trackable promotions and dynamic demand generation.
This opens the opportunity to verticals where there’s time sensitivity or perishable inventory (think restaurants). It then straddles local advertising and yield management, especially when bundled with things like scheduling tools, as Groupon has developed.
A third model will be the development, optimization and hosting of mobile websites for small businesses (and large businesses for that matter). This ties to the fact that increasing levels of mobile search occurs, while mobile websites are woefully under-optimized.
Duda Mobile reports that less than 2 percent of websites are optimized for mobile screens. This mostly entails layout, touch-friendliness, and the calls to action that properly capture the local user intent that is inherent in mobile search.
This opportunity also falls within the field of presence management. As consumers are coming across a fragmented universe of sources to make local purchase decisions, the need to be present across these channels grows. This will increasingly include the mobile web.
Some of the above will be provisioned directly by savvy SMBs. But it mostly represents an opportunity for agencies and resellers. And for the same fragmentation point just mentioned, those who can offer simplicity and “one-stop-shop” appeal will have a leg up.
The wild card in all of this is Facebook. We’re hearing lots about its undefined mobile monetization and how that’s causing uncertainty in its valuation.
The opportunity is massive when you consider that half of Facebook’s 900 million global users are monthly active mobile users. But as was mentioned above for Yelp, its revenue per user faces downward pressure if it doesn’t directly monetize those users.
So Facebook moves in mobile monetization will be huge — not just for its own ability to reconcile a massive valuation, but the implications for the rest of the market. In other words, its sheer size dictates that what it ends up doing will greatly influence the state of the art in mobile ads.
This will come about as it acclimates both users and advertisers to different forms of mobile ads. That will go a long way in shaping these constituents’ view and comfort levels with mobile advertising, therefore signaling where industry standards will develop.
So far that’s taken form in its Sponsored Stories ad units. This is a natural fit for smaller screens where banner ads don’t play as well. It’s also an organic placement that allows advertisers to pay for distribution of conversations that are already happening among users.
That’s where things will start, but they’ll evolve a great deal. Look out for a more robust “off-site” ad network (in mobile and desktop). Here Facebook will use Open Graph data to serve ads in a targeted fashion for other publishers, a la AdSense. And watch for moves in mobile payments too.
Whatever Facebook does in mobile monetization, watch closely as it will have far reaching implications for the directions the rest of the market will follow. That goes for both location based mobile advertising, and all other forms.