Mobile Advertisement CPM

via moconews.net

[by Chetan Sharma] At least half a dozen press releases popped up during the writing of this book claiming a $50 or $60 and higher CPM rate for mobile ads. A brief look back at Internet advertising from 1998 to 2002 shows that a $50 CPM, or anything near it, is not defensible for very long. For the CPM model to work at any price point, even in the short term, these networks need a critical mass of advertisers willing to spend branding (versus direct marketing) dollars on a new, untested medium that will appear in a wide range of content. That is going to be difficult, if not impossible, to find. Since the agency ecosystem is rooted in print and TV, it is also anchored in CPMs and GRPs (gross rating points). For the near-term future, CPMs probably will determine the ratio of dollars spent in mobile. But the ecosystem is being yanked into the digital world with more transparent ROIs that gauge new levels of consumer interaction and impact. Outcomes need to be tied to more than just the theory of eyeballs in the living room. Lots more in extended entry....

Assuming for a moment that the mobile ad networks can find enough advertisers, it will increase the attraction for publishers to run ads on their networks, adding more inventory and depressing prices. In addition, web-based interactive agencies were already burned once by ad networks with prices above a $30 CPM. It is likely that the entire mobile CPM model will shrink, as it did on the Web. In both the PPC (pay per click) and CPA (cost per acquisition) models, more responsibility is put on the content providers, insulating advertisers from some risk until the consumer clicks toward a transaction or sale. However, the implementation and success of CPC and CPA models rely on huge impression volumes, an ad sales system more scalable than is required for CPM models, and a mobile infrastructure capable of monetizing consumer clicks or actions. All these are a long way off for mobile advertising. As noted by Larry Shapiro, VP of Disney; We might have 10 percent to 20 percent of click-through rates (CTRs), but 90 percent of unsold inventory and CPMs are high indicating the early stages of the market and all of this will trend down like the way you had on Internet when we had $30 CPMs, 10 percent CTRs, and 95 percent unsold and all those numbers changed in the mature market.

Two major groups are using mobile for advertising today. First are the companies that want to advertise on mobile to get consumers to click to their point of sale to buy a game, mobile music, ring tones, or video. For these advertisers, mobile advertising is about accelerating the process of acquiring a new customer. Their ad spending will be measured and driven by the lifetime value of that new customer. Mobile CPM rates above that are not sustainable for this group. For lifetime economics in these scenarios to make sense, CPM rates must drop to between $5 and $10. As mobile search-based keyword auctions appear, these advertisers may well move their budgets over. But is this type of advertiser really going to scale mobile advertising revenues? No. It will basically be capped by the marketing budgets of these smaller companies. Beyond the CPM and economic issues, arent all mobile application providers essentially competing with each other for the same time and service spends from the same consumers? How do mobile portal managers feel about semicompetitive mobile media advertising on their prime real estate with the goal of stealing a customers attention? Will every ad have to be preapproved? Will this really be the market force that drops CPM rates? No, it will not.

The second group of mobile advertisers consists of companies outside the mobile industry looking to increase the awareness of their products and services in a high value, personal scenario. These companies are just beginning to understand the unique value of mobile advertising for relevant, targeted, effective presentations to their audience. Selling these companies on the concept of mobile advertising and getting them to spend more than just their trial budgets is a long, arduous cycle. And the high CPM rates are often confusing to this group. Compared with $10 for a run on an untargeted network to $20 for a targeted web site group, there is still a question of cost and value of the $50 CPMs in mobile. Part of this high mobile CPM rate is driven by lack of mobile inventory today. Once the inventory arrives, that pressure will force the CPMs down in mobile.

Similar to the Web, the mobile CPMs will bifurcate into a lower cost, less targeted run-of-network (off deck) with CPMs between $2 and $9. The higher tier will be targeted mobile sites with specific audiences, where CPM rates will be around $12 up to $20 on the high side. The CPM rates simply follow the degree of targeting value. Better targeting equals higher CPM rates. In mobile, these will be mostly on-deck with high degrees of targeting based on proprietary mobile data being exposed anonymously for the ad campaign. Todays mobile press releases touting costly, untargeted inventory is absurd and wont last. Off-deck mobile ad networks, with less well-defined targeting approaches, will turn into the equivalent of the Webs run-of-network buys, where inventory should always be inexpensive. CPMs will be tied to a certain size of advertising buy, but it wont be an unreasonable premium for smaller buys.

But with the potentially higher value of mobile targeting into niche audiences in a fractured mediascape, is there another level of ad targeting rates, metrics, and value beyond the tried-and-true CPM of yesteryear? Yes, there is!

This article is excerpted from forthcoming Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market (John Wiley, 2008) by Chetan Sharma, Joe Herzog, and Victor Melfi.