Knowledge Bridge

//Shubha Bala /June 27 / 2012

Hyperlocal, smart targeted mobile ads may earn even higher revenues

As mobile phones and devices become increasingly common for accessing the internet, large companies are moving increasingly towards targeted and hyperlocal advertising while people browse the web on the go.

Apple recently announced that it will be getting rid of Google Maps starting with its iPhone iOS6 and introducing its own maps service.  With this, Alex Salkever of local journalism business site Street Fight says it opens the door to advertising revenues through hyperlocal ads based on people’s current location and their search history.  And it can succeed in this ad world that has been mainly dominated by Google. Apple has all the technology in place to deliver customised, local ads to people doing searches on their mobile phones, Salkever adds.

Google, meanwhile, has revamped its own map ads in hopes of getting higher click-through rates (CTR) and keeping its share of hyperlocal advertising revenue.

To the surprise of many, Facebook has begun to demonstrate just how lucrative mobile ads can actually be.  “Sponsored stories” on the Facebook mobile app – ads that are integrated into the Facebook newsfeed – are getting 1.93 times higher CTR than sponsored stories on Facebook desktop, and the eCPM (effective cost per thousand impressions) has been 2.65 times higher.  Although some of the ad companies interviewed by Josh Constine of TechCrunch varied in their estimation of the CTR, even the most conservative estimate of 0.8% still saw an average CTR of 2% when smart targeting was taken into account.  According to Tutawa Ahwol writing for Public Media Interactive, the industry standard for click through rates for internet banner advertising is 0.2 to 0.3 percent based on data from 2010. The worry for the industry is that CTRs have been dropping for years, and more recent data from PR and marketing firm Ogilvy say the CTRs for internet banner ads have now fallen to just 0.1 percent.

Therefore, Constine says,

There’s no space for an ads sidebar and if far too many ads are injected into the content feed, users could get angry and stop browsing. But the impressively high CTR and eCPM mean Facebook doesn’t have to show too many Sponsored Stories to make a ton of money off of them.

Given the information Facebook has about its users, it is better poised than any other social networking site to produce extremely targeted advertisements – including hyperlocal ads based on real-time locations.

While these big digital companies are exploding onto the mobile advertising scene, it’s important to note that the biggest growth will be seen outside of North America.  Russia’s mobile penetration is amongst the highest in the world at 159%, 25% of which are smart phones.  Mobile internet penetration is at 20%, and is growing exponentially.  Right now search engine advertising accounts for approximately 53% of the total online advertising in Russia, and Yandex is the leader with a whopping 61% of search revenues.

The challenge is to understand how news organizations can take their share of the mobile advertising market, especially local news companies that can more easily take advantage of hyperlocal ads.  In last year’s Street Fight Summit, Alistair Goodman, CEO of Placecast, said “We’re approaching a time where you’re going to be able to bid on a user on a street corner at a particular point in time in real time.”

If you’re interested in more innovations in the business of hyperlocal, Street Fight is a media and research organization – with a blog – focused on exactly this.

Article by Shubha Bala