If you read my post last week, “Why CPMs May Go Down to Zero,” you’d think that I was bearish on online media. Truth is, I’m wildly optimistic at a macro level — but considering the general flight to quality that all industries eventually endure, I’m a bit cynical when it comes to individual stories.
One of the remaining beacons of optimism has been the long-held view that even though consumers are now spending 25% of their time online, marketers are only spending 10% of their budgets online. A recent presentation by Sir Martin Sorrell pegged that figure at 33% in a few years, but I’m going to guess that by then people will be spending far more time online, when you combine time spent on mobile devices and tablets.
Meanwhile, the rise of mobile has been one of the most exciting and challenging facets of the digital revolution. However, while many initially hoped for mobile’s CPM to make up for any softness in Internet rates, today the reality is that desktop rates tend to make mobile CPMs look downright frothy! When all is said and done, what you are going to see over time is some kind of convergence between ad rates between Web browsing through a PC, tablet or mobile. But a topic for another article.
The Defense Rests
It’s becoming clear to me that mobile will kill any debate about the discrepancy between time and proportion of budgets. It’s a matter of time before you spend as much time (if not more) on your mobile device than elsewhere. So just as the Web was starting to make up for the shortfall between percentage time spent online and proportion of ad dollars garnered by the Web, mobile is coming along and disrupting the dynamics enormously.
Please Don’t Do That
A few years ago, every so-called expert talked about the wonderful benefits of mobile advertising — such as Starbucks sending you a promotional text message as you were walking by one of their stores — without ever asking if any consumer in their right mind would put up with that tactic more than once before throwing their wireless device through a Starbucks window at the nearest barista.
Today, we realize that mobile advertising is filled with so many riddles that no way on earth is the amount of time spent on the medium going to match the time we spend connected to advertisers. Indeed, as some have noted, considering that the wireless phone is emerging as the “first screen,” then why must the Web account for a commensurate amount of advertising? It shouldn’t, will be the argument, by those who prefer the status quo.
Will Mobile Challenge Give Rise to Micropayments?
A byproduct of this, I believe, will be publishers experimenting with a non-advertising model, possibly micropayments (I have always been bearish on those, online). Since consumers are more willing to spend on mobile than when in front of a computer, it could be argued that a user could pay 1 cent to skip a pre-roll. Mind you, that is an implied $10 eCPM, a rate which most advertisers are more than willing to pay, meaning the publisher is equally off if the user is willing to put up with the inconvenience. However, say the user is willing to pay 2 cents or 3 cents to skip the ad, then we’re talking $20-$30 CPM, which in a backdrop of falling CPMs starts to look mighty interesting. Again, I am not sure if consumers will ever pay for anything. Plus, there’s the reality that having users pay to watch (or read) based on volume and consumption is a bad idea — it gives a disincentive to build volume.