In an industry such as aviation – where everyone from pilots in the cockpit to CEOs in the cabin are connected to their smartphones 24/7 – mobile’s going nowhere. But up. For now, though, mobile advertising requires a leap of faith. One backed by some intriguing indicators.
If you own a smartphone, you’ve seen mobile ads a time or two (thousand). Most of us just wait out the obligatory three seconds to skip past and get back to “Words With Friends,” or the next song. As prevalent as mobile advertising is, the services have yet to spin straw into gold. The recent Wall Street Journal article “Riches in Mobile Ads, Just No Profits” pointed out that mobile ads drew less than 1% – about $1.45 billion dollars of total ad sales. Consumers’ love for Pandora and Instagram has yet to translate to solid financial performance.
Faith Backed by Promise
Signs point to an upward trajectory. In 2011, venture capitalists channeled $5.8 billion into mobile industries. That amounts to almost 42% of all of technology investments.
In March 2011, Millennial Media’s initial public offering reported revenues of $103.7 million with a loss of $287, 000 – a marginal sum since the company’s valued at close to $1.4 billion. The real value is potential reach: the total number of users and how often ads can be exposed to them.
Facebook just purchased Instagram for $1 billion dollars – in spite of only 40 million users, no revenue stream, and no plans to create one. Previously only available through Apple’s user platform, Instagram’s now available on the Android market, potentially doubling its user base. The real test will be if Instagram’s purchase adds value to Facebook’s upcoming IPO.
Pandora, a popular music streaming service for both mobile and PC usage, operates under a free, and premium subscription service. Under the free service, consumers are exposed to both banner and audio commercial advertising. The premium service limits the exposure primarily to screen ads. Mobile usage has gone from 55% to 70% of total listener hours. Pandora reported that mobile makes up 45% of its advertising, but it only sells 20% to 25% of its total available ads. Compare this to the 80% PC-based service it sells.
It is not actual revenue but potential revenue that serves as the basis for these companies’ valuations and charges. It’s not just venture capitalists who believe in the power of mobile. Savvy marketers do, too. Mobile ads offer unrivaled potential reach to consumers on the go. And no industry is more on the move than aviation.