Frost & Sullivan is forecasting that by 2015, mobile advertising revenues in the U.S. alone will rise from $491 million to $2.04 billion. That’s compared with total global mobile advertising revenues today of roughly $2 billion. By 2015, mobile commerce is expected to reach $119 billion in total transaction value, and half the world’s mobile subscribers could be making mobile payments. According to a survey of 1,800 people by advertising and marketing agency Leo Burnett, 50% of consumers use mobile devices as part of their shopping experiences, be it searching for deals, locating product information, or executing on-the-fly price comparisons.
In the U.S. usage of location-based services (e.g., foursquare, Gowalla, Loopt) on mobile devices will hit 50 million users in the U.S. alone, up from 16 million users. Use of social networks over mobile devices is soaring, according to comScore. In 2010, 30% of smartphone users accessed social networks via mobile browsers, a hefty increase from 22.5% in 2009; Twitter and Facebook saw huge increases in mobile usage at 347% and 112% year-over-year growth, respectively. So what do all these numbers really mean for companies in the mobile commerce space? We’re now talking about a major monetization engine for many companies, something that really took hold for the first time in 2010 and will continue to demand more attention from companies with mobile monetization plays in the near future.
The reason for this is because the business and revenue impact of mobile latency is no longer a trivial thing that can be passed off as part of leading-edge technology adoption. Similarly, it’s no longer just the alpha adopters who will get angry at a brand that delivers a poor mobile experience. Now, it’s tens of millions of Americans and hundreds of millions of people worldwide with access to high- speed wireless data networks. Here are just a few of the ways that latency can crush revenues. In the m-commerce segment, slow-loading coupon offerings will convert users at much lower rates. This will become a more acute problem as coupon offerings go from national to regional and local targeting, some even with same-day purchase requirements.
In this new reality of hyperlocal and up-to- the-minute deals, the old ways of caching coupons in legacy CDNs for broad swatches of the country or very large regions no longer work well. Taking that thought one step further, slow-loading, location-based deals will make it harder for companies to execute on loyalty or proximity offerings targeted to specific users who may be regular customers. For a company such as Groupon, which will rely on not only local deals but also time-sensitive local deals, the penalty for high latency is even higher because its deals go away quickly, eliminating opportunities for further revenues.
In mobile advertising, high latency means fewer impressions, lower click-through rates, and lower monetization. Studies have shown that ads shown during searches on mobile devices have much higher conversion rates than ads served to a computer over a landline connection. That’s because mobile advertising is more per- sonal and more immediate. Someone looking for a restaurant in the Lower East Side of Manhattan is doing so because he or she wants to find a place to eat now or very soon. Someone searching through reviews for electronics on a handset is likely standing in a Best Buy considering a purchase. So the opportunity for ad monetization is greater, unless you can’t deliver the ads quickly. Mobile users will quickly move to another review site or search on Yelp instead of OpenTable if their pages are loading too slowly.