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Are mobile display ads overpriced?

Samsung Galaxy SIII

Growth rate slows for mobile ad budgets

Advertisers can significantly overpay for mobile banner ads designed to acquire new customers, according to a new report from Marchex.

The report, “The Downside of Mobile Display Advertising: How Performance Advertisers Lose Big on Banners,” found that advertisers can overpay by more than 10x to generate one quality customer call. The results underscore the need for performance-driven advertisers to track their mobile ad campaigns and perform deep analysis to understand how to optimize advertising on mobile.

“The findings say that marketers should insist on paying for performance campaigns on mobile display differently,” said John Busby, vice president of Marchex Institute, Seattle, WA.

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“Per-impression and per-click pricing simply doesn’t seem to work for marketers,” he said. “Instead, marketers should insist on paying for outcomes in mobile display – a quality phone call, a lead form, etc.

“The time is ripe for a change in how we price mobile media.”

Action driven
While mobile offers marketers new opportunities to drive engagement with their brands, it also presents several challenges when it comes to driving performance because it has a smaller form factor than desktop.

There is a lot of fragmentation and consumer behave differently on mobile with their actions more deliberate.

For the report, Marchex examined a set of advertising campaigns across six major mobile display ad networks. The analysis was designed to determine if ad views and clicks translate into real customers by focusing on how well mobile banner ads performed in terms of getting customers to call a business from their mobile phones.

Marchex found that advertisers who spend on mobile banner ads to attract new customers receive a poor return on investment. The study did not address the effectiveness of mobile for raising brand awareness.

To get one quality call from mobile display, it takes on average 494,104 mobile display impressions, according to Marchex’s analysis. These impressions generate 2,481 clicks on average, which leads to 29 calls, only one of which is typically a high quality call.

If an advertiser pays $0.61 per CPM, this translates to an effective cost of $302 to get that one call. If the marketer pays $0.10 per click, this translates to an effective cost of $248 for the call.

Accidental clicks
Additionally, the report found that clicks are not indicative of customer intent as there can be high rates of accidental clicks on mobile display ads.

Overall, the report found that mobile display ad performance varies wildly. In one case, a campaign that received 1.4 million impressions did not result in one quality phone call.

Going forward, Marchex recommends that returns should be based on consumer actions, not impressions.

“It was surprising to find that mobile display ads are overpriced because if one is to simply look at the click response to mobile display, one might conclude that the campaigns were successful,” Mr. Busby said.

“Yet our study found that the great majority of clicks were accidental with little to no chance to convert to customers,” he said.

“The biggest surprise was there was no relationship between clicks and success rate, and this was the basis for finding that mobile display ads did not convert into actions at a rate anywhere near the market would pay for."

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York/>

News Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at chantal@mobilemarketer.com.

Related content: Advertising, banner ads, display ads, Marchex, John Busby, mobile marketing, mobile

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Comments on "Are mobile display ads overpriced? "

  1. scott merrill says:

    December 13, 2012 at 2:14pm

    I find it interesting a call vendor is suggesting mobile should be bought on a pay per call basis. What verticals were they testing? Probably service realted (yellow page) type headings, i.e pest control, security, cable....Not good mobile applications yet today
  2. timo platt says:

    December 13, 2012 at 9:53am

    Instead of paying per CPM or click for mobile displays, marketers must consider broadening their mobile strategyby adding new mobile channels, such as #CEM -- consumer engagement-mobile -- for end-to-end personalization and engagement, to engage a broader audience, send customized messaging to target audiences, learn what the consumer wants to buy, guide the purchase decision, and close the sale. W

    In this new #CEM channel, marketers pay for #ROI achieved, using such metrics such as new customers, total revenues and incremental sales produced by the CEM channel
  3. Roger Pavane says:

    December 13, 2012 at 8:27am

    Mobie display ads are worthless unless they are hyper-targeted. Impression based are expensive, better off with LBS enabled when that finally works the way it should.
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