Will you pay as much money for an economy class seat in a flight as for a business class? Will you pay more for a health drink does not clearly mention its ingredients as for another one that does? If you answers to both those questions is an easy “No!” you can understand the latest tumult in the world of digital advertising, that is going to have a big impact on the media business in the coming months.
First, Google’s quarterly results disappointed markets last week and its stock fell 8% and lost nearly $20 billion in value. The key point is that while the company reported a 33% gain in paid clicks for its advertisements, mostly of search, the average cost per click was down 15%. Though economic factors and exchange rates played a role, the main reasoning was around how mobile ads fetch less per click.
CEO Larry Page said: “Today, we live in a world of abundance; abundant information and abundant computing ... It’s hardly surprising mobile search queries and mobile commerce are growing dramatically across the world.”
But what he forgot to say was captured in search engine business blog Traffick.com that said: Google is selling a lot more bargain-priced clicks in smartphones.
Mobile and desktop screens are smaller and advertisers will pay less for “less leg room” — as in economy class seats. While Google is betting on exploding mobile volumes, it is like saying that it will sell more economy class seats with lower profit margins.
Meanwhile, in a related development, Facebook threw open a system to link its precious data on users — who now number more than one billion — to application developers.
Last week, I had spoken of the rise of “appzines” — or app magazines that are revolutionising digital content. App developers such as publishers and game companies have been seeking advertising by telling brands about the kind of people who use their apps. Now, by allowing Facebook log-ins they are highlighting data from Facebook on who uses the apps. This is a lot like a health drink that clearly mentions its ingredients — and thus, commands a visibility premium.
“With these new ads, mobile apps and games of all sizes across any category can reach the right audience, at scale,” Facebook said.
In simple words, in an emerging mobile world, Facebook-linked ads may get a leg-up on the strength of user data linked to apps, while Google ads may get discounted in small screens. The advertising fashion may well shift from the power of “search view” to “app depth”.