So you have built your mobile website or app and now you want to monetize it. You have a few options: you can sell apps on iTunes or other stores, charge a subscription or paywall, or make your content free and subsidize it with advertising.
The best approach will be determined by your audience, the value of your content or service and your distribution model.
If you are looking to grow your user base substantially, advertising is one of the only effective approaches. By some estimates an app distributed for free will have 10 times more downloads compared with a paid application.
With the growth in smartphones, mobile sites and apps, mobile has become the fastest growing category in advertising. According to eMarketer, mobile advertising spending in the US will grow 80 percent to over US$ 2.6 billion in 2012. And many experts expect mobile advertising to exceed desktop web advertising in the next few years. Whether you are a developer, a publisher or marketer, mobile advertising is a hot topic.
Yet, despite the increased spending in mobile advertising, publishers and advertisers alike are challenged with understanding the key metrics in mobile advertising, as well as finding a reliable way to forecast mobile advertising revenues and ROI.
The opportunity for mobile advertising far exceeds display ads. From location-based services, to bluecasting, to video, to interstitial web pages, there are many ways to create sponsorship. But for most sites and apps, mobile advertising is still focused on display ads. When using display or banner advertising, there are a few key metrics that provide the foundation for nearly any mobile advertising campaign.
Key Mobile Ad Metrics
The estimated cost-per-thousand (or Roman number M) is the key metric in mobile advertising. This is the amount that a publisher is paid on average per 1,000 impressions.
For publishers, bulk mobile eCPMs range on average between US$ 1.25 per thousand impressions to as little as US$ .25 per thousand. On the desktop web, advertising is usually sold by either CPM or PPC (pay-per-click). In PPC, also called CPC (cost-per-click), the publisher only gets paid when a user clicks on an ad.
Mobile advertising differs from the desktop Internet in that some networks, like Apple’s popular iAd program, provide a blended model that provides a minimum CPM rate as well as an incremental PPC fee. Of course Google is still one of the major advertising players in mobile and, as with desktop advertising, heavily slants towards PPC.
Regardless of whether you use CPM, PPC or a blended model, forecasting will still use CPM units with an assumed click-thru rate (CTR), which is why the “e” for estimated has been appended to the CPM metric.
The click-thru rate, or conversion rate, is how often a user actually clicks on an advertisement compared with how often an ad is shown. If an ad is clicked on one time per one hundred impressions, the CTR is one percent.
Each time an ad is displayed it creates an impression. How a site or application is created and which ad network or server is utilized will impact the number of impressions.
Refresh rates are how often a new ad is loaded.
Many mobile ad networks have a refresh rate of 30 seconds. Thus, a two minute session on a mobile application will generate four impressions. However for Apple iAD the refresh rate is every three minutes, which would result in only one impression within a two minute session. Moreover, some ad services will create a new impression for every page view on a mobile website.
When forecasting your impressions you need to know the ad refresh rate, the average duration of an app session per user, and if page views and/or duration are used to create impressions. You also need to determine which refresh rate will create the most click-through rates for your ads.
The fill rate is how often an ad is delivered compared to how many times it is requested.
Mobile usage far exceeds the amount of available paid advertising, and fill rates for mobile websites and applications are notoriously low. Although fill rates vary between networks, Apple iAD often only delivers a 25 percent fill rate, or in other words only one ad delivered per four requests. Other networks boast higher fill rates, but often with substantially lower CPMs.
Ideally, publishers will utilize multiple ad networks to fill 100 percent of the inventory. This may be supported through client-side script in the site or app, or by using a mobile ad server, such as AdWhirl, that can broker the ad requests.
The ad unit refers to the dimensions of the mobile ad.
Ad unit standards are in a bit of flux, complicated by the sheer number of handsets and screen sizes on the market. But the most popular smartphone banner size is 300 x 50 pixels.
The Mobile Marketing Association advocates the following ad units.
Full-Feature and Smartphone Standard Ad Units:
- 300x250 (Smartphones Only)
- 300x50 (Smartphones Only)
- 320x50 (Smartphones Only)
Tablet Standard Ad Units:
The subject of the app or mobile site is referred to as the “category.”
Some categories have much higher eCPMs compared to other categories. When purchasing mobile advertising you need to think about which categories you want to support based on the positioning and relevancy of your product or service.
Publishers need to understand that the topic of the app or site will dramatically affect the rate that advertisers will pay to place ads. For instance, according to a recent report published by Velti, the weather category averages over twice the eCPM of games.
The platform is the type of device that the mobile ad is delivered on.
Platform can impact the eCPM earned for ads as well as the ad units required to deliver those ads. The most popular platform is Apple iOS, accounting for over 50 percent of all mobile ad impressions and often generating the highest eCPMs for mobile ads.
Forecasting Mobile Ad Revenue for Publishers
As a mobile web or app publisher it can be challenging to forecast mobile ad revenue, especially if you are using multiple ad networks to fill the available advertising inventory, and if those networks use a CPM or PPC model. To make an accurate forecast you need to make some broad assumptions.
The first item to forecast is how many impressions you think you can generate. This will be calculated by:
- The number of times per month people will use your mobile site or app
- The average duration of each session of usage for your mobile site or app
- The refresh rate for how often the ads are loaded with the app or web page
Once you understand how many impressions you can generate, you need to calculate the eCPM rate for each thousand impressions. This will be impacted by:
- The category of your app or website
- The click-thru rate for ads on your app or site
- The platform(s) your app or site are delivered on
Lastly you need to calculate the fill rate for how much of the available ad inventory will be filled by an ad network. Assuming you are using multiple networks to increase your fill rate, you need to determine which percentage of requests will be filled by which network, and at which rates.
Mobile is the future of advertising. It delivers location, context, behavior and other dimensions that promise to make advertising more relevant for end users and more profitable for publishers.
Yet today mobile advertising is in a bit of a freefall, with mobile usage growing faster than available advertising, resulting in falling eCPM rates. On the other side, the growth of mobile is creating more impressions, which equates to more revenue for publishers. Deciding if mobile advertising fits your business requires building a strong forecast model and then testing those assumptions as you go to market.
Whatever direction you take, the one thing you can count on is that it will all change tomorrow. The mobile industry is evolving at such a fast pace that any advertising program will need to be readdressed on a near continual basis.
Feel free to share your thoughts and questions on mobile advertising in the comments below.
Title image courtesy of SeanPavonePhoto (Shutterstock).
Editor's Note: You may also be interested in reading:
- Four Ways to Find Hidden Revenue on Your e-Commerce Site by @johnboyle
- 5 Steps to Creating More Effective Content by @adamblitzer
- Mobile Apps or Mobile Web? Siteworx's Tim McLaughlin Speaks Out by @bmosherzinck