The Mobile Economy

We all are aware of the fact that mobile is the future for technology and web. There have been enough studies and factual presentations to prove
that consumers are increasingly using their mobile devices to access web.

But even with the worldwide explosion of high speed tablets and smartphones, some websites are struggling to generate enough revenue to keep them in business. Publishers that entirely depend on online ad revenues are the most impacted.

The traditional print model was suffering, which encouraged publishers to go online. By the time they could adjust to the online revenue model, accessing web using mobile devices has gained traction. How would the ever struggling print industry cope-up with these changes!

According to a study published on Journalism.org for every $1 gained in the digital space $7 are lost in print revenue.

The current ad revenue on Website v/s mobile is disturbing for the online publishers. The current CPM (Cost per Mille) for a banner ad on a website in the region is approximately $30 v/s $7-10 on a mobile website. This varies from various ad networks, but for a comparison purposes publishers are loosing around 60% of the revenue as advertisers shift the dollars to the mobile platform.

Online Publishers run their business on two important factors, how many people (reach) access their content and how many times they visit the website (frequency). With the mobile channel (apps, mobile website) in place there is always a possibility of cannibalization of the website traffic.

The good news is that the growth in mobile usage has been met with a sharp increase in ad impression leading to increase in the revenue.

The International Advertising Bureau had valued the global mobile advertising market in 2011 at 5.3 billion out of which Middle East and Africa accounts for 3.2%

An infograph released by the mobile Ad network inMobi states that in Q1 2012 there were 11 billion ad impressions generated on their mobile network in the Middle East. Out of this 11 billion 82% impressions were generated on smart phones.

To understand the Mobile Usage in the Middle East region look at the below stats: -

According to a research done by Google, Middle East is leading the smartphone race globally with 62% of mobile users being on smartphones in UAE and 60% in Saudi Arabia. In the UAE 71% of users are accessing Internet every day.
Other interesting stat from an ecommerce perspective is that smartphone owners in the Middle East are the most active mobile shoppers. In Egypt, 41% of smartphone owners have a made a purchase on their mobile device, and of these mobile shoppers 80% make purchases once a month or more. This monthly shopping behavior is the highest out of all of the countries that participated and in fact, 46% of Egyptians expect to make more mobile purchases in the future.

The above stats prove that there is a huge revenue opportunity in the Mobile space regionally.

The web companies are still depending on a click to make money on mobile. A recent survey by mobile app marketing platform Trademob found that 40 percent of mobile clicks on ads are essentially useless, the result of accidental presses or fraud.

To debate this opportunity, how many of you actually like to see a banner ad while playing a game or surfing a news app? Irritating isn’t it! The banner ad on a mobile actually takes up a significant amount of real estate space.

Earlier this year Google had acquired loss making Motorola Mobility business. Last week Google reported their Q3 2012 net revenue of $11.33 billion, missing market expectations of $11.86 billion. Motorola acquisition was directly linked to Google’s decision to launch Android as a major business venture. When you account for the costs of the Motorola purchase, Android has been a pretty epic failure, however it has been a successful product challenging the companies like Apple. Even after acquiring mobile companies Google is still not able to crack the solution to monetize the mobile business. It can’t charge as much for a mobile ad or click as they can for a regular one on a browser.

Mobile advertising is generating significantly less revenue for all of the players, including Facebook.

Facebook has a product called sponsored stories. For example, if a user clicked the Like button on the Facebook page of a certain brand, some of his friends might see a notice about this when they visit the site. The website now generates about $1 million of revenue a day, about half of which comes from mobile users. However, this is a small step in the mobile space for a company like Facebook.

Most online publishing websites have not been built on business models that take into account the potential lower ad revenue models that mobile may continue to present. But as the mobiles usage increases, it’s imperative that not only publishers but any one in the online business creates a new business model that doesn’t rely solely on ads.

The Article was first published in Qatar Today magazine’s Nov 2012 issue