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Mobile Advertising to Reach $8.2 Billion by 2016 As Search Market Share Shrinks

New figures released by Forrester Research project the healthy growth recently seen in U.S. interactive advertising will continue through 2016, with total spending reaching $76.6 billion, or 35 percent of global ad spend.

The figures are particularly encouraging for those in the mobile sector, who have had to deflect criticism about the current state of mobile advertising and its viability using current technology. The report projects mobile interactive advertising will enjoy a compound annual growth rate of 38 percent, reaching $8.2 billion in 2016. This best-in-class growth will be led by a growing mobile commerce market, consolidation of mobile ad networks and the implementation of rich media ad formats as smartphone technology advances.

Consolidation in mobile ad networks has accelerated in the past two years, as Google acquired AdMob for $750 million, Apple acquired Quattro Wireless for $275 million and ValueClick acquired Greystripe for $75 million, placing the full force of some of the most valuable companies in the world behind the mobile ad sector.

Mobile Advertisement Example - Land Rover

While display and search are projected to retain their dominance of most interactive ad budgets as rich media, text listings and online video components become budget staples, search engine advertising is expected to see a significant reduction in both its growth rate and its share of the overall interactive market. Search advertising is projected to experience a compound annual growth rate of 12 percent, nearly doubling from $18.8 billion in 2011 to $33.3 billion in 2016, but will see its share of the overall market decrease from 55 percent to 44 percent over the same period as other formats establish themselves as meaningful components of large scale media buys.

Forrester reports social media marketing will enjoy a healthy 26 percent compound annual growth rate, but will only reach $5 billion in total spend due to the inexpensive nature of many social ad platforms.

With the explosive valuations of literally thousands of VC-funded startups heavily dependent on advertising revenue for survival, let alone growth, these latest figures are encouraging. However, marketers appreciate (and are increasingly demanding) both security and results, which will likely benefit the largest and most established companies in mobile and social, including Google, Apple, Facebook and Twitter. The industry should expect further consolidation as the large, cash and equity-rich players utilize critical acquisitions to expand their arsenal and take advantage of the rapidly accelerating growth in interactive advertising.

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From Avatar to the iPad 2 – We’re in an Experience Driven Economy

You know the feeling. Being so profoundly overtaken by awe, laughter, incredulity or amazement. Experiences like these tap into the deepest and purest of human emotions, and serve as powerful motivators. We are in a new economic era; an era in which savvy businesses craft their product and service strategies with the specific and overarching goal of creating compelling consumer experiences.

Hollywood was among the first industries to recognize that even the best stories need great packaging to become the mega-hits that bring swarms of people to theaters in costumes and tents, waiting for hours to experience the story. Avatar was not a multi-billion dollar smash hit because the story was particularly exceptional or because audiences were deeply committed to the film’s message of environmentalism. The film attracted an enormous and diverse audience of moviegoers craving to immerse themselves in the engrossing experience James Cameron expertly crafted. The impressive 3D effects, captivating majesty of Pandora and exceptionally-directed audio throughout the film catapulted audiences into a foreign world, allowing them to experience the story in a way that simply was not possible even twenty years ago. James Cameron isn’t just selling movie tickets. He is selling an experience. Entertainment locations like Universal’s Harry Potter theme park and Disneyworld don’t sell roller coaster tickets and concessions. They sell an experience. Starbucks isn’t selling coffee and pastries. It is selling an experience.

Avatar Movie Wallpaper

The entertainment industry was a pioneer, but new players are encouraged by the success they’ve seen and are increasing their efforts to weave the overall consumer or experience into every decision they make.

The resurgence of Apple as a beloved consumer and cultural icon can be directly linked to its insistence on providing unique and powerfully positive experiences to its customers. One only needs to step inside an Apple retail store to understand how well this strategy has caught on. Flocks of current and would-be customers seem suspended in a perpetual state of bliss and fascination as they explore and tinker with the latest iPhones, iPads and MacBooks. Even months after a product is released, Apple stores are bustling with activity and energy. Why? Because Apple created a hands-on experience and instills a sense of ownership in its customers.

But what makes Apple such a unique and powerful example of experience-driven strategy is its array of products designed to wow the users’ senses. The touch, audio and visual interactions that characterize the company’s most successful products have taken a company that was once a quarter or two away from a low-ball acquisition and made it a beloved symbol of quality, innovation and excellence. (Author’s note: I give high praise to Apple, but I’m no ‘fanboy’ – I have happily used a PC for 15 years and will critique Apple if/when necessary.)

Apple iPad 2 Customers in Store

Facebook, Twitter, Foursquare and others are carefully crafting new and addictive user experiences that have led to astounding engagement and interaction metrics. The genuinely positive experience of interacting with your social connections and having the ability to share your own story is an experience we – as humans – crave.

From luxury car dealerships and IMAX theaters to retail stores and theme parks, business are trending toward products and services driven by a foundation of selling experiences. These experiences are powerful, and as technology advances even further, the experiences will become deeper, more interactive and more compelling. An incredible, truly wowing experience with a product or service is rare, but if businesses can deliver one, they are poised for transformative success.

NOTE: Visit www.letschatbusiness.net on your iPad for a unique, Flipboard-esque experience driven by Onswipe and WordPress.

Google Dives Head First into Display Advertising

[UPDATE 10/14/10] Google shares soar as the company reports impressive 23% YoY growth after the closing bell. CEO Eric Schmidt attributes growth to strength of Google’s core businesses and “significant momentum” in its newer display and mobile advertising businesses. For the full report from Google, click here.

In a move intended to diversify their revenue stream, Silicon Valley giant Google launched a sprawling multimedia campaign named “Watch This Space”, announcing their increased efforts to grow their business in the display advertising sector.

There was a time when Google could do no wrong, and investors witnessed the search engine’s share price rocket into the stratosphere, reaching its peak at $741.79 in November 2007. Google shares are down approximately 16% YTD ($525.62) and many indicate this is the result of growing concern over the company’s dependence on search. As the New York Times highlighted in September, over 90% of Google’s revenues come from text ads.

The new campaign includes a massive interactive billboard in Manhattan and seemingly omnipresent display ads across the web displaying bold messages: “This Space Can Be Smarter” and “Display ads are big. They’re gonna be huge.” The ads often occupy every open display ad slot on their platform sites, making it difficult for readers to miss.

Google Ad Campaign - Bloomberg

Earlier this year, Facebook surpassed long-time industry leader Yahoo! to become the leading publisher of display ads in the United States with 16.2% of the market. Yahoo! sits in second with 12.1%, and Microsoft has a 5.5% share to hold third place. (It is critical to note that comScore does not include ads from Yahoo! and Microsoft’s partner networks, which would undoubtedly vault Yahoo! beyond Facebook as number one, and advertisers pay significantly less to display ads on Facebook than Yahoo! and Microsoft.)

Notice the glaring omission? Google is nowhere to be found. Back in 2007, when Yahoo! acquired Right Media for a total of $725 million, the display ad market was growing but the future of success was not set in stone. The fear was that with a wealth of new websites competing for visitors and advertisers, the average price of display ads would decrease. As it turned out, the fear was not to be realized, as ad exchange services like Right Media and Google’s DoubleClick increased the average price of ads as a result of the tracking information and user behavior metrics they were able to provide.

With display advertising now solidified as a powerful revenue source, growing faster than the overall ad market, Google is at a key competitive disadvantage by not having a meaningful presence in the market. These new efforts indicate Google’s recognition that they can capitalize on a rapidly growing advertising sector by leveraging their incredibly talented human resources, expansive networks, and powerful financial position. Its search dominance not in doubt, Google needs a blockbuster new business unit to reassure investors that they aren’t a one-trick pony.

Will Google become a major player in the display advertising sector? Share your thoughts with a comment below.

Is Advertising Content?

Like many of world’s Internet users, when I browse my favorite websites my eyes tend to scan past the navigational elements of the page, take a quick glance at any advertisements, and move directly to the content of the page. This week, Dave Morgan and Joe Marchese of OnlineSPIN took to the headlines to debate a critical question: “Is advertising content?” Before presenting my argument, here are the key points outlined by each side.

Advertising Is NOT Content:

  1. Consumers would rather experience content without advertising
  2. Consumers are even willing to pay to remove advertising
  3. Regardless of the quality of the advertising, users don’t want to be interrupted

Advertising IS Content:

  1. Consumers value advertising content as much as media/editorial content
  2. In a recession consumers prefer free services, advertising provides that
  3. Consumers don’t hate all ads, they hate being bombarded by irrelevant ones

Each position has its own validity, and neither can be universally applied to every user and every platform. However, after careful analysis of the facts, it is evident that if done properly, advertising is content, and plays a critical role in the success of any website or business.

When an advertiser develops and releases a powerful, relevant, meaningful ad that adds value to the consumer experience by eliciting strong feelings and inspiring interest in users, the advertisement becomes a portal for a potential customer/subscriber/user to learn something new, experience something different, or discover a product or service that enriches their lives. However, when consumers are overexposed, constantly flooded by too widely-targeted ads, their effectiveness is dramatically reduced, and the value added the the viewer becomes less and less.

For every one hour of television, there is between 14-18 minutes of advertising. So when I watch Fringe live on Thursday nights, between 23-30% of my time is spent viewing advertisements as I wait to return to the show. When I’m watching live I am offered very little choice as to whether I see the advertisements, and more often than not, the ads are more of a necessary transition than valuable content. To combat this, advertisers utilize integrated product placement to more seamlessly mesh the content of the program with the content of the ad. As the original debaters noted, television commercials can be content in the proper context. Super Bowl advertisements, with a hefty price tag of $3 million every 30 seconds, are a critical element of the viewing experience and undoubtedly provide additional value to the viewers (some of whom believe the football game is the “commercial break” until the next set of ads).

Google Super Bowl
Online, the dynamics of advertising as content change as choice, customization, and interaction become increasingly available to users. Display advertisements from industry heavyweights like Yahoo!, Facebook, and Microsoft have revolutionized the way users view and feel about the advertisements they see. By involving users, advertisers create an interactive, participative environment in which ads become a source of entertainment, and have the potential to overtake the page media to become the primary content on a website.

I visited the Yahoo! Sports Golf page today, checking in on the commentary about the PGA Tour FedEx Cup Playoffs, and encountered an ad that I spent more than six (6) minutes interacting with. The American Express video ad featured several levels, allowing me to select a topic, and control a video featuring David Toms, a prominent PGA Tour player. I viewed three short instructional segments, and absorbed tips that I can use next time I am out on the course. When I had completed my interaction with the advertisement, I continued down the page to read the rest of the article.

The ad did not get in the way, it did not distract from the original content, and it did not detract from my experience. In fact, it did the exact opposite. I wantedto interact with the ad, and it became a critically important and positive part of my experience on the website. Relevant, engaging, dynamic, and complex advertisements can become content as elemental as the site media itself. There is no doubt that if done properly (adding true value to the consumer/user experience through engagement, choice, and interaction), advertising is content that can be as important a definition of the user experience as the core page media.

See how intent targeted advertising is reshaping the way publishers target users to give you the most relevant ads, click here.

To read the original articles, click here and here.

Interactive Display Ads Are Thriving, Yahoo! is Reaping the Rewards

Online advertising spending is growing every year, and companies are looking for new, innovative tactics to reach and engage their customers. For many of the heavy-hitter ad spenders, this means premium, large, and interactive display ads. With total online advertising revenue in 2010 expected to hit $19 billion (up from $10 billion in 2004), and display advertising expected to grow 7% per year, reaching consumers through the Internet is a critical part of any advertising effort.

(LCB wrote a previous post about the future of online advertising, check it out HERE!)

Online media giant Yahoo! ($YHOO) is positioning itself to be the premier platform for high-quality display advertisements, and the company’s outlook is heavily dependent on the success of this strategy. According to JP Morgan, Yahoo! leads the display ad market with a 17% share, ahead of Microsoft (11%) and AOL (7%). The company’s CEO, Carol Bartz, has stated numerous times that she believes display advertising is an integral part of the turnaround efforts at Yahoo!, and the evidence is clearly visible on the company’s homepage (www.yahoo.com).

Yahoo!

Yahoo! presents 10 billion ads every day, and advertisers want to make each impression count. To maximize the value to advertisers and consumers, Yahoo! is facilitating a shift to large, interactive ads that allow consumers to actively engage the ad. An example below is a Lean Cuisine advertisement on the Yahoo! homepage. As you can see, the slide-out ad takes up a major portion of the above-the-fold area of the page. The ad involves a three-part “quiz” that users take, selecting food preferences to determine which new Lean Cuisine product is best suited for their taste. Not only does this engage consumers, giving them a sense of control, but it provides Lean Cuisine with a wealth of data for use in future product development.

Lean Cuisine

This specific ad is highly representative of the style of ads that companies and agencies are creating to display on the site, and the platform and strategy has been lucrative for Yahoo! In their second-quarter earnings report, the company’s profits soared 51% from the year before, largely based on the success of display advertising. As the global economy continues its recovery and earnings continue to impress, companies are likely to ramp up their advertising spending. With consumers seeking more control over their purchases, agencies are delivering opportunities for consumers to be actively involved in the the ads they see, providing increased identification between brands and customers. Display advertising continues to grow as a percentage of overall online advertising spending, and for Yahoo!, this means improved revenues and continued increases in profits.

As Ad Revenues Surge, Who Comes Out on Top?

During the Great Recession of the last two years, online advertising revenues dipped as much as 7%. Over the next five years, sales of online advertising are expected to more than double, led by healthy gains in search engine advertising. By the end up 2010, revenues are projected to reach nearly $19 billion, up almost $10 billion from 2004. Revenues from sponsored links and other forms of search engine advertising are expected to increase at a rate of 12% a year, whereas display ads should rise by an annual rate of 7%.

So as the online advertising market turns around, which companies are likely to capitalize on the success? Google’s heavy reliance on sponsored link and search engine advertising revenues positions them to continue to thrive in the rebound, but Yahoo!’s future is not as clear. With one year at the helm under her belt, Yahoo! CEO Carol Bartz has certainly made her mark on the company. If nothing more, she has injected intensity, energy, and a desire to return to the company’s core businesses. Employees have had mixed reactions to her management style, and it is still premature to assess the results of her tenure. Her propensity for loose-lipped conversations with the media laced with profanity and bravado have made Bartz a “love her or hate her” figure in the tech world. A benefit of these candid interactions is that the public generally has a crystal clear picture of what’s going on at Yahoo! – good or bad. In recent interviews, she noted that her company plans to focus on premium, interactive, and bold display advertising.

The pitch to advertisers is this: why spend money on a dull and unassuming text ad on a search engine or in print media when you can dazzle tens of millions viewers with a colorful, animated, and assertive display ad? When it comes to these display ads, Bartz indicated that Yahoo! is trending towards bigger and flashier. Check out this TurboTax ad on the Yahoo! homepage:

The still image of the ad is dominating enough; it takes up nearly the entire homepage screen. However, when you see the ad in action, it takes on a life of its own. In this Super Bowl and Tax Season TurboTax spot, Chris Berman’s booming voice commands attention and flashing gadgets and animations draw the viewer’s eyes to the massive ad. Beyond the size and energy, the value lies within the ad’s interactive capabilities. This “on demand” functionality hands the control and power back to the user, capturing their interest and maintaining their engagement.

We’ll likely continue to see similar ads on the Yahoo! homepage for the foreseeable future, and soon enough we will be able to gauge their effectiveness as the Great Recession becomes a painful memory – but a memory nonetheless. Carol Bartz is hedging Yahoo!’s bets on display advertising and premium content, but will the surge of search engine advertising revenues halt her efforts?

What do you think of the large display ads? Are they too obtrusive or do they better suit your online needs?

Identify the Problem, Be the Solution

As one of the most visited websites on the Internet, Yahoo! provides advertisers with access to a massive pool of potential customers. Display advertising, a sector in which Yahoo! provides unparalleled results, allows companies to capture the visual attention of viewers in a manner that text advertising simply cannot.

Companies pay hundreds of thousands of dollars to advertise on Yahoo!’s homepage, and they expect results from this large investment. To meet the goals of the advertisers, Yahoo! pairs users with advertisements that are specifically tailored to their demographic. This targeted advertising provides users with more relevant, more effective interactions on the web.

Beyond ads targeted at various demographics, advertisers look to provide users with contextual ads that are relevant to the time period. During the holiday season, the Yahoo! homepage carried large display ads catering to the desires of consumers to obtain massive shopping savings. Now that the holidays have come and gone, the content of the advertisements have shifted.

TurboTax, a company that specializes in at-home tax servicing, has identified a customer need/problem (maximum tax refunds at the lowest price), developed a marketing plan that addresses that need, and provided them with a solution. By doing this, they have tapped into their customers’ hierarchy of needs, satisfying them in a way that the company’s competitors cannot. Of course, not every visitor to the Yahoo! homepage will witness the animated advertisement and immediately become a TurboTax customer. However, the association these viewers will (hopefully) retain may connect TurboTax with tax savings and maximum tax refunds, leading to potential referrals or recommendations.

Identifying and addressing customer needs is the key to the success of any marketing campaign. To accomplish this goal, companies must perform market research and target their advertisements toward specific segments of the consumer market.