Doing the Math for Advertising on Mobile Apps

By Tad Miller | Jun 22, 2012
More Articles by Tad

I’ve written before about how most Google AdWords advertisers who use the Display Network on mobile devices usually have no idea that their ads are showing on mobile apps.  The problem with that from my perspective is that if you are using keywords to contextually trigger your display ads you are relying on those words to keep their ad serving targeted.  Google says that it uses keyword context to trigger those ads, but all the evidence indicates otherwise.

  • What is the keyword context that would make an ad for show on Angry Birds?  Shouldn’t all the ads be for bird seed instead?
  • Why would a realtor’s ad show on Pandora for the song Primary, by the Cure?  Shouldn’t there be ads for medicine?
  • Why would an ad for Charmin Toilet Paper be on my Advanced Task Killer?  Is it because it “wipes” out Apps on your phone you aren’t using at that time?

My personal opinion is that when advertisers use keyword context on Display Ads triggered on mobile apps the context that really matters to Google is how high your AdGroup’s default bid is and keywords don’t come into the equation at all.

So I was very interested in Google’s recent news that they now have Display Network targeting to just advertise on mobile apps only including the AdMob Network which Google bought two years ago for $750 Million.

How it should be done

Advertising on mobile apps isn’t inherently bad at all, provided you know what you are doing and understand the limitations of the advertising medium.  The most advantageous aspect of advertising on an app is that you can target your ads to a specific location.  It’s great for driving foot traffic and store visits to businesses like restaurants or bars.  The context that makes it work is proximity of mobile app users to the location of the advertiser.  You can also add an ad scheduling aspect to it to ensure that the ads are working when your business is open and ready for customers.

Assume my new favorite Barbecue Restaurant, Two J’s Smokehouse of Palmyra, Virginia is only open Friday through Sunday.  They can advertise on those days on mobile apps in their zip code.

They can choose to essentially “carpet bomb” everyone in their zip code using all participating Apps that allow advertising or they can choose specific app categories or even the specific participating apps.  (Angry Birds players might like ribs).  Special calls to action like daily specials or deals should resonate well.

Set the Bar Low

One thing you need to realize about advertising on mobile apps.  At it’s best having your ad on mobile apps might be just a way to get your businesses name in front of the the  App using public.  It’s the digital equivalent of a roadside billboard.  It’s “Push” marketing in the sense that it’s pushing an ad at someone who isn’t necessarily seeking any information at all about that advertiser.

Search advertisers are used to the “Pull” of search advertising where the searchers actively seek out information on a brand or seek a product or service that an advertiser is looking for.  When conversions, sales or leads matter and the cost metrics of conversions, sales or leads matter display banners or text ads on Pandora mobile phone apps are likely the last thing you should be spending your advertising budget on.

The most obvious products to advertise on mobile apps would seem to be other mobile apps.  I’ve seen many instances of this.  But if you have a mobile app you need to understand how much revenue per app user you are making before you go spending money on advertising to get more app users.

The average price of the top 20 Google Play Paid Apps this week is $3.22.  Even assuming 50% profit ($1.66 per App) that doesn’t leave a lot of room to bid very aggressively and maintain profitability.  The profit margins on mobile apps are much smaller than the average bids needed to get your ad to show on apps.  Even with healthy 10% or 15% conversion rates the best you might be doing from a return on investment perspective is breaking even.

The same might be true of free apps that make there money from allowing advertising on the apps.  App developers need to know how much advertising revenue they are making per app user and do the math to determine if the profit margins are big enough to allow aggressive enough advertising that would allow ads to show and then conversion rates high enough to bring in more revenue producing app users.  For most app developers the math doesn’t work out.

The same fundamental problems still exist

Even though you may have elected to have your campaign only advertise on mobile apps it doesn’t mean that all of the other advertisers showing ads on mobile apps did the same thing.  Advertisers utilizing the Display Network on mobile devices are eligible to have there ads show on mobile apps, and as I mentioned above many don’t even know there ads are showing on mobile apps.  I believe that this is the case with most of the text ads that you see showing on mobile apps.

Sophisticated advertisers that knowingly try to capitalize on this ad medium usually use display banners instead of text banners.  Oftentimes these advertisers are big brands with big budgets and big bids. I almost exclusively see ads for Toyota when playing Angry Birds.

Usually these apps have space for just one ad.  That means the top bidder usually gets all of the ad impressions and clicks.  Even if you have very tight geo-targeting, you might have to really raise your bids pretty high to get your ads to show over deep-pocketed national brands and that impacts your return on investment.

Don’t believe the hype

The world is going crazy for mobile and it is changing advertising.  Google made a serious $750 Million investment in AdMob to capitalize on the “mobile revolution”.  But at its best advertising on mobile apps is a modern day roadside sign that can help local businesses drive foot traffic to there business locations.  The reality is that it’s dominated by large brands right now that may or may not know that there ads are even showing on apps and the best they might be doing is “building brand recognition”.  What remains to be seen is what happens when Facebook unveils its new location based mobile ads.  Facebook has a huge reach and potentially it’s clicks could be cheaper than Google’s.  It might be a better alternative.

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