Thursday, August 20, 2009

How Much Money Do Mobile Ad Networks Make?

I always relish a good data nugget sandwich like the MocoNews post from a couple of weeks ago about how difficult it is to measure the size and reach of the 6 biggest US mobile advertising networks. The article highlighted some recent monthly unique site visitor data, per network, from Nielsen. Ostensibly the data indicates that Millennial's network is the biggest (by a wide margin) in the US, with the potential to reach up to 82% of the 55mil US mobile web users (hmm...that's if they ever use their mobile browsers, right?). Moco and an associated post on Mobile Marketer spend a lot of time debating the value of these numbers as a method of comparison. Interesting, if you're into that sort of thing...but frankly what I really care about, and I know you do too, is figuring out how much money these guys make. Analysts, pundits and panelistas love to throw out big mobile ad numbers like $2.7bil WW and $300mil in the US...but I'm generally super-cynical about accepting that kinda nonsense at face value. So, despite the aforementioned measurement difficulties & the advice of school marms everywhere, I decided to take a stab at the revenues the big 6 US mobile ad networks are seeing from selling ads on those networks.

So here are my assumptions... and, frankly, I think I'm being generous. I'm gonna say that the average US mobile browser is exposed to about 20 ads per month across these networks, which would be a total of 1.1bil impressions (55mil x 20) total. The reality, of course, is that this is a Pareto principle on steroids...wherein most of the activity is generated by a very small base. I've divided that number by the share each network has of unique visits (yielding about 6.4 impressions per network per month). Fantasy (rate card) mobile CPMs are $15 (good luck), but the blended reality (effective CPM) considering CPC deals, unsold inventory & a large remnant market is probably more like $1.75 (I know...ouch). Publishers keep about 60% of ad revenue (maybe more) and carriers (when involved) can take 50% before publisher...so I'm guessing that on average the networks keep something like 25% of their topline revenues. If these assumptions are correct...or even close to it (and my model isn't broken)...then, as you can see, these companies still have pretty nascent businesses.
btw -- this is a guesstimate (based on lots of assumptions...though, I believe, generous ones), so if anyone has any data points that could yield a more accurate outcome please feel free to comment (or contact me directly) and I'll make the appropriate modifications.

20 comments:

  1. Most things in mobile is spoken in terms of 'billions' yet you notice that many players are very coy about their actual revenue !

    Its hyped to the sky and only time will tell whos left standing once reality sets in.
    There is a lot of money to be made in mobile advertising but I see mobile operators taking a bigger chunk of this as they roll out their own ad serving platforms cutting out 3rd party players.
    Still a very big cake globally and everything to play for.

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  2. Jeremy,

    Interesting analysis, and thanks for it. I guess the answer is somewhere in between. Another interesting concept for you to explore is that usually reach is also an outcome based on and the varying effective CPM (CPM x fill + CPC x CTR x fill) each individual network. Given this, maybe it is possible that the market is even more skewed to the top part of that list.

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  3. Jeremy. Great comments and analysis. You are right to be super-cynical. The entire industry is being built around hype. I'd go even further and say it 90% hype and 10% substance. The industry leaders and mobile advertising players are out their to build up the industry so that when the buying frenzy starts -- because mobile advertising is an excellent way to engage potential customers -- they (and their investors) all get very rich.

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  4. Yes. You are still being generous. Lots of ad networks or self service also rely on third party enablers and operators that take a cut too.

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  5. That looks pretty sad. maybe someone can help me with this. Is AdInfuse / Velti on this list? I am going to do a deal with them or AdMob for banner ads.

    Anyone with experience with them, please respond... don't trash anyone, just say who you'd go with.

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  6. For banner ads, i would go with a combination of Millennial and Quattro and not Admob or Adinfuse. Use Admob and others as your fillers.

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  7. Go with an aggregator like RingRing Media.

    You get all the ad networks in one go and they deal with the payments.

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  8. good post...only comment would be that you are being super generous with the eCPMs. You assume $1.75 and in my experience across multiple publishers, its more like $0.75 across a healthy inventory base. This would reduce their revenues by a factor of 2.5, which I would consider more believable. That would also triangulate well with the fact that only 1 or 2 of them are profitable.

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  9. Interesting Analysis, this is very close to the reality as all the numbers and the hype is never sustainable unless the market place is continously sustained by quality advertisers. But many ad networks are shooting themselves even offering a $0.01 CPC in markets where there is large traffic. Can you imagine what kind of eCPMs that is going to generate
    You're gonna see many of them get out of fantasy land when the VC money dries up..

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  10. This analysis is great, though I tend to agree with the 0.75$ eCPM for most of the sites. On the other way around, there are some networks which don't work with carriers (most of Admob traffic, Buzzcity, AdModa)...which gives them 35% of the price of the click.

    In any case, VC money is still burning in Mobile Advertising

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  11. Hundreds of millions of desirable auditory canals, an equal count-plus or minus- of eyeballs, and voila! an audience to die for.
    Really?
    Now imagine the evolutionary process of the Internet wherein the sound volume of screaming Users, apoplectic over the loading time for the information they wanted is applied to Mobi.
    Get the picture?
    Still think Mobi has a -(bright) (postitive) (chancy) (suicide prone) you pick it-future?

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  12. I would not Millennial as it is a pretty dodgy company that have had many issues.

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  13. What about outside companies like inmobi and the likes? How do they fair in all this?

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  14. Having read all the above, I am still in the process of setting up a Mobile Ad Network. (What the heck, is this guy crazy). I have had a couple of successful business in the past (one in the mobile market, which had some deep pocket competitors). In the end I did win. My strategy (besides having great technology to help automate the process and segment the data) is to stay small and make the strategic relationships that can put me ahead over the big companies. The big guys often tend to through a lot of money around trying to buy they're market - sometimes its works, most of the time it doesn’t.

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  16. What is the name of the song in aTelstra Mobile ad where the guy folds up tvs and things?

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  17. Interesting analysis. I must say that you did great job. It seems to be 90% correct and very close to reality. Certainly, I tend to agree with the 0.75$ eCPM for most of the sites.

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  18. seriously I've no idea to this matter, I only know before banner ad design. You give me some extra resource. Thanks

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