Monetization? Screen Size DOES Matter -- Though Mostly Just for Advertising

The World Wide Web is unbundling. Millions of new digital electronic devices are being connected to the Internet every day, and the shapes, sizes and functionality of the devices grow daily as well. The days when browsable, searchable real-time news, information and entertainment was limited to the computer alone are over. The majority of devices connected to the Internet today are not personal computers as we have known them -- desktops and laptops -- and this trend is unlikely to ever reverse.

Just as the Web has outgrown personal computer devices, so have Web services like Google, Twitter, and Facebook, now as available on tablets and smartphones as they are on PCs. And, for some of these services, usage and user interactions “off PC” are more frequent and growing much faster than they are “on PC.”

The growth of “off PC” Web usage made a lot of folks nervous about the future of Web services -- just look at all of the hubbub on this issue relative to the Facebook IPO. As most of us in the industry know, mobile Web usage hasn’t monetized for advertising nearly as well as “on PC” usage has. Earlier this week at the All Things D Conference, Kliener Perkins’ Mary Meeker told us that rates for mobile Web advertising are only 20% of the rates for Web ads presented on personal computers.

Why only 20%? First, mobile advertising is still a nascent market, and everyone in the ecosystem is still trying to figure out how to best use the device to deliver effective advertising messages at scale. But probably one of the biggest reasons that mobile ad monetization lags the PC by so much is screen size.

Calling out the screen size is a pretty easy assumption to make. Most computer screens are 20X the size of smartphone screens. For an advertisement to work, it needs to be seen. For it to work well, it helps to have an impact on the viewer/user. Even over the long term, it is unlikely that small screens will ever have as much visual and emotive impact as large screens -- which should affect their capacity to deliver advertising. Of course, advertising is about much more than screen size. Relevance, personalization, portability, interactions, etc. are all part of what will make mobile advertising special over time.

Does this mean that I am bearish on the business future of Web services? Absolutely not. Screen size matters a lot in advertising -- at least advertising as we have known it. It also matters a lot for watching movies. After that, I don’t think it matters much at all. If you have tens of millions (or hundreds of millions) of folks using your Web services each and every day on mobile devices to communicate, learn, share, be entertained, shop, or any one of the hundreds of applications that people use today, you will find lots of ways to make money, most of which are bigger than advertising and movies. I’m certain of it. What about you? What do you think?