Fueled by fast-growing adoption of smartphones and tablets, the outlook for mobile advertising is as bullish as ever in 2012. But not everyone
is expecting a surge in mobile ad spending this year.
Among a series of
predictions that analysts at S&P Capital IQ released today, one claims that 2012 will not turn out to the “banner year” for mobile advertising that many foresee. Online
Media Daily followed up with equity analyst Scott Kessler, who heads the tech sector group at S&P Capital IQ, about his take on mobile advertising and other mobile industry topics.
OMD: Why don’t you think 2012 will be a big year for mobile advertising?
Kessler: First and foremost, there’s still going to be a tremendous
emphasis on both deployments and usage. It's a lot more about market share dynamics than monetization at this point. The major players across the mobile ecosystem are more interested in acquiring
customers and somehow trying to achieve higher levels of usage by taking the next step, which is serving those users with related advertising.
Look -- we’ve come a long way with the
iPhone and the iPad, and other similar form factors have made mobile advertising more of a possibility than it was a couple of years ago. There are tremendous possibilities and opportunities, but also
potential pitfalls.
Look at Apple, for example. iAd hasn’t really been a material revenue contributor for them. I think they just hired someone from Adobe [Todd Teresi] to oversee that
business, and the reason you do that is because maybe that business is not playing out as you might expect. So for a lot of those reasons, as well as complexities associated with continuing
fragmentation across Android, we should not expect mobile advertising to move the needle for most companies this year.
OMD: Do you think the mobile
advertising process generally is still too complex for marketers?
Kessler: Initially there were a lot of questions about mobile advertising because it seemed to be a
harder proposition. You’re talking about different users, a different form factor, different bandwidth constraints, and different types of inventory. One of the things that’s conducive to
innovation and growth is the establishment of platforms and standards consistent across a variety of different contexts. That’s clearly the case with traditional online advertising; that is not
in place when it applies to mobile.
You have a couple of major players with disparate operating systems, and you have what’s going on with respect to apps. Apple is probably not the best
in terms of using that as a vehicle for so-called advertising and marketing. This is still very much a work in progress.
OMD: What about Google, which has clearly made mobile a key
part of its growth strategy?
Kessler: They have tremendous technologies and assets to pursue mobile advertising and marketing opportunities. However, the question is:
What will be successful offerings and models for Google? Everyone understands Android, but what about the fact that they’re buying Motorola Mobility? What about YouTube; what about their
standard offerings available on mobile? And they’re trying to figure out how to incorporate AdMob across all these platforms and offerings, and it’s very complicated and challenging.
OMD: When it comes to the mobile payments space, you see PayPal being a bigger player than Google or Google Wallet. Why?
Kessler: There really is no other
company in our judgment that is as well-positioned as PayPal in this particular area. They have leading market share in online and mobile payments at this point. But in addition, they have a very
large user base of over 100 million accounts, responsible for moving billions of dollars in gross merchandise volume. [It] solved a lot of technology problems in relation to everything from
cross-border transactions to different currencies to dealing with escrow.
OMD: In relation to PayPal, what do you make of its president, Scott Thompson, leaving to take the reins at
Yahoo? Do you think he can help make Yahoo a bigger player in mobile?
Kessler: Absolutely. Yahoo for some time has been trying its best when it comes to mobile. Like
other players, they have a tremendous amount of technology and assets that will continue to be leveraged as pertains to mobile. But there are some things PayPal has done very well that could be
instructive for Yahoo in mobile, international, and just positioning the company more as a platform instead of a series of disparate offerings.
OMD: You raise skepticism in your 2012
predictions about whether Google will close the Motorola deal in the first half of the year -- or at all, for that matter. What problems do you see there?
There are concerns about the
Motorola Mobility deal. They were talking about an early 2012 closing, and in August, we thought this was a stretch given some of their other large or more controversial deals. Obviously, when you
have Motorola Mobility indicating some details that haven’t been encouraging, it causes one to wonder if Google still feels comfortable with the deal. There’s no guarantee there’s
going to be a sign-off. There are a number of constituencies and jurisdictions that could play a major role here.
OMD: One company that’s long been the subject of acquisition
rumors is Millennial Media, which just filed to go public. What do you make of that move?
Kessler: Generally speaking, we try to keep opinions about companies we
don’t cover to ourselves. But the benefit they have is that they’re not inextricably linked to a particular platform or carrier or OEM, and there are benefits to that.
OMD: What about the IPO market for tech companies now overall?
Kessler: Internet companies haven’t been particularly successful
following IPOs in the last year. When you see all the relatively well-established Internet companies that have come public over the last year, it's pretty surprising and startling to some extent, how
poorly the stocks have fared post-IPO.