A friend in the investment banking industry once cautioned me about working for a public company traded on a junior exchange. In his words, “the value never catches up with the promote.” By which he meant that a story that’s been sold simply to drive up the share price isn’t sustainable in the real world, and at some point there will be a day of reckoning when the promoters have made their money and moved on. Average Joe shareholder is inevitably left holding the bag, as are most of the employees.
Gphone or not, at first glance a similar story looks to be unfolding in the mobile advertising space. This week the New York Times reported on CBS’s mobile advertising initiative, which in partnership with Loopt enables targeting of consumers by location when they visit CBS’s mobile news and sports websites.
Location-based ads have long been viewed as critical to accelerating the disappointing growth of the mobile ad market, and the Times isn’t alone in seeing the CBS / Loopt experiment as a sign that the market might finally be progressing in line with expectations. Others, however, point out that it’s not a good sign that after all of these years we’re still talking about what are effectively science projects, not a real market.
The divergent growth projections themselves tell part of the story. If Gartner is projecting worldwide mobile ad revenues at $14.6 Billion by 2012 and Forrester thinks the number will be under $1 Billion then regardless of your affinity to one group of analysts over another, we’re talking about an industry in its infancy, and certainly one in which it’s possible to imagine countless new players and models emerging. In turn it’s also likely that many of the mobile advertising venture investments made in the last three years will stumble, potentially making the space less attractive.
I’m not so sure that a bit of bubble bursting would be a bad thing. What strikes me about the mobile ad space is that because the platform is itself in a massive state of flux, it’s difficult to predict how consumer behavior with respect to mobile devices will evolve, and by extension what are the appropriate and effective methods of delivering advertising. The perception of the mobile environment as a place for collaborative, open development is relatively new (and it’s a vision that is still very much constrained by the carriers who continue to control access to mobile subscribers). In turn the mobile space has seen lots of innovation but nothing close to the overwhelming onslaught of activity around the early days of the consumer Internet. Rich content on a mobile device, video, micro-blogging, mobile instant messaging, mobile browsing, all of these things are commonplace if you’re even peripherally connected to the technology world, but for the mainstream cellphone user they’re still quite alien.
I’m all for embracing new marketing channels, but in many respects the community around mobile content and devices needs to evolve before the channel will truly be understood and widely leveraged by marketers, and it’s here that I’d recommend mobile innovation be focused. In the first dot-com boom, IPOs soared and fell on overblown and misguided expectations of online advertising. In the background, Google, which existed long before the first bubble burst, was working on the utility of its offering, anticipating better search as the cornerstone of the web. Their category-defining revenue model came much later, seemingly from nowhere but in reality simply reaping the rewards of more than five years of building a genuinely groundbreaking utility.
So when it comes to mobile advertising, my prediction is a few more years of uncertainty and disappointment, before it all comes together, seemingly from nowhere but in reality built on the back of innovation that’s underway right now. To paraphrase Donald Rumsfeld, the space will be defined by what we don’t know we don’t know.
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