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FEATURE

Mobile Advertising: Pot of Gold, or Mirage?

A look at the differing views of mobile advertising and its revenue generating capabilities compared to traditional advertising.

Lee Gomes
July 17 , 2012

Here are two ratios that may seem like dry statistics, but which in fact go to the heart of the business plans of scores of Silicon Valley startups, and could mean life or death for them.

Last year, Americans spent just seven percent of their time reading newspapers and magazines. Yet those print outlets took in a quarter of all advertising revenue. By contrast, Americans spent 10% of their time on mobile phones. However, mobile ads represented just one percent of all advertising expenditures.

That means that every minute spent reading the newspaper attracted 40 times the advertising revenue of a minute spent looking at a mobile phone.

For analyst Mary Meeker, that represents what she calls a "$20 billion opportunity." Her logic: The discrepancy between print advertising and mobile advertising is unsustainable; and the advertising dollars spent for mobile will eventually catch up with the time users actually spend on the medium. Since mobile advertising attracts only $1.6 billion today, its "rightful share" of the advertising pie is $20 billion. (Actually, in Meeker's analysis, a small part of the $20 billion includes traditional Internet advertising.)

Disqus: Do you think mobile advertising is an opportunity or an intrusion?

Meeker gained fame as a Wall Street analyst during the dot com era; she currently is a partner at Kleiner Perkins Caufield & Byers, the prominent Silicon Valley venture capital company. The statistics about print and mobile advertising were from just one small part of a 112-page PowerPoint presentation on Internet trends that Meeker recently gave at the "All Things D" conference.

It was the second such presentation on technology trends that Meeker has given at the annual event. In just two years, Meeker's survey has come to be regarded by some in Silicon Valley as a kind of "state of the union" presentation about what is happening and where things are heading.

Twenty billion dollars, of course, is a lot of money, and it's the reason that so many investors and entrepreneurs are interested in just about everything having to do with mobile phones and social media. The advertising model for traditional websites hasn't quite worked out the way most people had hoped. Except for a few exceptions like Google, many sites are finding it increasingly difficult to monetize their traffic via ads, largely because the supply of ads on the internet as a whole continues to grow, greatly increasing competition.

Social media and mobile phones, though, are viewed by some people as an opportunity to hit the reset button on the advertising business model. They're hoping for different economics in the mobile/social world, and for them, Meeker's presentation and the potential for revenue upside she described was vindication of their vision.

But not everyone agrees with Meeker. A striking dissent came from Jean-Louis Gassée, the sharp-tongued former Apple executive who is now a venture capitalist with Allegis Capital in San Francisco. Gassée is co-author, along with media expert Frédéric Filloux, of the Monday Note, a widely-read tech industry newsletter.

In an article following Meeker's presentation, Gassée called the $20 billion figure a "mirage," and argued that the assumption behind it -- that a new technology would essentially evolve the same way as a previous technology -- was badly flawed. For one thing, he said, the screen size on a mobile phone is far different than on a full computer screen, or even on a newspaper or magazine page. In addition, mobile users are usually engaged in a specific attention-grabbing activity when using their phone, like phoning or texting. That makes ads far more intrusive, he argued, and thus much more difficult to place.

As he summed it up in an email: "The screens are too small, and our attention is too divided." (Meeker declined an invitation to respond to Gassée.)

As the two are veterans of the technology world, both views are worth attending to. And the topic will no doubt be debated endlessly in coming months and years. We'll one day know who was right; unfortunately, that bit of data is one we're going to have to wait for.

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The contents or opinions in this feature are independent and do not necessarily represent the views of Cisco. They are offered in an effort to encourage continuing conversations on a broad range of innovative technology subjects. We welcome your comments and engagement.

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