Page 344 - Using MIS

312 Chapter 8 Social Media Information Systems
Does Mobility Reduce Online Ad Revenue?

The ad click revenue model successfully emerged on PC devices where there is plenty of space
for lots of ads. However, as users move from PCs to mobile devices, particularly small-screen
smartphones, there is much less ad space. Does this mean a reduction in ad revenue?
On the surface, yes. According to Cowen analyst Jim Friedland, in 2012, Google generated
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$7 from each smartphone and about $30 from each desktop. However, growth in the number of
mobile devices far exceeds PC growth. In 2013, global mobile data traffic increased by 81 percent,
and the number of mobile devices worldwide grew from 6.5 billion to 7 billion. By 2018, the num-
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ber of mobile devices is expected to reach 10 billion, which will exceed the world’s population.
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Cisco predicts that mobile data traffic will increase eleven-fold between 2013 and 2018. So,
even though the revenue per device may be lower for mobile devices than PCs, the sheer number
of mobile devices may swamp the difference in revenue.
Furthermore, the number of devices is not the whole story. According to Peter Kafka, the
average click-through rate of smartphones is 4.12 percent, while that same rate on PCs is 2.39
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percent. So, mobile users click ads more often and hence generate more revenue. In June
2012, Marcus Moretti claimed, in fact, that for every 1,000 ad impressions, Facebook earned
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$9.86 on mobile ads and $3.62 on Web ads. In 2014, Facebook saw 59 percent of its first quarter
revenue come from mobile ads. 25
However, clicks aren’t the final story either. Because ads take up so much more space on mo-
bile devices than they do on PCs, many of the mobile clicks could have been accidental. Conversion
rate measures the frequency that someone who clicks on an ad makes a purchase, “likes” a site, or
takes some other action desired by the advertiser. According to Kafka, the conversion rate is more
than twice as high on PCs as on smartphones, 5.2 percent to 2.0 percent, respectively. So, at least ac-
cording to one study, PC ad clicks are more effective, on average, than mobile clicks.
Clickstream data is easy to gather, and as we have seen, analyses of it are widespread.
It’s possible, for example, to measure click and conversion rates by type of mobile device.
According to Robert Hof, Android users are far more likely to click and convert on Facebook ads
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than iPhone users. But why? Is it the device? Is it the way the ads are integrated into the user
experience? Is it the user? Are Android users more curious than iPhone users? Or are iPhone us-
ers more discriminating? Or just older and less likely to buy things? We do not know.
What we can conclude from this morass of confusing data, however, is that mobile devices
are most unlikely to spell the death of the Web/social media revenue model. The users are there,
the interest is there, and what remains is a design problem: how best to configure the mobile
experience to obtain legitimate clicks and conversions. The computer industry is superb at solv-
ing design problems; given the current dynamic evolution of mobile interfaces and USX, active,
interesting, and compelling ways of presenting ads in iOS/Android/Window 8 environments are
just around the corner.

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Erick Schonfeld, “Cowen: Google’s Mobile Ad Revenues Could Surge to $5.8 Billion in 2012,” TechCrunch,
last modified January 21, 2012, http://techcrunch.com/2012/01/21/cowen-googles-mobile-ad-revenues-
could-surge-to-5-8-billion-in-2012/.
21 Cisco, “Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2013–2018,” Cisco.com,
February 5, 2014, accesssed May 2014, www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-
networking-index-vni/white_paper_c11-520862.pdf.
22 Ibid.
23 Peter Kafka, “When You Search on Your Phone, You Click on More Ads. On Purpose?,” All Things D, last
modified March 26, 2012, http://allthingsd.com/20120326/when-you-search-on-your-phone-you-click-
on-more-ads-on-purpose/.
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Marcus Moretti, “It Turns Out Facebook’s Mobile Ads Are Clicked On Much More Than Its Web Ads,” Business
Insider, last modified June 19, 2012, www.businessinsider.com/so-it-turns-out-facebooks-mobile-ads-are-
clicked-much-more-than-its-web-ads-2012-6.
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Constine, “Facebook Beats in Q1 with $2.5B in Revenue.”
26 Robert Hof, “Google’s Android Kills Apple’s iOS on Facebook Mobile Ad Performance,” Forbes, June 26, 2012,
accessed July 2012, www.forbes.com/sites/roberthof/2012/06/26/googles-android-kills-apples-ios-on-facebook-
mobile-ad-performance/.