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As Readers Turn to Smartphones, Publishers Struggle to Monetize the Traffic

26 Feb 2015

Last year, mobile constituted 60 per cent of time spent on digital, up from 53 per cent in 2013, according to ComScore. This mobile explosion is helping spike traffic at media sites. But they're failing to monetize it quickly enough, resulting in a widening gap between mobile readers and revenue. At The New York Times, for instance, more than half its digital audience comes from mobile, yet just 10 per cent of its digital-ad revenue is attributed to these devices. A high-ranking digital-media exec put the broader industry's state of affairs bluntly: "We're looking at an 'Oh shit' moment."


The revenue gap isn't from a lack of ad dollars. In 2015, marketers are expected to spend $28.5 billion advertising on smartphones and tablets in the U.S., a 50 per cent increase over last year, according to eMarketer. By 2018, ad spending on those devices is forecast to reach $58 billion, representing a quarter of all ad spending in the U.S.


"We're seeing significant increase from 2014 to 2015," said Rachel Pasqua, who leads the North American mobile practice at media agency MEC.


So far, however, the bulk of that money is going to digital giants like Facebook, where 69 per cent of the company's $3.6 billion in ad revenue last quarter came from ads shown on mobile devices.


"What you'll notice is that not a single one is a media company," said Ryan McConville, chief operating officer at Kargo, which sells ads on premium publisher's mobile sites. "They're tech platforms. They don't make their own content."


There are several reasons why media companies are struggling to turn their mobile traffic into revenue. Screen sizes allow for fewer ads per page on mobile compared with desktop. "Page for page, if you kept your [advertising] rates completely flat, and you moved a reader from desktop onto mobile, you could literally get four times less revenue just because of the size of the screen," Mr. McConville said.


The ads are cheaper partly because they're smaller, but also because media-buying agencies and marketers haven't wrapped their heads around mobile yet. "A lot of brands and agencies don't have the manpower in house to make sense of it all," said Ms. Pasqua. "It's a matter of time for the industry to get a handle on where they're investing and how."Ad rates are also cheaper on mobile. The cost per thousand impressions, or CPM, ranges from a few cents when an ad is sold through automated ad technology to about $20 for a site wrap on a premium website. But that same $20 ad could fetch $35 or more on desktop.


"It's still largely unchartered territory," she added. "When you have uncharted territory, the knee jerk is to go to the big player everyone is familiar with."


After a slow start in the mobile space, publishers are scrambling to peel mobile-ad budgets away from Facebook. Yahoo, for example, redesigned many of its mobile apps and sites and has automated the sale of its mobile search ads and mobile-native Stream Ads, making it easier to advertise to audiences on the go. Twenty percent of Yahoo's ad revenue now comes from mobile.


The Times' mobile strategy leans on native advertising. It has sold mobile-first native ads to Google, Emirates and Chobani, which sponsored the rollout of the Times Cooking app.


"In mobile, there is one container," said Ms. Kopit Levien. "News is presented in a listlike format and there's not necessarily any point of engagement aside from putting marketers content within that list."


But getting native ads through the edit-driven culture of the Times has been a hard sell. "We knew we were going to a mobile world and our theory was that in a mobile world the marketer would have to be a part of that stream," she said. Of course, the Times generates significant revenue from its readers. Subscriptions have swelled thanks to its introduction of digital-only subscriptions including the mobile app NYT Now.


Publishers without reader revenue are experimenting with other ways to make money from their content on mobile platforms. Last month, 10 media companies including Vice, Cosmopolitan and CNN partnered with Snapchat for the mobile messaging app's Discover, a feature in the app where users can view stories, videos and ads. "The mobile game is moving really fast right now," said Andrew Morse, CNN's head of digital. "We need to be running."

Source: AdAge



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