MoComment: The Money in Mobile Advertising CPMs

[by Chetan Sharma] At least half a dozen press releases popped up during the writing of this book claiming a $50 or $60 and higher CPM rate for mobile ads. A brief look back at Internet advertising from 1998 to 2002 shows that a $50 CPM, or anything near it, is not defensible for very long. For the CPM model to work at any price point, even in the short term, these networks need a critical mass of advertisers willing to spend branding (versus direct marketing) dollars on a new, untested medium that will appear in a wide range of content. That is going to be difficult, if not impossible, to find. Since the agency ecosystem is rooted in print and TV, it is also anchored in CPMs and GRPs (gross rating points). For the near-term future, CPMs probably will determine the ratio of dollars spent in mobile. But the ecosystem is being yanked into the digital world with more transparent ROIs that gauge new levels of consumer interaction and impact. Outcomes need to be tied to more than just the theory of eyeballs in the living room. Lots more in extended entry….

Assuming for a moment that the mobile ad networks can find enough advertisers, it will increase the attraction for publishers to run ads on their networks, adding more inventory and depressing prices. In addition, web-based interactive agencies were already burned once by ad networks with prices above a $30 CPM. It is likely that the entire mobile CPM model will shrink, as it did on the Web. In both the PPC (pay per click) and CPA (cost per acquisition) models, more responsibility is put on the content providers, insulating advertisers from some risk until the consumer clicks toward a transaction or sale. However, the implementation and success of CPC and CPA models rely on huge impression volumes, an ad sales system more scalable than is required for CPM models, and a mobile infrastructure capable of monetizing consumer clicks or actions. All these are a long way off for mobile advertising. As noted by Larry Shapiro, VP of Disney;

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