Editor’s note: Location is key to monetizing mobile ads, ThinkNear chief executive Eli Portnoy wrote in a guest post for us yesterday. Now James Hritz weighs in with some further thoughts on the matter, focusing on how app publishers view the matter. He’s a veteran monetization specialist who worked at Fox for years, and is now the Vice President of monetization at Tunewiki.
Interesting and thoughtful mobile monetization article by Eli Portnoy.
Sure, Eli speaks a lot of truth about the current state of advertising in mobile and for advertisers, geo-targeted local ads seems like nirvana. The real challenge is going to be for mobile publishers and the nature of their inventory. Aside from the largest publishers in mobile (read billions of impressions per month and there is only a handful of these guys), local ads are generally a tough proposition because most publishers simply do not have large enough volumes across cities, zip codes, or lat/long coordinates to make demand from local advertisers pay off.
Lets say you have an app with one million US daily active, you’d be surprised by how much of the DAUs reside in a very long tail of locations. Perhaps the first few hundred thousand reside in places like New York, Los Angeles, Chicago, etc.(major population centers/designated market areas), but then after that the number of locations skyrocket and the DAUs per location shrink rapidly. Also, the typical app only generates so many impressions per user per day through usage.
So, that means the publisher has a a limited number of chances to match that user with an ad that is relevant to them even if the geo is spot on. This opportunity only gets smaller the lower the DAU/MAU ratio of the app. This means for apps like utilities, that users only use once in a while (low DAU/MAU ratio), it may not be the least bit practical to use local ads as a source of demand for inventory.
Local ads, like most other types of performance based ads, often need minimum volume levels before they start to perform and normalize around the averages. For many apps, the local campaigns just won’t be able to get enough volume to perform as well as garden variety CPC ads for things like games. This puts the publisher in the position of having to waste lots of impressions before ever seeing revenue from local ads.
So, local ads and their potential sound great in theory, but it may be only a small sliver of the app publisher universe that can ever truly make money off of them.
[This post was originally published on Quora. Image via ]