Roger Entner, Senior Vice President, Research and Insights, Telecom Practice
As the advertising, Internet, and mobile worlds rapidly converge, we need to shift how we look at these various industries and the metrics we use to describe the potential business. What is essential is a different, unified mindset of how to evaluate the opportunity and to compare the various components of the customer value stream.
The giants of the computing and Internet world have provided the mobile advertising ecosphere the legitimacy it was looking for through the acquisitions of Admob by Google and Quattro Wireless by Apple, and the subsequent launch of iAd. Now, we need a better understanding of the revenue opportunities.
Pure valuations or even revenue figures provide only limited insights into the true performance of a company. In the mobile world, ARPU or average revenue per user, is a commonly used metric to compare the various revenue opportunities regardless of the size of the underlying carrier.
ARPU is calculated by dividing quarterly revenues by three to get monthly revenues and then dividing the monthly revenues by the number of subscribers or unique users.
| Q1 2010 | AT&T Mobility | Verizon Wireless | |
|---|---|---|---|
| Total Revenues | $13.9b | $13.4b | $6.67b |
| Data Revenues / Google-owned sites Revenues | $4.1b | $4.5b | $4.44b |
| Subscribers/Unique Users | 86.9m | 87.8m | 156m |
| ARPU per month | $15.73 | $17.06 | $9.40 |
| Source: The Nielsen Company calculations based on company information |
We used Google-owned site revenues because we can determine a unique user count, which we cannot do for the source of the vast majority of the remaining revenues from AdSense.
Now everyone agrees that mobile is at least as attractive as an advertising platform as the Internet. Your cell phone is always with you, is more personal than any other device, and has the ability to integrate location and immediacy. Furthermore, mobile advertising is becoming less hampered by the limitations of the device in terms of screen size and network speed and the difference between the Internet and mobile experience is becoming less and less. At the same time, we are at the very beginning of location-based advertising, couponing or even simple things like dropping a previously opted-in voicemail into our mailbox.
This brings us back to mobile advertising. If mobile is as good or better than the Internet as an advertising vehicle, it is also able to monetize it at least equally well. Google gets $9.40 per month per unique user in revenue from advertising to Internet users. They should be able to get at least the same per month for a mobile customer that uses the device longer, more often, more intensely, and more personally than the computer and the Internet. If we take $9.40 and multiply it by 280 million wireless subscribers in the U.S., the mobile advertising market potential is more than $2.5 billion per month or more than $30 billion per year. Think at least 30 billion reasons why Google wants to buy AdMob for $750 million, at least 30 billion reasons why Apple bought Quattro Wireless for $360 million, and at least 30 billion reasons why others will want to participate in this space – and this is just 30 billion reasons why to do it in the U.S., let’s not forget about Europe, Asia, Latin America, Africa, and Australia.
This article also appears at Fierce Wireless
