Programmatic Lunch

Something Ventured, Nothing Gained? – CMAL Consulting

Alex Spencer

Christian Louca, director of CMAL Consulting, argues that we need to make a change to the mobile ecosystem, if we want to avoid another dot-com bubble burst.

We have come a long way since 27 October 1994. That was the day that the first ever online banner ad ran, for AT&T, on Hotwired.com. Over a four-month period, 44 per cent of those who saw it clicked on it.

These are quite remarkable statistics in comparison to today, where 0.5–1 per cent of people are likely to click on an ad. Meanwhile, there were 615m devices blocking ads worldwide by the end of the last year, according to PageFair, with 308m of those on mobile. Growth of ad blockers is expected to continue across Asia, North America and Europe this year.

At this point, alarm bells should be ringing for anyone investing in mobile.

We are currently in a period of rapid technological advancement in many areas, but it is the commercialisation of mobile as a marketing channel that is leading to the greatest expansion of capital growth since the 1990s.

The bubble
There is currently an abundance of venture capital funding for startups in this industry, and a dearth of them actually turning a profit. The situation is really no different to the early dot-com days. We are guilty of building a culture where far too often the focus is on the next billion-dollar business and not enough on building real business on solid foundations.

There are stories sold to investors to attract funding, but the reality of the market is often distorted in the process. Meanwhile, there is often pressure from investors to generate a return in an unrealistic timeframe. This puts negative pressure on businesses that can ultimately send them down an unwanted path.

This is a relatively young industry. The earliest advertising on mobile was in 2000, via SMS, but arguably mobile banner advertising wasn’t serious until the release of the iPhone in 2007. If we take that as the base, then the industry is only 10 years old. Right now, there is simply not enough understanding of this space among the venture capital community.

It’s important to remember that razzle-dazzle acquisitions – like AdMob and Amobee in the early days, and more recently Turn – are the exception rather than the rule. There is certainly money to be made, but more of a reality check on timeframes and potential returns is needed.

Making progress
We have an industry that is driven by an almost obsessive need for smartphone connectivity across the globe. However, we still largely have an old-fashioned way of advertising to the connected generation, hence the inevitable actions of those now resorting to ad blocking.

We need to wake up. If ads weren’t irritating, and instead were adding value to people’s lives, they wouldn’t block them.

People generally understand that they get online services for free because of advertising, but they don’t want those services being interrupted by annoying, irrelevant experiences. This is where we need more innovation and more focus on delivering contextually relevant seamless ad experiences, instead of the ‘me too’ technology which is fuelling the bubble.

For this industry to fulfil its potential, and not face another dot-com crash, we must resolve industry problems such as viewability, fraud, brand safety, transparency and privacy. But let’s put the consumer first, and clean up in the process.

Everyone in the industry, from the passionate people working on the ground all the way up to the investors, has a responsibility to make sure they are investing and building an exciting digital future – one where everyone benefits.

This article first appeared in the June 2017 print edition of Mobile Marketing. You can read the whole issue here.

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