Daniel Solden, CEO of MobAd, argues that direct response outperforms brand advertising on mobile. 

In days gone by, Mad Men ruled the roost and advertising was a cross between art and a dream. More recently, however, a new more tangible way of spending ad budget has emerged.

While the value of a truly creative and dynamically executed brand campaign lives on, as proven by the consumer goods companies, P&G & Unilever, and movie studios able to make money even when a film flops, the new school of advertising – quantitative – is starting to gain force.

Amazon is a case in point – one of the strongest brands in the world decided early in its life to run a 16 month $50m TV advertising test. A year later, in 2003, Jeff Bezos, Amazon founder & CEO told the New York Times: “Amazon was unbelievably fixated on it, it was a long expensive test, but we were really determined to understand this for our company once and for all.” Bezos concluded that while the television campaign did give Amazon a slight bump in sales it wasn’t enough to justify the cost.

Likewise, Neflix CEO, Reed Hastings said that he found TV advertising too expensive as a lot of the people “who see the ad don’t use the web at all, and therefore can’t use your service.”

Mobile advertising
So what of mobile advertising? The industry can be split into two schools of thought:
Brand campaigns running rich media creative on high CPM (cost per thousand) premium inventory.
Direct response campaigns running simpler creative on lower cost inventory.

At first glance, many would argue that brand campaigns employing beautiful and engaging creative should outperform direct response campaigns by capturing the user’s attention and creating an indelible brand reference in the consumer’s mind. However, in reality, a brief look at the numbers from a typical campaign quickly dispels that myth:

Brand campaign – Budget: $100,000; CPM: $10 – $30. 5,000 downloads = $20/download

Direct response campaign – Budget: $100,000; CPM: $0.20 – $2.00. 50,000 downloads = $2/ download

On mobile there are three significant reasons why direct response outperforms brand from an ROI point of view:

The additional cost of running a brand campaign is not justified, as contrary to popular belief, users don’t actually care about your banners, just the product! A simple way to prove this is by asking people what banner they clicked on to download Candy Crush Saga! Who remembers the banner?

Efficient campaigns are those that reach the intended target audience in the most cost-effective manner possible. Spending 10X more on the advertising cost can only be justified if the campaign performs 10X better on a per-impression level.
The viral effect (word of mouth) is likely to be far greater when looking at 50,000 new users than 5,000. Interestingly, the driving principle behind Amazon’s marketing strategy is Bezos’ belief that customers drive sales.

Mass-market appeal
MobAd sees this first hand on a quantitative level. Depending on the quality of an app and mass-market appeal, the advertising data changes dramatically, lowering cost per download, increasing average revenue per user, and most importantly, increasing the viral factor, i.e. the number of new “organic” users that are generated in proportion to a paid media campaign.

Some apps which have reached critical mass – such as Candy Crush Saga – are now so well-executed, enriching, and popular, that it is very easy to drive an incremental download (from paid advertising) as the snowball effect means the eCPI (cost per install) keeps getting lower and lower – until the app reaches its end of life.

Daniel Solden is CEO of MobAd