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How will Facebook monetize mobile? Its organic-seeming Sponsored Stories ad format may be the answer. Mobile Sponsored Stories are getting over 13 times the click-through rates and earn 11.2 times the money per impression (eCPM) on mobile compared to all of Facebook’s desktop ads, and 1.93 times the CTR and 2.65 times the eCPM of Sponsored Stories on the web in the two weeks since Facebook began selling them separate from web ads.

The data comes from new studies by TBG Digital, AdParlor, and Spruce Media, three of Facebook’s biggest Ads API partners that help brands buy ads. Since Sponsored Stories slip into content feeds so seamlessly, Facebook may actually be better equipped to handle the shift to mobile advertising than other web-first tech companies. Let’s check out the early proof.

Much of the doubt surrounding Facebook’s IPO came from evidence that the social network’s user base was shifting away from the web to mobile, where Facebook only began testing ads in February. On the web users are shown up to seven ads per page and some spend big sums on social games, but on mobile they’re only shown a couple of ads per day and few pay for games on Facebook’s HTML5 gaming platform.

Fears about Facebook’s mobile future are partly to blame for its share price sinking from its $38 opening to around $31.50 today. But earlier this month, Facebook began allowing advertisers to specify that they wanted their ads only shown on mobile, and now the world is getting its first deep look at how Facebook mobile ads perform. The results could make investors more optimistic.

TBG Digital’s CEO Simon Mansell tells me “this is huge news that show mobile is potentially going to be the big revenue driver that Facebook needs, especially because the usage in there.” Here’s the results of two data sets shared exclusively with TechCrunch plus more confirmations from the ad industry.

Facebook Ads Performance: Mobile vs Web

According to a new study by TBG Digital on 278,389,453 Sponsored Story ad impressions across 17 clients, mobile news feed Sponsored Stories (the only ads Facebook shows on mobile) have a stunning click-through rate of 1.14% at a $0.86 CPC. That means Facebook earns $9.86 per 1000 impressions (eCPM), and that could actually rise as more advertisers realize the power of mobile Sponsored Stories and compete for impressions there.

Compare those numbers to the desktop news feed Sponsored Stories that get a 0.588% CTR at $0.63 CPC and earn Facebook an eCPM of $3.72, and Facebook is getting 1.93x the CTR and earning 2.65x as much on mobile sponsored stories compared to what it makes on the web.

And look at Facebook’s desktop ads as a whole, including both Sponsored Stories and the traditional sidebars ads. They’re getting just 0.083% CTR at a $0.88 CPC earning Facebook an eCPM of only $0.74, so mobile Sponsored Stories have 13.7X the CTR and earn Facebook 11.2x as much as its combined desktop ad offering.

Meanwhile, a quick look at a campaign in the tends of thousands of dollars by AdParlor showed that mobile ads have a CTR of 0.821% while traditional Facebook ad campaigns that mostly show up in the web sidebar with some presence in the web and mobile news feed had a CTR of regular ads have a CTR of just 0.032%. That’s a 25x better CTR on mobile. The campaign at gaining new fans for a Facebook page, and while the click-to-fan conversion rate on mobile was slightly worse – 55% on mobile versus 72% across placements – the improved in CTR makes up for it many times over.

Other sources in the ad industry confirm the high performance of Facebook mobile ads. Another Ads API giant Spruce Media told MediaPost that its tests with Facebook mobile sponsored stories have seen click-through rates from .8% to 1.7%, the same range as TBG Digital and AdParlor. This doesn’t seem like users are just clicking the relatively new, three month old ad units out of curiosity. It looks like users are actually perceiving them as content, and are clicking through to learn more about the Pages and apps their friends interact with.

Cracking The Code For Mobile Ads

Attaining such a high click-through rate for mobile Sponsored Stories is game-changing for Facebook, because there’s simply not as much room for it or any service to advertise on mobile.

There’s no space for an ads sidebar and if far too many ads are injected into the content feed, users could get angry and stop browsing. But the impressively high CTR and eCPM mean Facebook doesn’t have to show too many Sponsored Stories to make a ton of money off of them.

And advertisers are lining up to buy them, says AdParlor CEO Hussein Fazal, “By allowing advertisers to show ads only on mobile – Facebook is definitely going to be able to generate more revenue. We have seen a ton of interest from advertisers who want to advertise just on mobile.”

Other social sites like Google+ and Twitter don’t have the scale, social graph, or on-site activity to serve Sponsored Stories that are as effective as Facebook’s. While Twitter and G+’s interest graph can power accurate ad targeting, only Facebook know who your closest friends are thanks to photo tags, wall posts, messages, and more. Its massive time-on-site also produces lots of interactions with brands and local businesses that can be turned into Sponsored Stories ads.

And Facebook is just getting started. Sources say it’s working on a hyper-local mobile ad targeting product that could serve extremely relevant local business ads to users within a few hundred feet of a brick and mortar store. Thanks to the new Facebook Exchange real-time bidding system, Facebook could drive up CPC or CPM prices by getting advertisers to compete to reach specific mobile users, including ones who’ve been retargeted after visiting sites that indicate purchase intent.

Legality is one of the last hurdles to the success of Sponsored Stories. Facebook settled a class-action lawsuit in California last week for using people’s likenesses in ads. It doesn’t currently offer an opt out for Sponsored Stories, but may eventually have to. Still, the setting would likely be buried deep enough to avoid too many people turning the offer the money-maker.

In the last two weeks, Facebook’s stock price has climbed nearly 20%, regaining a big chunk of what it lost since the IPO. Those who bought in at the bottom are looking wiser now. High mobile Sponsored Story CTRs indicate at least some users don’t hate the ads, and wouldn’t rebel if they see more.

Now Facebook has to strike the right balance of how many mobile ads to show. If it succeeds, it could walk the tightrope of the shift to mobile, end up a very rich company on the other side, and generate the returns that so many have hoped for.

Of all the eye-opening stats that analyst and VC Mary Meeker dropped today with her annual Internet Trends report, one of the scariest for marketers and publishers was just how poorly mobile usage is being monetized.

In a world that is rapidly adopting smartphones, tablets, and everything in between, there is a serious disconnect between making money from users of those devices versus users of desktops and laptops. Frankly, it’s a little scary for those who make a living from the web.

First, the good news: People are rapidly adopting mobile devices and mobile Internet traffic is growing quickly. The total amount of Internet traffic coming from mobile now sits at about 10 percent versus 1 percent in late 2009. That means mobile devices are immensely popular and people are responding well to using phones to access web-based content.

And in India specifically, take a glance at just how quickly mobile adoption is overcoming desktop-based web growth.

But — and it’s a big but — the monetization on mobile web and mobile apps is absolutely terrible versus the desktop-focused web. It’s so much of a problem that it almost certainly will affect Facebook’s long-term growth prospects, which is one factor that weighed down its IPO. Also, take note that current comScore projections say the effective CPM per desktop user is $3.50 per person, but eCPM per mobile user is just $.75 per person.

Now, to be fair, mobile monetization has grown over time. Apps have especially have seen their compound annual growth rate (CAGR) rise.

While it’s encouraging to see the value of both mobile apps and the mobile web rise, it’s going to be a tough ride while marketers, publishers, and web-focused companies figure out how to keep those CPM rates going up.

At the All Things D conference today, where Meeker first presented these slides, she did note that some companies, especially Twitter, have done a good job at stepping up their game to monetize mobile.

“It’s early,” Meeker said. “The screen is small and the ad units haven’t been rolled out effectively yet. We’re still early in figuring out local and social, and I think we’re going to get there.”

Top photo credit: koya979/Shutterstock

Slides credit: Mary Meeker, Kleiner Perkins Caufield Byers

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Filed under: mobile

Application developers may start to lose up to 24 percent of advertising revenue as Apple turns away applications using UDID, or unique device identifier, data.

“The move away from UDIDs threatens advertising revenue that many publishers depend on in order to support their content creation and businesses,” said Jim Payne, co-founder of MoPub, in a statement. “It’s clear that Apple needs to address this issue with an appropriate alternative, because the damage to a publisher’s bottom line will likely be material if UDID data actually disappears.”

Advertisers look at UDID data to determine the level of success a campaign may have in a certain app. It can tell you the types of users that will see the ad, and it delivers conversion data on that user (for instance, if an advertisement has caused the user to download a new app). It measures “an ad’s effectiveness and value,” MoPub explained.

Advertisers pay by impression, or who sees the application. Without that data, advertisers are taking a greater risk deploying campaigns. They are unable to tell whether that impression is really valuable, and are thus are less likely to pay big amounts for those impressions. According to MoPub, an eCPM, or cost per thousand impressions, with UDID data could fetch .76 cents, whereas one without the data would only bring in .58 cents.

That adds up and for apps that rely on advertising revenue, this can take a big chunk out of their livelihood.

Apple decided to turn away applications using UDID because of privacy concerns. Individuals did not want their unique identifier being shared with advertisers. And with debacles like Path and other major apps using the address book to gain new users without permission, mobile privacy is in the spotlight. Developers are going to need to find a new way to prove their user quality or risk losing out.

Image via Tom Cheredar

Filed under: mobile

iOS edged out Android in mobile ad marketshare last month, according to a new report from mobile marketing company Velti.

The report is based on data collected from 33,405 apps via the Mobclix Exchange, which Velti acquired in 2010. It says that at the end of 2011, iOS and Android both had 50 percent marketshare, but that iOS pulled ahead in March, with 53 percent marketshare for the month.

March also saw the launch of the new iPad. Apple has already called it “the strongest iPad launch yet,” with 3 million units sold in three days. That’s reflected in Velti’s numbers too — the report says that the new iPad accounted for 2.2 percent of all iPad ad impressions this month, compared to 1.5 percent for the iPad 2 in its first month.

The report also has data on the most lucrative ad formats and apps. Not surprisingly, larger ads made more money for publishers — a fullscreen iPhone ad saw an average eCPM (price paid per thousand impressions) of $1.22, compared to 59 cents for a standard 300 by 50 banner. On Android, the average eCPM was $1.14 for fullscreen and 33 cents for a standard banner. (The difference on the low end reflects “advertiser demand and preference towards iOS,” Velti says.) Weather apps had the highest eCPM ($1.24), followed by education ($1.17) and lifestyle ($0.89).

There’s a certain logic to the concept of spending the most ad dollars in places where people spend the most time. But then, bus shelter ads are effective. People don’t spend a lot of time there, but when they are there, they’re bored and probably more likely to examine the ad than an ad on a flipping magazine page.

Flurry took a look at the Time vs Dollars ratio and here’s what they found:

TV is looking nice and even. Web dollars are catching up to time spent and Radio is balancing out. But look at print and mobile. Talk about out of whack.

It’s interesting, because mobile is slowly becoming print’s replacement. Instead of buying the Wall Street Journal, people read it on their iPad. Instead of reading the TV Guide magazine, they let their smartphones remind them when their favorite shows are on.

But look at the dollar discrepancy!

Mobile, I get. The technology is growing and changing faster than we can keep up, so I’m not surprised that ad dollars are lagging. But why are we still dumping all that money into print? Someone must be making money here or it wouldn’t still be riding that high.

My guess would be advertisers in women’s magazines. From Cover Girl make-up ads in Glamour to Swiffer dusters in Good Housekeeping, these are tried and true and I suspect they’re still going strong.

But the same women who buy those magazines are also pumping up the eCPMs (effective cost per mille /thousands) for mobile ads. Flurry found that women, aged 25-34 bring in an average eCPM of $13, well above the male average of $8.

They also found higher eCPMs from people who earned between $60,000 and $100,000 a year.

Let’s summarize, well-educated, young, upper middle class women are ready and willing to buy things via their mobile device. And yet, mobile is claiming only 1% of the total media ad spend.

The time for excuses is over, my friends. Mobile isn’t a maybe, it’s the future of marketing.

Some of you may know that my company is pretty heavy into iPhone development and Android development – but we also have some very popular apps that we sell or give away in the various markets. We have tons of Jewish iPhone apps (and some non Jewish iPhone apps) and also some Android apps.

Many of our apps are free, and some of the free apps are monetized with ad networks. I’ve been testing some of the larger ad networks for a long time now, including Google AdSense for Mobile Apps, AdMob (which has now taken over for AdSense since Google acquired them) and Apple iAds.

So when I heard Apple dropped the price for advertisers to participate in iAds, I was happy. The volume is not there and the earnings are not there also. Previously, Apple required a minimum ad spend of half a million dollars, Apple dropped that to only $100,000, which is still huge compared to virtually no requirement with Google’s AdMob. So I am hoping this is a step in the right direction for Apple and iAds – I’d love to see it more self service and thus yield more ad inventory and hopefully a higher eCPM.

Since we have started with ads in our apps, we used both iAds and Google ads. A few weeks ago, our Google AdSense ads stopped working completely. Google AdSense was paying us well, a eCPM of about $2.50. It was out performing Apple iAds at about $0.70 eCPM and doing much better than my tests with AdMob earning under $0.40 eCPM.

The issue is, now AdSense is not an option and our earnings have dropped.

In any event, Apple said they have increased the revenue share to 70 percent, which is just about what Google AdSense gives, a little higher actually.

Do you monetize your apps with ads? What works for you? Please no spam.

Forum discussion at WebmasterWorld.

Dale Carr is CEO of Los Angeles and Sydney, Australia-based ad network LeadBolt.

Android developers are getting just 7% of the revenue that Apple iOS developers are getting, according to a recent article that quoted research by Piper Jaffray. The article’s premise was that developers will obviously go where the money is, so Android will continue to struggle when it comes to drawing in more developers. This got me really thinking … could this be right? If it is, who are all the developers on my company’s ad network?

It really is amazing what you can do with statistics.

First, the 7% statistic relates to revenue earned from the sale of apps, so it doesn’t include ad revenue. Second, it uses revenue numbers from the life of Apple’s App Store, which has obviously been around a lot longer and is much further up the growth hockey stick than Android.

Some more stats to confuse the issue:

According to research by Inneractive, click-through-rates (CTR) on iOS are more than double what they are on Android, but the cost-per-thousand (eCPM) is only 30% higher. This would indicate that Android developers are getting more bang for each click. Combine this with another recent statistic that Android generates twice the ad impressions of iOS and you have Android earning more in real dollar terms from ad revenue.

So, perhaps a more considered approach is required in comparing the revenues developers make off the two platforms.

Apple has built a closed ecosystem. It heavily regulates the App Atore and does not look favourably on revenue generated outside of this environment. Ad revenue is the major hole in its “atmosphere”. It cannot, for obvious reasons, close the hole. It has tried to be part of the leakage through iAds. Given its current mindset, it is in Apple’s interest to control this outflow from its incredibly full bucket.

On the other side you have Android. Open source, open environment, open market. Added to the mix is that Google, the developer of the Android platform, is an advertising company. Wouldn’t it be in Google’s interest to ensure the ad revenue floodgates open as wide as possible?

The last piece in this puzzle is to look at monetization trends. Almost 90% of all apps that are downloaded are free and involve no in-app monetization. In fact, according to Distimo, growth in the top paid apps for the 12 months to July was only 7% compared to 34% for the top free apps. Apple’s recorded revenue comes from a slowing trend for paid apps, while 72% of its revenue is from the 4% of apps with in-app purchase models (note: in-app purchases were only introduced to Android Market in March).

While Apple continues to limit revenue outside of its ecosystem, the continuing proliferation of smartphones (at increasingly lower prices) and therefore the increasing number of app users who will not pay for that usage, means that Apple apps will be forgoing a growing monetization segment. In contrast, Android’s open environment, and the ability for developers to use premium ad methods may mean that Android developers are in fact following the money.

Filed under: dev, mobile

Depending on who you ask, there are anywhere from 10-20 billion display impressions available globally each day for demand-side platforms (DSPs) and their clients to purchase on real-time bidding (RTB) sources like ad exchanges and supply side platforms (SSPs). On top of that, some DSPs have now enabled buying of other types of media, including premium display, social, video, and mobile, bringing the total addressable ad inventory closer to something like 30 billion daily impressions that can be serviced through the execution and decisioning layer of a DSP.

Let’s put that in the context of a single advertiser. For easy math, let’s say a display campaign spends $100,000 per month, or a little over $3,000 per day. At an eCPM of say $2.00, that’s a little over 1.5 million impressions per day, or roughly 0.01 percent of the total available supply. Even if you tweak the assumptions above to be 10 times higher or lower, the bottom line is that a typical campaign is buying an incredibly small fraction of what’s out there. But with such a small fraction to play with, how do you ensure that you’re getting only the very best-performing impressions and audiences for your budget, and not simply an average cross-section of the total, or worse, a below-average one?

You can start with retargeting, which we all know works, but has limited scale. But what happens after you’ve remarketed the consumers who are already engaged with your brand and products? How do you bring new customers into the conversation? How do you get new prospects to convert? In short, how do you decide which 0.01 percent of the unwashed mass of impressions is the right 0.01 percent for your campaign?

This article introduces four important concepts and folds them together into a framework designed to pinpoint that 0.01 percent. As any data modeler knows, being able to single out the top decile, or in this case the top hundredth of a percentile, generates massively disproportionate returns. It’s no different here.

Impression Quality is a measure of how effectively an impression delivers the action desired by a particular buyer, be it a positive brand response, a click, a purchase, or even ROI. When I say “impression” I don’t just mean the blank space on a website waiting for an ad to show up. I mean that blank space, combined with the creative that is served into it, combined with the media in which it sits, combined with the user who is going to see it. The sum of all those things — media + creative + user — is an impression. Mathematically, the impression quality is an algorithmic prediction of how likely the user is to take the action desired by that buyer on that impression, relative to all other impressions.

For example, if a buyer’s goal is to drive purchases, and a particular impression is predicted to have a response rate of 10 percent per 1,000 impressions, versus a campaign average of 2 percent, that impression has an impression quality of 5.0. The impression quality prediction is based on dozens if not hundreds of variables describing the creative (offer, message, image, etc.), the media (site, content category, ad size, ad placement, time of day, day of week, etc.), and the user (via any number of cookie-based and non-cookie-based user variables).

Impression quality is incredibly important because it separates the wheat from the chaff — the quality impressions that drive high user action rates, from the low-quality impressions that don’t. And since it depends not just on the media, but on the user who is seeing the ad and on the creative served, the very same impression could have high quality to buyer “A” (because that user is buyer A’s ideal target consumer and that publisher has relevant content to buyer A) and low quality to buyer “B” (because that user is not buyer B’s target, nor is that publisher relevant to buyer B).

The same impression could even have different quality to a single buyer, depending on which creative the buyer chooses to serve (e.g., because the user is more likely to take action on creative 1 versus creative 2).

High impression quality often comes at a high price, but not always. Imagine you place a certain ad on the homepage of a certain website and show it to a certain user at a certain time. That ad will have a certain click-through rate or response rate, or whatever “action rate” the buyer cares about, regardless of what the publisher happened to charge for it. Whether it was a $20 CPM, $2 CPM, or a free impression that was part of a “make good,” the intrinsic quality and performance of that impression is actually the same. Price doesn’t cause impression quality, but it does correlate because some of the media characteristics that drive high ipression qality happen to be the same ones that publishers charge higher prices for. That said, much if not most of the information that goes into calculating impression quality is only known by the buyer. Just as beauty is in the eye of the beholder, impression quality is specific to the buyer, which is why it’s critical for buyers to have the algorithmic capability to calculate it, for billions of impressions a day, in real-time.

Buyer Value is the dollar value that a specific impression is worth to a specific buyer, and it’s a function of both the impression quality and the buyer’s goals. In essence, it translates the impression quality into a CPM. Mathematically, buyer value is simply equal to the predicted user action rate multiplied by the buyer’s goal value.

For example, if an impression has a predicted 2 percent response rate per 1,000 impressions, and the buyer’s goal is a $75 CPA, that impression has a buyer value of $1.50 CPM. A different buyer, running a different creative, will have a different predicted action rate and a different goal value, resulting in perhaps a $0.10 CPM buyer value, while a third buyer with their creative, predicted action rate, and goal value may have a $7.75 CPM buyer value — all for the same impression. That’s why publishers actually have very little insight into buyer value — like impression quality, it’s primarily a function of factors that are specific to each advertiser.  And since it’s related to impression quality, a sophisticated algorithm is required to accurately determine buyer value.

Market Value is the predicted price at which an impression is likely to clear in an RTB auction. Unlike Buyer Value, it isn’t dependent on any single buyer, but rather on the interaction of all participants in the RTB marketplace. Mathematically, it’s a prediction of the price at which an impression will clear, with a certain probability. For example, for a certain impression, on a certain site, a $5.00 bid will win 94 percent of the time, a $3.00 bid will win 68 percent of the time, a $1.00 bid will win 40 percent of the time, etc. Of course, it’s not just a function of the site, but of many other variables like ad size, position on the page, time of day, and dozens of other variables. In contrast to Buyer Value, publishers do know the Market Value, because it quantifies the price at which their impressions clear, and at which they get paid. Buyers can easily know it too, down to the impression level, if they leverage an algorithm that can accurately predict it based on the myriad variables that characterize every impression.

And finally, Relative Value quantifies the gap between what a single buyer thinks an impression is worth (which governs the bid price), and what the rest of the market thinks it’s worth (which governs the clearing price). Mathematically, it’s simply a ratio of the buyer value to the market value. In other words, the larger the relative value, the more that particular buyer values the impression over the market, and hence the greater the value to the buyer. It’s important to note that the relative value of an impression is not necessarily a reflection of price; it’s the relative comparison of the buyer value to the market value that matters. A relative value of 3.0 could mean a buyer value of a $0.30 CPM versus a market value of a $0.10 CPM, or a buyer value of a $12 CPM versus a market value of a $4 CPM. As we’ll see in a moment, the latter is much more interesting.

So what does this all mean? Let’s take a look at the graph. It’s a simplified 2×2 representation of impression quality versus relative value. Think of it as effectiveness (impression quality) versus efficiency (relative value).

The shading indicates how the universe of available RTB impressions populates the graph. Darker areas contain more available impressions in the RTB landscape, while lighter areas contain fewer impressions. Let’s take a look at each quadrant of the graph:

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Er wordt veel onderzoek gedaan naar de smartphone & tablet markt, en dus worden er ook veel infographics over gemaakt. In deze InfographicMonday een selectie van een aantal interessante infographics over smartphones & tablets: het verschil tussen Android en iOS wat betreft eCPM & CTR, en in hoeverre maakt het daarbij uit of de gebruiker man of vrouw is? Daarnaast zoomt een infographic van ClickZ in op de tablet markt, zo laat onderzoek van IDG zien dat 80 procent van de tabletmarkt in handen is van Apple’s iPad. Lees meer over: InfographicMonday: Mobiele eCPM & CTR, QR codes en kosten van mobiel internet.