New IDC figures showing Google's share of the mobile ad market are raising eyebrows among market observers that haven't been paying attention to Google's stealth growth in the mobile ad market. IDC reported that Google is on its way to controlling 59% of the mobile ad market. A year ago, prior to its acquisition of AdMob, it had only a 48.6% hold of the market, and many believed it was positioned to lose market share - a sentiment that was shared by IDC as well.
After Google reported it expected its mobile ad business to generate $1 billion annually, IDC revised its numbers. "Google is a lot bigger than we thought," Karsten Weide, a vice-president at IDC told BusinessWeek. Most intriguing of all, IDC estimates that of Google's $1 billion in mobile ad revenues, only about $150 million is coming from apps. The vast majority of its mobile ad revenues can be attributed to display and search ads. (via Paid Content).
Are Apps Cost Effective?
It is too soon to say definitely yet, but these numbers add to the growing pile of anecdotal evidence that apps may not be the money maker - or at least the primary advertising format - earlier expected in the mobile environment. Part of the issue is that, depending on their complexity, apps are expensive to develop and don’t necessarily deliver a straightforward ROI - a situation that doesn’t lend itself to producing inventory for the ads.
Increasingly, companies are coming to the conclusion that their mobile budgets are better spent on optimizing a website, as opposed to building an app. In a recent mobile commerce survey by Adobe, some 80% of businesses across a wide range of vertical industries said they plan to or already have developed mobile websites in the next year, while downloadable, application-only mobile commerce strategy was the preference of only 8% of respondents.
One developer, David Link, creative director at The Wonder factory, told AdWeek that publishing companies spend as much as $500,000 in costs to provide ongoing sales, ad, tech and design support for their online apps. "The problem with apps is, not a ton of people are downloading them," said Martin Walker, a publishing industry consultant. (via Adweek). "It's a very small business at the moment. Apple still owns it and they won't let you sell subs. You can't make money on something where you're selling a few thousand copies."