Apple's iAd Shooting for the High End in More Ways than One

The conventional wisdom likely is that the new Apple iAd network is going to be positive for mobile advertising, showcasing what can be done with rich media on an easy-to-use device with a large screen.

But iAd might have another effect: driving up ad pricing double to triple current rates. That might be welcome for ad sellers, but not for buyers.

Since Apple never likes anything but the "premium" position in any market where it competes, that might not be too surprising.

According contentSutra, iAd cost per thousand impressions will be highly variable in terms of cost, but in some cases could wind up being triple what marketers are used to paying for banners, and double the price of a video ad on mobile (click on the image for a larger view).

In other cases, a very successful campaign that generates an unusual number of clicks could wind up being more than seven times what an advertiser had anticipated.

Keep in mind that Apple is setting the minimum annual spend at $1 million for brands to use its iAd platform. To put that in perspective, consider that Jaguar and Land Rover in 2009 spent about  $1.6 million in aggregate for mobile marketing.

Some advertisers might decide they like the iAd formats, and start shifting lots more money into mobile advertising. Others will push back against the price and take a wait-and-see attitude. Either way, iAd is going to have complex impact. It likely will spur larger mobile advertising commitments from some buyers more concerned with cutting edge than return on investment. Most will watch and see what happens, at least in terms of the high-end, showcase content Apple wants to show it can produce.

Clearwire Says It Has 3 Customer Segments

Clearwire says three customer segments already have emerged for the firm's fourth-generation wireless network. "A Clear customer is often a cord-cutter," says Clearwire CEO Bill Morrow. "This customer has a mobile phone, but no fixed line phone in the house." That customer fits the profile of an on-the-go user that wants broadband available outside the house.

"They also probably don't have cable TV service," he says, and tend to substitute Hulu, YouTube or other video sites for TV. It probably goes without saying that this sort of customer is single and younger, without children.

The "cable customer," on the other hand, "can't cut his Internet connection at home," says Morrow. That is because this second sort of customer has a family sharing a single at-home video entertainment connection, as well as a broadband Internet access connection.

In this segment, the 4G wireless service is part of a triple play package.

The third segment consists of mobile customers served by Sprint that wants to add a broadband access service for PCs and other devices, and for whom the convenience of having both mobile phone and broadband access services on the same bill, provided by one carrier, is valuable.

"When you go into the market you see all these different customer segments and it's easy to see that you can get more subscribers in total by marketing to different groups instead of just having one brand," says Morrow.

Clear customers do use much more bandwidth than the typical 3G user, though. "We're finding that customers are using on average 7 GBytes of data per month on our service," says Morrow. "The average amount of data a 3G subscriber uses a month is about 1 GByte to 2.5 GBytes a month.

It is not certain why this is the case. It could be that heavy users are attracted to the unlimited access, with no monthly caps. It could be that knowing there is no cap motivates usage, as broadband leads users to consumer more data than they do when on a dial-up service.

Why Wireless Might be the Best Way to Serve the "Unserved"

A new study produced by the Federal Communications Commission might be interpreted as arguing for a wireless approach to bringing broadband to many unserved locations, said by the FCC to number seven million homes, adequate for service at 4 Mbps downstream and 1 Mbps upstream.

The most rural 250,000 housing units account for $13.4 billion of the total $23.5 billion investment required. In fact, as cost varies inversely with density and distance from a central office or cable headend, the cost curve is a reverse Pareto distribution (a reverse "long tail").

The FCC says wireless, such as a fourth-generation wireless network, is the lowest-cost technology in 90 percent of cases. The point is that population density generally is inversely related to access cost.

Apps or Mobile Web? It is Going to be a Toss Up

Today most mobile applications for smartphones are downloaded from “app stores.” According to ABI Research data, in 2009 consumers downloaded some 2.4 billion applications from such stores, and the download rate will accelerate over the next few years until in 2013 smartphone downloads are expected to peak at just below seven billion.

So you might be wondering whether this implies a decline of interest in mobile apps. Not really. What the forecast implies is that there will be other ways to get and use applications, namely using a mobile Web browser.

After 2013, smartphone download rates from app stores will start a slow decline, although total downloads from all sources will probably continue to grow, ABI Research believes.

ABI argues that more and more people will start visiting mobile websites authored using HTML5, which will mean applications can be run natively from inside Web pages where today external apps might be required.

Moreover, handset makers and service providers will pre-install apps on their products, such as social networking apps and some mobile office suites, removing the need for downloading those kinds of applications.

“App stores aren’t going away," says ABI Research Senior Analyst Mark Beccue."Following the 2013 peak in demand, the number of downloads in 2015 will have decreased only seven or eight percent."

But users will be able to gain the value of apps using their browsers.

Also, it is conceivable that mobile network operators will host their own app stores. Many observers think such efforts will enjoy only modest success, but there is one notable area where huge success could be possible.

If operators concentrate on providing downloadable apps to feature phones, that could be a big factor in newer and developing markets where smartphone penetration is lower.

80% U.S. Smartphone Penetration by End of 2012?

Is it possible 80 percent of U.S. mobile phones in use by the end of 2012 could be smartphones? The answer is "yes."

To get there, one would only have to assume that current use rates of mobile browsers are a solid indication of current smartphone use, that current rates of usage will grow at current rates of nine percent every quarter through 2011, and then will increase one percentage point faster during each quarter of 2012.


U.S. mobile users increased their use of browsers, downloaded applications and social networking at about a nine percent rate each during the first quarter of 2010, according to comScore. At that rate, by the end of 2010, 39 percent of mobile subscribers will use browsers, 38 percent will be using downloaded applications and 25 percent will be using social media.

If that rate continues throughout 2011, by the end of that year 55 percent of mobile subscribers will be using browsers, 53 percent will be using downloaded applications and 35 percent will be using social networking.

In an average month during the January through March 2010 time period, 64 percent of U.S. mobile subscribers used text messaging on their mobile device, up 0.6 percentage points compared to the fourth quarter of 2009.

Browsers were used by 30 percent of U.S. mobile subscribers, up three percentage points over the fourth quarter of 2009. About 29 percent of mobile users downloaded applications, up three percent from the fourth quarter of 2009.

Some 19 percent of mobile users used social networking sites and blogs in the first quarter of 2010, up three percent over the fourth quarter of 2009.

So the issue is what would be different about your life or your business if 80 percent of mobile users are on smartphones by the end of 2012, and those smartphones can download at speeds between 3 Mbps and perhaps 12 Mbps, and can upload at speeds from 1 Mbps to perhaps 5 Mbps.

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Algorithmic Trading Broke, Then Fixed, the Market

Yesterday the stock market dropped almost 1,000 points intraday before rebounding almost as quickly. Algorithmic (computer-to-computer) trading is blamed, but it might be worth pointing out that algo trading also fixed the market, just about as fast as it "broke" the market in an anamoly.

Right now, securities exchanges are looking at particular equities that might have been affected by the abrupt drop and are going to cancel the trades. The other thing is that few actual human traders actually were able to react quickly enough, one way or ther other. It appears execution platforms became overloaded and wouldn't place buy or sell orders in any case.

There also were liquidity issues. For every seller, there must be a buyer. It appears that in many cases there were no buyers to be had, so abrupt was the plunge. Liquidity, in other words, evaporated.

But algo traders apparently were able both to execute "sell" and then "buy" orders fast enough to clear about 600 points of movement within about five minutes. The conventional wisdom was that a misplaced large order triggered the abrupt declines, which triggered the other trading algorithms.

It might also be fair to note that those same automated trade programs also erased the anamoly within 30 minutes, which shell-shocked humand mostly gaped in awe at something most likely had never seen.

The sheer snapback of the price in such a short amount of time was not driven by fundamental traders (humans) who all of a sudden found “value” in the market with a trailing P/E. The only sort of quick analysis that provides that kind of price action are done by non-humans at quantitative firms, and they saved the market from something much, much worse.

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Sprint HTC Evo on June 6?

The latest rumor about availability of the Sprint HTC Evo is "around June 6, 2010." Reportedly the device will reail for about $200 on a two-year contract, and as much as $600 if you want to buy it without a contract.

Some policy advocates think such contracts impair consumer welfare because they make it hard for consumers to switch whenever they feel like it. One simply should note that any consumer can buy a device at full retail price if that is what they prefer.

Most consumers keep demonstrating, though, that they prefer $200 devices and contracts, compared to $600 devices without contracts. If you don't want a contract, don't buy one. Most consumers can figure out that a $200 subsidized phone provides real value.

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