Mobile Advertising Grows 79% in 2010

Some people might say an upside surprise for mobile advertising spending in 2010 means that mobile marketing has broken through to reach the mainstream of digital advertising in 2010. Others would be happy to note the unexpected growth, even if it is still a bit premature to call mobile advertising "mainstream."

This year, U.S. mobile ad spending will be up 79 percent to reach $743 million, eMarketer now forecasts. That growth will slow somewhat to still-dramatic double-digit rates as spending hits over $1.1 billion in 2011 and more than $2.5 billion by 2014. 

Earlier estimates had called for 2010 growth to perhaps $570 million. 

For now, however, text messaging still is the largest channel, with spending of $327 million estimated for 2010. But growth is fastest for video advertising, mobile display and mobile search.

Still, $743 million is a fraction of all U.S. advertising. That is a market worth about $170 billion, so it is a bit premature to talk about how "mainstream" mobile advertising or mobile marketing has become. 

Online advertising is still about 12 percent of total advertising. If you are looking for where the growth is, online and mobile are good bets. But if you are looking at where organizations and businesses spend their money today, mobile would not be one of the largest buckets.

Mobile Ad Spending Up Nearly 80% in 2010

60% of Office Workers Say They Don't Need Their Offices

 A new study funded by Cisco found that 60 percent of workers around the world believe that they do not need to be in the office anymore to be productive. This was especially the case in Asia and Latin America. More than nine of 10 employees in India (93 percent) said they did not need to be in the office to be productive. This sentiment was extremely prevalent in China (81 percent) and Brazil (76 percent) as well.


In fact, their desire to be mobile and flexible is so strong that 60 percent of workers would choose jobs that were lower-paying but allowed work outside of the office over higher salaried jobs that lacked such flexibility. 


According to the study, which involved surveys of 2,600 workers and IT professionals in 13 countries, 13 percent of respondents noted that having the flexibility to work anywhere would dictate their company loyalty, while 12 percent said it would have an impact on their choice of jobs. In fact, two-thirds of respondents said they would take a job with less pay and more flexibility in device usage, access to social media and mobility over a higher-paying job with less flexibility.

A Whale of a Problem

The stage now is set for huge conflict between state public-sector workers and taxpayers, and the reason is pension obligations.

Because almost all states are required to balance their budgets, general fund monies must be used to pay pension obligations if the pension funds come up short. They certainly will do that. The funds are generally underfunded, and make assumptions about fund returns that simply are not credible.

Utah has calculated it will have to commit 10 percent of its general fund for 25 years just to pay for the effects of the 2008 stockmarket crash, for example.

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States use the expected return on the assets in their pension funds as a discount rate. This is often around eight percent, and reflects the performance of the past 20 to 30 years.

However, such returns will be hard to come by in future. Given current bond yields of two percent and a typical portfolio with 60 percent  in equities and 40 percent in bonds, a total return of eight requires a return of 12 percent on equities.

With American equities yielding just two percent to 2.5 percent, that in turn would require dividends to grow by nine percent to 10 percent a year.

That simply is not plausible. In a state such as Colorado, nearly 55 percent of all funds will have to be spent on pension obligations, effectively reducing the amount of money available to fund on-going operations by fully half....IF investment returns come in at an overall eight percent.

That isn't going to happen. Nor do these forecasts take into account financial "black swan" events that destroy huge amounts of equity.

Who would bet that between now and 2022  there will not have been at least one major financial event that wipes out huge chunks of pension plan equity?

These forecasts are not realistic. Colorado will wind up spending most of its general fund revenues to pay pensions, unless something quite dramatic happens, and quite soon. That is not a "political" issue. It is a simple mater of public finance getting severely out of whack. Something will have to be done, and it won't be pleasant.

Either we get an unpleasant fix, or we decide now that in 12 years there is no money to fund on-going state government services.

The Value of an Existing Customer

In most cases, the value of an existing customer is much higher than the value of a newly-acquired customer, for a number of reasons.

(click on the image for a larger view, once to open, and then click on the image again and it gets large enough to read easily)

It is, for example. six to seven times more costly to gain one new customer than to retain one existing customer, Flowtown argues. Also, boosting customer retention rates by five percent can boost profits from five percent to 95 percent.

The Value of an Existing Customer / Flowtown (@flowtown):

Embedded Devices Haven't Sold That Well, AT&T Says

In business and politics, there often are several ways to interpret virtually any public statement, and some comments by David Haight, AT&T vice president of product development for emerging devices, is probably one of those.

On one hand, AT&T itself has had modest success selling "embedded devices," typically netbooks sold at a discount with a two-year mobile data plan costing up to $60 a month.

3G-enabled laptops haven't sold all that well for several reasons. The cost difference between a device that uses Wi-Fi-only for connectivity, and a version using mobile broadband is too great, they're hard to find in stores, and service plans are just too expensive, he argues.

Users are able to figure out on their own that getting at $100 or $200 discount on a $300 device, but then having to pay $60 a month for two years, is not such a great deal. Sure, the user gets $100 or $200 of value upfront, but then pays $1440 over two years in service fees. With the growing availability of "free" Wi-Fi hotspots and at-home and in-office Wi-Fi, that might not seem such a great deal.

AT&T obviously has found, in introducing "no contract" and lower-priced access plans for Apple iPads, that consumers prefer both the absence of contract commitments and lower recurring prices.

AT&T might also be signaling its belief that Verizon Wireless will have little luck bundling iPads with MiFi service, since that is basically what AT&T had been trying to do with its embedded devices. Verizon hopes to prove AT&T wrong, offering plans ranging from $20 to $50 a month.

AT&T Exec: New Laptop Service Plans, More Tablets Coming

Groupon Social Coupons Unprofitable for a Third of Marketers

About a third of the merchants extending Groupon discounts say they have lost money on the deals, a study by Rice University’s Jones School of Business found. Which is to say 70 percent of offers did generate a profit for the firms offering the deals.

The study of 150 businesses running Groupon promotions between June 2009 and August 2010 found that those coupon campaigns were unprofitable for 32 percent of the businesses that ran them. And more than 40 percent of the response group said they would not run another social coupon promotion again.

According to Jones School associate professor Utpal Dholakia, the author of the research, the profitability of a coupon promotion can be measured by two main criteria: whether customers redeeming the coupons spent more than the Groupon amount, and what percentage of those customers came back again to shop without a Groupon offer.

Those survey respondents who said the Groupon campaigns had not been profitable for them reported that only about 25 percent of redeemers spent more than the face value of the coupon. They also said that about 13 percent of those coupon holders came back a second time to shop at full price.

One way to look at matters then is that even when an unprofitable promotion has been run, about 13 percent of customers came back to buy again, paying full retail prices. Whether that is worth doing or not depends on the offers being made. But a campaign that provides sales lift of 13 percent does not, on its face, seem a bad investment. It all depends on how the offers are constructed.

Groupon Social Coupons Unprofitable for One-third of Marketers

Verizon Wireless to Offer $15 Data Plan

Verizon Wireless plans to introduce a less expensive, $15-a-month data plan for smartphone customers, the Wall Street Journal reports. 

The  plan gives customers 150 megabytes of data. Customers who exceed the monthly limit will be charged extra. Verizon Wireless apparently will continue to offer its unlimited data plan for $29.99 a month.

The new $15 plan will be available on Oct. 28, 2010 for new customers, and requires a two-year contract. Existing customers have the option of moving to the less expensive option, or keeping their current plan.