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Mobile apps: A source of real revenue for news orgs?

Posted on by sbhatt

On Thursday night, I attended a panel discussion on mobile advertising put on by TiE-Seattle, a not-for-profit group dedicated to fostering and supporting entrepreneurship. TiE-Seattle is part of a global network born in the early 1990s when Silicon Valley entrepreneurs of South Asian heritage decided to hold regular meetups.

The panel discussion certainly had some noteworthy speakers, but more on that later.

First, the WHY.

As in, why might mobile advertising be an important subject for journalists, especially those in print media, to think about?

Even if more people than ever are consuming what journalists create, the revenue that pays for the people, the equipment and the overhead is shrinking. (It’s no surprise publishers like the New York Times are planning to erect paywalls for their content starting next year.)

I thought newspapers might be stabilizing in 2010 after two terrible years, but the former media executive and bearish pundit Alan Mutter recently raised alarms again that the newspaper industry is still in trouble, having missed out on the recovery in advertising spending in the first quarter of 2010. His chart says it all: “Newspaper and magazine [ad] sales in the first quarter dropped respectively 9.7% and 3.9% at the same time television expenditures advanced 10.5%, Internet rose 7.5% and radio gained 6.0%.”

Auto and retail advertising historically have been important sources of newspaper ad revenue, so it’s disturbing to hear that even as auto and retail sales rose in the first quarter, spending on newspaper advertising for these verticals plunged. Clearly, some big car advertisers (i.e. Ford, Mercedes) are testing other ways to deliver ad impressions to potential customers.

Motor Trend magazine earlier this year launched an iPhone app with Mercedes-Benz sponsorship. According to an article in eMarketer, the iPhone app was part of an integrated marketing campaign in which Mercedes wanted to convey the message that the E-Class represents the next generation of Mercedes-Benz design and technology.

Advertisers like Mercedes-Benz are eager to deliver their messages to the booming number of mobile customers. Get the stats here.

Publishers are branding themselves too with apps. The alternate weeklies in Seattle, The Stranger and Seattle Weekly, have happy hour apps.

The question is can newspapers, most of which have weak engineering capacity and change-resistant cultures, come up with apps compelling enough to make the upfront development costs payoff? The Miami Herald’s iPhone app for baseball fans has been a hit. My own employer, The Seattle Times, has an iPhone app.

The challenge for media organizations is not simply migrating their content to mobile devices (just as they migrated it to the web), but leveraging the unique strengths of mobile for content AND advertising.

Mobile devices offer multiple “sensors” — such as location (GPS), touch, balance (accelerometer), visual (camera) and aural (mic). Unlike PCs, mobile offers advertisers a unique end-user; most of us don’t lend out our cell phones. All of these factors create interest for advertisers, who want to deliver a message to a specific audience that is going to stand out and be memorable in today’s information glut.

That brings us back to the TiE-Seattle event on Thursday night.

TiE-Seattle’s panel was composed of marketing and business types:

(Interestingly, the panel moderator, Kevin Keating, was a former journalist for the Spokane Spokesman-Review and is now founding partner of Lucid Communications, a strategic marketing firm based in Seattle. Keating opened the discussion by noting that research firm Garnter forecasts mobile advertising will reach $1.6 billion this year.)

Google and Apple are staking claims to mobile advertising by controlling the platforms that serve up mobile ads.

“It’ll lend a lot of credibility to the space,” Jordan said.

Similarly, Ribera views 2010 as the first year that mobile is seriously considered part of the marketing mix. Two-thirds of the campaigns his group is doing now, he said, are “integrated media buys,” with ads deployed on three marketing channels — mobile, web and keyword search.

Publishers, take note: The CPMs for mobile ads are higher than banner ads on websites, Ribera tells me.

But Bryan is skeptical of claims that mobile will eat the lunch of television, the dominant media for brand awareness advertising. (Think Super Bowl.) “Advertising is not an infinitely large bucket of money,” he said.

There’s consensus that mobile is gaining advertiser interest by delivering targeted messages through text messages (SMS), keyword search, and interactive apps.

But marketers are learning that user behavior is not the same on the mobile screen as it is on a PC. Mobile users have more urgent demands for information when it comes to search.

For example, Ribera noted, most mobile users of the Bing search engine complete their task within an hour or a day, whereas most PC users take up to a week. Mobile search keywords tend to be more conversational and abbreviated than PC search keywords.

(I love the fact that audience members added their knowledge to the discussion: C.N. Chiu, a consultant for MobileWebGo in Portland, Ore., said Spanish-speaking users are six times more likely than native English speakers to use mobile search.)

What does all this mean for news organizations and journalists? Based on what I learned from these speakers, here’s a few thoughts.

1. News organizations should charge for their apps, but they should be sure the apps do more than simply copy what is delivered on the PC screen. Get creative and offer something that’s entertaining, educational or utilitarian. Give the user a satisfying experience. This is not unrealistic as mobile payment use is growing. (If it’s a sponsored app, then obviously the news organization wants to make it a free download to maximize its distribution.)

2. Text messaging still has the greatest reach on mobile devices, but location-based services are the hot new thing. (Uh, Foursquare, anyone?) Could news organizations license to location-based services their news stories about a location, so urban explorers can not only find deals on shoes but also learn more about that neighborhood?

3. There’s great demand for quality video on mobile devices but a whole host of technical issues need to be worked out. But once those issues are worked out (and it won’t be long), inventory will sell out quickly. The new iPhone takes 720p high-def video and the $5 iMovie app turns the device into a video editor. Start to build mobile video into your multimedia workflow so you’ll be in a position to sell ads with them. Think Webiscenes, not Webisodes.

4. Because mobile users’ information needs are typically more urgent, certain kinds of content will be a better fit for the mobile device: Movie and restaurant reviews, breaking news alerts and sports stats. But news apps, because they must be downloaded by the user, involve intention and thus can also be designed to appeal to a niche editorial interest — and carry higher advertising rates.

Please add your comments! And contact us at aajaseattle@gmail.com if you have ideas for speakers for our next Innovation Salon, which will focus on monetizing digital news content.

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