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Mobile ad rates soared 20% in last year

Mobile ad rates have shot up 20% over the last 12 months as advertisers become more competitive over premium inventory on tablet and smartphone devices, according to research.

Data compiled by M&C Saatchi Performance indicates that UK mobile advertising rates have increased by $0.10 on average over the last 12 months with prices rising to as high as $0.60 per click, according to the agency’s CEO James Hilton. 

The figures take into account CPC, CPM and CPA buys and signals the end of mobile advertising inventory costing only a fraction of online media buys as brands increasingly brief their agencies to target high-value users of such devices.

“With more smartphone users coming on to the market there’s more inventory to bid on so what you find is that the cheap inventory is getting cheaper,” said Hilton.

“But the premium inventory is getting more expensive. That’s because of a few things, firstly the targeting ability is getting better and plus you’ve got more people bidding on the inventory.”

Hilton added that the increase in costs is not necessarily a bad thing for advertising agencies as the enhanced targeting and tracking capabilities associated with such inventory made it easier to achieve client objectives.

“It makes it worthwhile when you can track more than just download numbers,” he said. “Conversions rates are better on the more premium inventory and the audiences there are more responsive.”

He also pointed out that major handset launches, such as the impending launch of the iPhone 5, also led to spikes in the cost of mobile inventory since mobile advertising lets advertisers target by device type.

“The cost of iPhone 5 traffic will be really high as brands will be eager to have their app as one of the first installed on such devices and that will lead to a lot more competition for this inventory,” said Hilton.

Mark Slade, MD of premium mobile ad network 4th Screen, agreed that the increased demand for such inventory over the last year led to publishers being able to charge healthier amounts for the inventory.

“There’s still more supply than there is demand,” he added.

Although the cost of mobile advertising has historically been a fraction of desktop inventory in the main, major media owners, including the Guardian, have had to keep inventory costs relatively high in order to protect their long-term futures.

“The bigger guys have had to keep their rates at a certain level as they want to protect their yield in the long term [when advertisers demand for such inventory followed consumer migration to mobile devices,” he added.

“What’s kept the price of mobile inventory down is the fact that much of it is available from the long-tail of app developers that don’t necessarily know a lot about long-term yield [and therefore sell their inventory at rock bottom prices],” added Slade.

“That’s how you start to see clicks going for prices like $0.05 to $0.06 a click.”

Simon Heyes, head of international media at LBi, argued that while mobile ads might not be as cheap as one or two years ago, mobile ad click-through performance is still much better than desktop CTRs.

“I wouldn’t say cheap mobile advertising is over. Remember, mobile is still very much in its infancy, and there is still scope for creating cost effective mobile advertising campaigns,” he said.

Heyes also added that the Facebook was facing pressures from investors to monetise its mobile audience was likely to have an effect on the overall cost of mobile inventory.

“Ad spend on Facebook continues to take a large chunk of the UK market’s overall media buying budget. So it will be interesting to see what changes Facebook makes to encourage brands and agencies to focus more on mobile ads,” he said.

“One way could be to roll out cheaper mobile only ads. This will likely be particularly cheaper in markets such as India, the Philippines and Turkey that still have considerable room for Facebook user growth.”

However, both Hilton and Heyes argued that while the cost of mobile ads increases, it doesn’t matter as long as this inventory continues to perform well.

“If client ad performance also improves then costs are simply relative to overall success,” said Heyes. “At the end of the day, costs may be rising, but we also need to look at the other end of the model – ad performance.”

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