Thomson Financial believes Google will generate an astonishing $21.31 billion in mobile advertising revenues in 2009. I don’t.
Moreover, I think Google is going to have a hard time migrating Adwords to mobile.

But $21 billion? Next year? Surely there is No Chance of that happening. I’ll be amazed if Google can generate a tenth of that from mobile, in 2009.

With numbers like that being thrown around it isn’t too surprising to see that Google CEO Eric Schmidt has turned into the company’s chief mobile cheerleader, although maybe the analysts Thomson polled should be headhunted for that task.

Here’s what Schmidt said about the mobile internet at the Davos conference, a few weeks ago:

“It is the recreation of the Internet, it’s the recreation of the PC story and it is before us — and it is very likely it will happen in the next year.”

Maybe so. But there are some big differences with mobile. I’ve been wondering whether Google, which is investing big into its Android mobile OS and Gphone projects, is going to be able to pull off the same trick twice. That is, to migrate Adwords onto mobile and generate billions in revenue every quarter, as it currently does via the internet.

Why won’t Adwords work so well on mobile?

Let’s just take a moment to think about why Adwords works so well online. It is largely because these ads are shown in a demand-driven environment, linked as they are to specific search queries.

These queries are identified by the advertisers, who write specific ads and specific landing pages to encourage relevant response and high conversion rates. Context and targeting: two cornerstones of advertising.

Why else does Adwords work so well? Well, it works because people are in ‘search mode’. They click results specifically aimed at their wants and needs. As such, Adwords works a treat. Note that Adsense works less well, mainly because people are not in ‘search mode’ when browsing news stories on publisher websites.

Adwords also works because it proves to advertisers that it works, making it far easier for them to spend ever-larger sums with Google. Before the internet, measuring the effectiveness of ads was very flaky / costly / time-consuming.

With Adwords, you can track a search query through an ad to a sale, and measure the ROI on that search term very accurately, in near-as-dammit real time. That’s why, in a nut, it took off.

It’s the same on mobile, right?

Wrong. The ad targeting will be there, and the measurement will be there, and there might be a bunch of other cool stuff thrown in (eg the location-based stuff – the so-called holy grail of mobile advertising). But what won’t be there is the consumer’s intent to buy, there and then, via the mobile internet. A little bit of consumer desire perhaps, but not intent. And anybody who thinks otherwise is a nut. It will undoubtedly change, but not overnight.

With mobile, the response metrics could look extremely screwy when compared with Adwords proper, assuming people don’t start to ignore the complexities of shopping via a handset. The clicks might be there, but the conversion rates should look a lot different.

Of course Google could try to join this up and make it very easy for people to buy via Google Checkout, which has a unified log-in system, but gaining that level of penetration among advertisers is a big ask. And I still come back to the killer question: why would you buy something via mobile? Why not wait until you’re in front of your laptop, or in a store, where it is much easier?

The key takeaway here is that Google Adwords keyword pricing should be vastly different (ie, much lower) on mobile. Advertisers love Adwords online because they can track click to sale. But location-based services such as ‘nearest Italian restaurant’ are not necessarily going to be measured in this manner, unless we get into m-vouchers, mobile bar codes, or somehow matching up the mobile number to the restaurant bill.

I’ll leave any thoughts on ‘m-currency’ and ‘mobile wallets’ to one side for now, although the theory is there (so is the bureaucracy).

Exception to the rule #1: RETENTION!

Despite all this mithering I do actually think that shopping via mobile handsets is a firm reality, even though it doesn’t seem to be happening yet on any kind of scale. It is a consumer / mobile user trend that has yet to take off. The thing is, shopping via mobile doesn’t need to be so reliant on paid search, as it is today on the internet. It’s a marketer mindset thing.

See, shopping has nothing much to do with mobile ‘advertising’, or at least it shouldn’t, if retail companies do the right thing by their customers.

That’s right:, I said ‘customers’. Consumers and customers are two very different beasts, and should be treated differently. Consumers are merely ‘prospective customers’. You advertise to consumers, whereas you market to your customers. And mobile might make it easier for them to become ‘repeat customers’, if you do the right things.

Think about it. Amazon wins so much repeat business from me because I can buy a product using the one-click checkout process. If Google focuses on the roll-out of Checkout and achieves some kind of critical mass among Adwords advertisers, then perhaps a one-click purchase process will be possible via mobile phones. Or maybe you’ll need Checkout to be able to buy Adwords in the first place. But from what I’ve heard, Google Checkout isn’t terribly popular, and is certainly struggling for traction here in the UK.

Unless it’s easy to buy – in other words, no dastardly seven-page form-filling process to be negotiated via that tiny keyboard on your handset – then I see no reason why you wouldn’t wait before placing your order. Who needs anything that badly?

With existing customers, mobile can become a really powerful tool in generating additional business. If I were working at a large retail, finance or travel company I would focus on building widgets and mobile experiences that allow customers to use their handsets for browsing, saving, comparing and buying. This would make mobile an extension of the online channel. And it should be very easy, and not built on keyword costs or banner ad clicks, or whatever.

The upshot here is that mobile, for all of the hype, could become a very useful in driving up customer retention rates. The internet has always been seen as a platform for customer acquisition, which has led to a lot of lazy thinking among marketers. Isn’t it a bit silly to keep throwing money at paid search to re-acquire customers that you should already have relationships with? I think it’s madness, personally.

Exception to the rule #2: TELEPHONE ORDERS!

The second exception to the rule is that mobile phones are, rather obviously, telephones. In some sectors 99% of sales occur via the telephone, leaving a paltry 1% for online and mail order. Maybe Madwords will introduce click-to-call functionality? Now that would work, and it would work very well for some businesses. 

There is of course an obvious issue here. It tends to be the older person who prefers to order via telephone, whereas mobile internet usage is a young person’s game (like it or not). So unless the oldies suddenly start buying internet-enabled handsets in their millions - and subsequently surf the mobile web with intent to buy – then this click-to-call model wouldn’t generate the kind of numbers the analysts are forecasting.

Overall, I think Google might be in for a shock if it plans on making tens of billions a year from Madwords. I’m pretty sure the plan is far grander than that, and, in terms of its mobile advertising business, it probably covers display ads, video ads, maps-based listings, and so on.

But as far as Google Adwords is concerned, the transition to mobile should be far more of a challenge than Thomson Financial is predicting. We’ll soon find out.

What do you think? Have you ever bought something via your mobile phone? Do you imagine that you will anytime soon? Why don’t you do this?

Further Reading

Mobile advertising research – analysts’ forecasts

10 reasons why mobile advertising is doomed

Paid Search Marketing (PPC) – Best Practice Guide