Mobile Ads: Not So Fast
Mobile advertising revenues aren't growing as fast as expected, and that could spell trouble for a bunch of venture-funded startups — Ads on cell phones have long been hailed as the next big thing. But flipping through industry forecasts, Didier Kuhn says, "I don't believe the figures I am seeing."
Context & Ripple Effects
Business Week's December 2007 piece lands against a backdrop of bullish mobile-advertising forecasts that investors have been using to justify a wave of venture funding into ad startups. The article's core claim, per the reporting, is that actual mobile ad revenues are growing more slowly than those projections assumed — and Didier Kuhn, quoted in the piece, says flatly that he does not believe the figures circulating in industry forecasts.
First-order effects
- Venture-funded mobile advertising startups whose business plans were sized against the industry forecasts now face a revenue shortfall relative to the numbers they raised against.
- Media buyers such as Kuhn who distrust the published figures will discount mobile inventory when allocating ad budgets, compounding the gap between projection and realization.
Second-order effects
- If realized revenue keeps lagging the forecasts, venture investors will reprice or withhold follow-on rounds for the mobile-ad cohort, forcing consolidation among the funded startups.
- Publishers and networks selling mobile inventory will come under pressure to prove performance metrics rather than cite market-size projections to win budgets.
Third-order effects
- A sustained pattern of over-forecasting would shift how the market is evaluated — from headline market-size projections toward measured revenue per active device as the metric investors and buyers actually trust.
The trend: Mobile advertising is entering a credibility test in which the spread between forecast and realized revenue, not the size of the projected market, determines which startups get funded.