by Matt Gallagher, Red Herring
Kleiner Perkins Caufield Byers VC Mary Meeker dropped a bombshell in her annual Internet Trends report at the All Things D conference Wednesday. While mobile traffic is exploding, up 10 percent today from 1 percent in late 2009, monetization on the mobile web and mobile apps is little more than a trickle in a bucket.
As users around the world embrace smartphones, tablets and other mobile tools, the profit potential dips considerably when compared to broader Internet platforms, mostly due to the availability of ad space on a mobile platform.
Still, mobile monetization is rapidly growing, from $700 million in 2008 to $12 billion in 2011, a compound annual growth rate of 153 percent. That’s obviously explained by the increase in mobile adoption, expanding 10 fold since 2009. India, in particular, has grown from almost zilch in 2009 to commanding over 50 percent of all Internet traffic in the region.
And then comes the sobering headache. The monetization on mobile web and mobile apps is just a fraction of the desktop web. The eCPMs are as much as five times lower on mobile than desktop, where the cost for a thousand impressions is 75 cents compared to the $3.50 mobile earns.
Anyone up for a slice of Facebook? Those metrics will certainly dampen Facebook’s revenue prospects, as the site admitted in its IPO by stating that mobile was a weak link. The company has only begun monetizing mobile, but as more of its users go mobile, the company earns less on ads because of the inherent limitations in mobile.
While the mobile boom, expected to quadruple Internet traffic by 2016, according to AFP, is transforming the world of technology, those same startups will continue to struggle with mobile’s trickling metrics. As the tech community dances the hula to the celebratory ukelele of the mobile Tiki party, the sobering reality is everyone’s working well below minimum wage compared to the salaries they’ve come to expect from traditional Internet. Such is the hard luck life of living in a tropical paradise.