A thousand percent here and a thousand percent there and pretty soon you're talking about real profits.Paraphrasing now-deceased Senator Everett Dirksen comment about billions of dollars is always fun, especially when the evidence is factual rather than theoretical.
The issue, as the following article explains, is that new research demonstrates that iPhone owners generate a lot more return on investment (ROI) for advertisers than do Android owners.
But before iPhone owners start doing victory laps declaiming the superiority of their devices, it is worth examining why this difference exists. Simply put, Apple charges more for its phones. Usually a lot more. Therefore, those who tend to buy such items tend to have more money. Which also, by implication and experience, means that they spend a lot more, too. This may also infer that iPhone owners are less cost sensitive when it comes to paying their phone bills.
Now some may argue that iPhone owners are more tech savvy, more net-oriented, smarter, prettier and more attuned to the zeitgeist. All of that may turn out to be true, but currently there is no data to support it. And it should also be pointed out that Facebook itself is a relatively new entity while its mobile initiative is even younger. This does not in any way discredit the comparative data but does suggest it may change over time, to say nothing of how people actually use their phones and make purchases.
All of which means that Apple's strategy is working for the time being, albeit on a relatively small base. Wealthy people can afford to buy more, but whether that will hold up globally as China and other developing nations gain access remains to be seen. Android's lower price point, bigger market share strategy may play out over time due to shear volume. The difference in return on investment is staggering since most of it appears to come from the top or revenue line rather than aggressive management of the cost or denominator. We will have to see if this is translating into another feature of advertiser satisfaction not directly based on a ratio: long term impact on sales and profits. JL
John Koetsier reports in VentureBeat:
A study of more than 200 billion ads on Facebook says that mobile ads on iPhone generate 1,790 percent more return on investment than ads on Android. Even worse, advertising on Android actually costs more than it returns.
The study is by Nanigans, one of the biggest buyers of Facebook ads, and it focuses on retailers, saying that in the past year on Facebook’s desktop ads, clickthroughs are up 375 percent and overall return on investment is 152 percent.
But it’s when the report focuses on mobile advertising that the really surprising numbers pop up.
“Retailers are realizing significantly greater return from audiences on iOS than audiences on Android,” the report says. “For the first three quarters of 2013, RPC [revenue per click] on iOS averaged 6.1 times higher than Android and ROI [return on investment] on iOS averaged 17.9 times higher than Android.”
When I talked to Nanigans SVP Dan Slagen about the results, he was candid, telling me that the company was a little “on the fence” about publishing that data, knowing that it would be controversial. Ultimately, however, that’s the data that the company was seeing, and the company decided to let the data speak.
Retailers have a large opportunity on mobile, the company says, but clearly the opportunity is much, much more lucrative on iPhone than it is on Android. Frankly, the numbers are shocking.
It’s not just that Android monetizes worse than iOS — it actually offers negative return on investment. In other words, while advertising on iOS brings retailer 162 percent more cash than they spend on the ads, advertising on Android returns 10 percent less than the cost of the ads.
Nanigans doesn’t speculate why the ad ROI differs so greatly between iOS and Android, and the study doesn’t delve into reasons, simply highlighting what’s happening. Likely, the challenge is the same that Android has faced for years: a lower-end audience.
Brutally put, iPhone owners simply tend to both make more money and spend more money than Android owners.
One caveat that Slagen offered, however, is that the data changes with industry, and that gaming and e-commerce industries, for instance, did not see the same kind of massive iPhone/Android gulf in ROI. Still, customers with iPhones are simply worth more, he said.
“Audiences cost more on iPhone, and the reason is that it’s worth it,” Slagen said. “Typically, we’re not looking to acquire one-time customers, we’re looking to invest over time … so we pay more up front for better long-term results.”
Oddly, however, the costs of advertising on Facebook mobile apps doesn’t really vary between Android and iOS, with CPMs (cost per thousand impressions) of $4.99 for iPhone and just slightly lower, $4.87, for Android. Advertisers are clearly voting with their dollars, however, with advertising budget allocation rising from under 20 percent for iOS in January to well over 50 percent by September.
That’s in spite of Android’s sizable market lead in terms of activations.
It’s only when you get to cost-conscious cost-per-click ad campaigns that you see differentiation: CPC ads on iOS cost $.40, while they are only $.18 on Android. However, with negative ROI, it would appear that Android ads are expensive at any price
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