(By Rich Bieglmeier) Last Thursday, Allen Huang, Product Manager, Mobile Display Ads for Google wrote a post tilted "Combating accidental clicks in mobile ads" on Google Mobile Ads Blog. The product manager highlighted an annoying issue many smartphone users have probably experienced, clicking an ad accidentally while trying to page down or some other function.
From personal experience, hardly anything is more annoying than another page opening to display some offer you are not interested in at all. It drives me nuts. According to some experts, it's because some people's thumbs are too fat. And to think I was more worried about the waistline. Weight Watchers for thumbs?
Unfortunately, accidental clicks - fat thumbs or not - are a real issue in the mobile advertising industry. German mobile app marketing firm Trademob says "40 percent of clicks are essentially worthless" as "22 percent of clicks are accidental, while 18 percent are fraudulent."
[Related -Google Inc (GOOG) Q4 Earnings Preview: What To Watch?]
To combat accidental clicks, Google introduced "confirmed clicks into all in-app image ad banners on smartphones, which reduces accidental clicks by prompting the user to confirm that they intended to click on the ad." No word from Huang regarding fraudulent clicks which is when humans or bots (programs that crawl the web) click on ads to drive up their pay-per-click (PPC) revenues. For example, a blogger sets up an adsense account, puts google ads on their blog, and then clicks on the ads him/herself to generate PPC revenue. iStock doesn't expect click fraudsters to be deterred by two clicks instead of one.
[Related -Boost Your Dividend Yield]
iStock applauds Google's efforts to improve the conversion rates for their advertisers. Over the long run, effective ads that convert to leads, sales… should mean advertisers will be willing to spend more as they get a better return on their dollars. In fact, industry experts believe mobile advertising will explode. eMarketer forecasts, "Overall spending on mobile advertising in the U.S., including display, search and messaging-based ads served to mobile phones and tablets, will rise 180 percent this year to top $4 billion," and to reach "$7.19 billion next year and nearly $21 billion by 2016."
The increase will mean huge business for Google as NBC reports, "Google held 24 percent of the U.S. [mobile] market last year." Battling accidental clicks should help Google keep much of its share. By 2016, mobile ads alone could exceed $5 billion a year in revenue for the search giant.
Last year, GOOG's "run-rate for mobile advertising hit $2.5 billion." In their most recent quarter post-earnings conference call, management told attendees, "our new run-rate for mobile is now over $8 billion. That's quite a business." However, and this is a big however, "this year, in this number we also added the gross revenue from the mobile sales of Google Play content. And finally, it also includes the consumer spending on the Play apps."
The consensus among analysts seems to be close to $4b in pure mobile ad revenue for the year ahead. What impact could the new anti-accidental click confirm policy have on gross income?
Using the $4 billion estimate and Trademob's 22% accidental click rate would mean up to $960 million in revenue could be at stake. That works out to $2.92 per share based on 328.59 million shares outstanding. Ouch!
Obviously, this is the worst case guesstimate as Google does not breakout pure, mobile ad revenue in its financial statements. Many, many things could help mitigate lost revenue resulting from the new, commendable policy. Nonetheless, iStock expects to see analysts take their estimates down a tick thanks to fat thumbs.