I must admit, I find most advertising downright insulting. The mere thought of a non-person, profit-seeking entity telling me how I should look, act and feel – oh, and BUY – is enough to make me consider living as a Buddhist monk.
But hey… advertising works. So as long as products and services are for sale, marketers will find a way to make sure I know about them (and why they’re sure to improve my life).
Nielson estimates the return on investment (ROI) of marketing dollars is about 9%. Meaning, in general, if a company spends $1 on advertising it can expect to make roughly $1.09 back. This may seem like a small edge, but that nine cents is the grease that keeps the wheels of consumption spinning along.
But advertising, with the help of technology, is becoming increasingly targeted. And this has the real potential to increase ROI for crafty marketers.
Take Roy’s Restaurants as an example. The “Hawaiian fusion” chain of restaurants hit payday when it gave Google’s Mobile Ads a try. The company ran an ultra-local, mobile-only campaign that spurred smartphone users in close proximity to one of the chain’s locations to call the restaurant. Results were impressive.
The company experienced a 40% increase in call volume and generated an 800% return on investment. For every $1 they paid Google for advertising they earned $8 back selling Mahi Mahi and Mai Tais. That’s a winning strategy for sure!
One company that’s driving the mobile-advertising market – besides the obvious ones like Google and Facebook – is Millennial Media (NYSE: MM).
Here’s a chart of Millennial’s stock price since its IPO in March of this year:
Much like Facebook’s, Millennial’s share price slid lower from day one. With the mobile-ad market still in its infancy, investors aren’t yet comfortable counting on consistent revenue from these companies.
Millennial did well to grow revenue from Q1 2011 to Q1 2012, posting a 53% increase. Yet, as a new company, its expenses are growing even faster as they build a foundation for future growth. Total operating expenses increased 101% during the same period, creating a net loss of $0.32 per share last quarter.
Until the company posts a profitable quarter I won’t be hitting the Buy button. But this is a stock to watch alongside the growing trend of mobile advertising.
If you haven’t done so already read the Survive & Prosper issue on “How Congress Views YOUR Money”.
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