Making Mobile Advertising Profitable for E-commerce Businesses, Part 1

Making Mobile Advertising Profitable for E-commerce Businesses, Part 1

By Arjun Malhotra • June 30, 2015

The other day I bought a new pair of headphones, picked up some groceries for the week, and got a friend a present for her birthday. All in all, a pretty unremarkable series of purchases – except for the fact that I made all of these purchases directly from my phone.

 

And I am not alone; smartphones increasingly present a convenient and easy way for people to buy things they want. No longer do I have to wait until I sit down at my computer to scroll through Amazon – I can do this while waiting for the bus on my way to work.

 

It’s no secret that Facebook users spend a lot of their time using Facebook on mobile devices – in fact, about one-third of Facebook’s 1.32 billion users only log-in on their phones. This presents a huge opportunity for e-commerce advertisers to reach additional customers and drive conversions.

 

So what’s the problem?

 

Though the mobile shopping experience continues to improve, advertisers can expect conversion rates to be 60-75% lower on mobile than on desktop. That’s enough to deter many brands from throwing budget at mobile ads. Look close, though, and you’ll see a lot of opportunity..

 

First off, Facebook inventory is significantly cheaper on mobile compared to desktop ads. Across a variety of Ampush e-commerce clients using mobile ads, we see Cost-Per-Click (CPC) come in 33% lower than desktop. Second, engagement is higher on mobile: the click-through-rate (CTR) of mobile ads is either comparable or up to 30% higher than that on desktop.

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So, despite the lower conversion rates, cheaper inventory and higher CTRs ultimately provide an opportunity for e-commerce advertisers to drive cost-efficient purchases at scale on the mobile platform. Given the opportunity, the keys to success can be found in mobile-oriented strategies for driving healthy CTRs and mitigating the effect of lower conversion rates.

 

Both the mobile web and mobile apps provide opportunities for e-commerce. Here is a closer look at how e-commerce marketers can enhance their advertising campaigns and browsing and buying experience. They key to making this approach work: using mobile app engagement ads to drive sales while driving return on ad spend, or ROAS for short.

 

Driving App Installs & In-App Purchases

To make e-commerce work using mobile apps, advertisers must use a balanced approach of driving users to install the app, and then driving the installers to purchase items within the app. Though the funnel to ultimately drive the purchase is longer, advertisers can benefit by providing an additional channel to reach and engage customers.

For Ampush e-commerce clients, Android mobile app install ads tend to drive ~1% purchase conversion rate, with 16% of purchases occurring on desktop, and 84% in-app. To increase purchase rates, e-commerce advertisers should consider pairing mobile install ads with mobile app engagement ads to drive installers back into the app to make purchases.

 

When advertisers take this approach, they often see superior results. Though mobile app engagement ads on Android see roughly 3x the CPC due to the limited audience, they see about 8x the purchase conversion rate of mobile app install ads, with about 80% of those purchases occurring in-app.

 

On iOS, costs for mobile app engagement ads are 3x that of mobile app install ads, but the purchase conversion rate is only ~2.5x that of mobile app install ads. As iOS users tend to be wealthier than the average Android user, it is not surprising that they are more likely to make an in-app purchase immediately following install.

Mobile apps are a viable avenue for driving purchases, but as the funnel from install to purchase is longer than that of web conversions, e-commerce advertisers must consider the right balance of mobile app install and mobile app engagement ads to find success.

 

In part two of this series, we’ll examine how advertisers can use the mobile web to drive purchases.