Investing in Mobile Commerce is a Growth Play? Really?

June 22nd, 2011
by David Gould

Some of you may know that I am the CEO of a Boulder-based company called mShopper.  mShopper offers a terrific, Saas mobile commerce platform.  I mention this to substantiate my creds only (this is not a plug).   In my capacity as CEO of mShopper, I can truly report from the very front lines of mobile commerce.  It is an exciting vantage point for sure.  Indeed, I recently concluded  a six-week long study of mobile commerce traffic patterns, the findings of which are very surprising.  The mobile commerce sector has experienced explosive growth over the last 18 months, powered by surging Smartphone sales and (reasonably) robust 3G networks.  One prevailing position amongst mCommerce vendors and retailers has been that an investment in mobile commerce was predominantly an investment in customer retention – placating existing customers who are, for the most part, increasingly visiting their favorite sites from their Smartphones. Our findings strongly suggest that the opposite is true; a significant majority of mStore traffic comes from organic mobile search! This has many important implications. Before I describe our study in detail, let me summarize our study’s findings for all those time-stressed readers out there:

  • Investing in a mobile optimized site is an investment in customer acquisition. Investing in mobile commerce is, to a lesser extent, an investment in customer retention.
  • There is a far greater sense of urgency on the part of retailers to quickly launch a mobile-optimized site than has previously been acknowledged. The “customer acquisition” window of opportunity will surely decrease quickly ovcr the next 18 months.
  • Correctly implementing an mStore is crucial. Poor deployment can dramatically reduce or eliminate the customer acquisition and growth benefits

Study Methodology
mShopper gathered and analyzed traffic patterns from seven clients over a time period that spanned from April 1, 2011 through May 15, 2011.  The clients included in the study ranged in size from 1.5 million visits per month to just over 20,000.  Product categories included a broad spectrum of all the most popular categories (we have refrained from including specific categories as such data could compromise the identity of the individual clients).  Data was gathered and parsed using Google® Analytics; every page of every mShopper client’s mStores is tracked with our analytics code.  We then compared overall visits to a client’s mStore into individual components including direct referrals from a client’s website’s home page versus traffic that was redirected directly from a product, brand, or category page.

Study Findings
The actual findings from our study are as follows:

Finding 1: A significant majority of mStore traffic comes from organic mobile search.
This was a very surprising result indeed.  While mShopper always knew that mobile shoppers are very ‘use case’ driven i.e. there is a specific reason why shoppers would take the time to visit a particular merchant’s mStore on a SmartPhone,  we had always assumed that launching a mobile site was more of a retention play; that an mStore was addressing existing customers who had such specific needs… In fact the opposite
is true.  Row I above shows the percent of mobile traffic that came to our clients’ sites as a result of an organic product, brand or product category search. With the exception of Merchant 1 (we will explain this later), the percent of mobile traffic visiting our clients’ sites who originated from an organic search ranged from a low of 66.1% to a high of 92.8%!  On average, 78.7% of our clients’ mobile traffic came from search! There are some other very interesting findings above.  Row F calculates our estimate of ‘natural, organic’ mobile traffic currently visiting our clients’ sites stated as a percent of overall traffic to those sites. Smartphone traffic to our clients’ E-Commerce sites ranges from a low of 0.43% to a high of 3.9%.  The weighted average is 1.8%.  Row G on the other hand calculates the incremental mobile search-originated traffic as a percent of existing eCommerce site traffic.  Think of this as new (mobile) eyeballs as a percent of existing overall traffic to an eCommerce site.  With the exception of Merchant 1 again, this number ranged from a low of 1.1% to a high of 9.9%!  Mobile search is generating a lot of new traffic!

Finding 2: Investing in a mobile optimized site is an investment in customer acquisition.
This is an obvious conclusion from Finding 1 above. While there are important retention benefits from launching a mobile optimized site, the truth is that retailers can expect, on average that nearly 80% of the inbound traffic to their mobile site will come from specific organic search queries.  We further conclude that any sales resulting from such traffic will, in all probability, come from a new customer.  We draw this conclusing based on simple math.  In the last month, well over one million people searched on the brand ‘Peg Perego’.  The likelihood that one of these random one million queries then went on to buy a Peg Perego stroller from a merchant with under 50,000 visits seems incredibly low. Beyond this, we actually noticed that the percent of people who make purchases through our clients’ websites and then identify themselves as “new customers”during the checkout process is even higher than the 78.7% percent of people who came to the site via mobile search! More interesting still is that of the merchants above, Merchant 2 actually has the second highest overall conversion rate through their mStore.  This is surprising because they have the lowest natural mobile traffic percentage currently visiting their site. This bit of data suggests that mobile search-originated traffic is more likely to convert than existing customer traffic. More data is needed to corroborate this premise, but intuitively it makes sense as search-originated traffic is use-case driven.

Finding 3:  There is a far greater sense of urgency on the part of retailers to quickly launch a mobile-optimized site than has previously been acknowledged.
The customer acquisition” mobile window of opportunity described in Finding 2 above will surely decrease in inverse proportion to the number retailers who have launched a mobile-optimized site.  If as described above, search originated traffic is highly unlikely to be an existing customer of a mobile site that benefits from their incremental traffic, this likelihood diminishes as more mobile sites come online.  It is also further unlikely that any individual ‘searcher’ will redirect to a particular site as more competitors come online.

Finding 4: Correctly implementing an mStore is crucial.
So what happened to Merchant 1? Why is their data so different?  Merchant 1 is, in fact the largest merchant in our group.  The monthly traffic to their E-Commerce site is 15X that of Merchant 2 (the next largest merchant in our study).  We would have expected that their mobile mStore traffic would have been roughly 15X Merchant 2’s mobile traffic; in fact, it is only 6X.  Further, only 25.9% of Merchant 1’s mobile traffic originated from an external search compared with 78.7% for the remainder of the group. What happened? We too were prplexed by this, and the answer is technological in nature.  mShopper deploys an intelligent bit of JavaScript that automatically ‘sniffs’ all inbound traffic to our clients’ websites and then re-routes mobile traffic to their mobile-optimized mStore.  Our code is further able to identify whether a visit is,  in fact, coming directly from the home page of our clients’ sites (and thus should be redirected to the home page of their mStore), or from an external product, brand, or product category search (and thus should be redirected to the appropriate product, brand, or product category in the same mStore).  Correct deployment of this code requires that the code be embedded on each page in our
clients’ websites.  After a lot of forensic work on our part, we found out that Merchant 1 had, in fact, only deployed this code on the home page of their site.  This very poor decision resulted in this merchant losing the vast majority of all the external, search-originated traffic, which in turn, would represent a majority of the traffic to their mStore!  Further still, Merchant 1’s conversion rate is roughly half that of Merchant 2, which further reinforces the premise that external search originated traffic is more likely to convert than natural, site-generated traffic.

What do you all think?  Please send me your comments!

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