Report: Mobile Will Account for Half of Social Advertising Revenue by 2017

The mobile and social media sectors have grown up together. Now, it looks they’re ready to tie the knot. Mobile is poised to account for a majority of spending on social media advertising in the U.S. by 2017, eclipsing spending on desktop a year later, according to report from BIA/Kelsey released this morning.

The research firm estimates that spending on social advertising in the U.S. will nearly triple over the next five years, swelling from $5.1 billion last year to $15 billion by 2018. In 2017, the firms expects that marketers will spend $6.7 billion — or half of all social media advertising revenues — on mobile ad formats.

The spike is due in large part to the faster-than-expected growth of Facebook’s mobile business. The social media giant hit a landmark in the fourth quarter of last year, when revenues from mobile advertising eclipsed those from desktop for the first time. Facebook accounted for 53% of the social media revenues in the U.S., and will retain its majority share through 2018, according to the report.

“There are the two key drivers for the growth of social media spending: mobile and native,” Jed Williams, an analyst at BIA/Kelsey told Street Fight. “The two are just so closely intertwined. If you look at the total revenue Facebook is driving from mobile and compare that to a quarter, and than a year ago — the growth has been dramatic.”

Native advertising is set to take hold this year. The firm expects spending on native advertising formats in social media, which the company defines as branded messaging included within the properties core experiences, to nearly triple in the next two years, with revenues hitting $5.4 billion in 2015 and surpassing spending on more traditional display formats for the first time.

In many ways, the local segment has emerged as a third wheel of sorts within social media advertising industry. The portion of social media spending on location-targeted ads accounted for a little over a quarter of the industry’s total revenue last year, and the firm projects that its share will only increase a few points over the next five years.

The muddled growth of local is due in large part to slower-than-expected rollouts of some key consumer product. Facebook, for instance, has done little in the last year to expand Graph Search, the social search product which many consider a potential competitor to Yelp, to a wider audience, although there’s also no sign that the company has taken steps back. However, Facebook did rebrand Nearby, the company’s local discovery product, to become Facebook Local Search, a sign that that the social media giant may be gearing up to grow the product.

Twitter’s foray into local has been equally half-hearted — the company tested a Nearby-like feature late last year, which allowed a handful of users to filter tweets by location. On the advertiser side, Twitter added click-to-call functionality this spring — a table-stakes feature for most companies — and rolled out a new integration with Datalogix to connect Twitter usage to in-store sales.

As a whole, product plays a much more important role in shaping the revenue opportunities for social media companies than for more traditional publishers. The growth of native advertising underscores the point. In social, the user’s context is critical to make marketing work.

For Facebook and Twitter, this means that they cannot rely on third-parties to bolt on location-targeting after the fact, and effectively replicate the complex mobile display advertising sector. In order to grow a robust local marketing businesses (both from national advertisers and small businesses), they need to develop the features and use cases which cause users to engage with the service in a local context. That means allowing users to look for friends and business nearby, engage with local media and content.

Steven Jacobs is Street Fight’s deputy editor.