Why Local Will Dominate Mobile Ad Spend

Share this:

The biggest question I’ve received in the wake of a recent mobile advertising forecast, is why locally targeted ads will be so dominant.

Specifically, BIA/Kelsey’s U.S. Mobile Local Ad Revenue Forecast projects overall mobile ad spending to grow from $690 million last year to $4.86 billion in 2015 — steep but not surprising.


But the local share of that total will go from $320 million to $3.37 billion, or about 2/3 of overall ad spend. Yes that’s a lot, and there are a few explanations, inherent in our many formulas and methodology (and below).

But first, what does local mean? Generally, we define local ads as being geotargeted, in terms of where they appear. In some cases they can include local calls to action (calls, directions, etc.), or locally oriented ad copy.

But beyond classifications (email me for more detailed methodology), the overall question remains: why will local be so dominant?

Reason 1: Usage.
Mobile local search is on the rise. Google reports that 40 percent of mobile searches have local intent, up from 33 percent a year ago. xAd meanwhile reports 117% year over year growth in mobile local search volume.


Reason 2: Advertiser Evolution
Brands and agencies are the largest source of mobile ad spending in the U.S.. But they’re only now starting in large part to break out of the bad practice of porting online ad creative and campaign objectives to the smaller screen.

Of the many granular targeting capabilities of the mobile device starting to take hold, the one we’ll focus on here is of course local. Millennial Media reports that location targeting in mobile ads is up 53 percent year-over-year.

And it’s not just large advertisers. Like online ads over the past decade, mobile advertising will increasingly move down-market to SMB and mid-market segments. These campaigns are all “counted” as local due to refined locus.


This down-market shift will happen on the backs of YPs, newspapers and other local media who increasingly deploy sales forces with digital bundles that include mobile. I talk to lots of these guys; they’re all doing it.

To augment that effect, we’re also seeing self-serve tools from the likes of Foursquare. Meanwhile Google has increasingly added options to AdWords to offer one-stop-shop appeal for mobile and online campaigns.

This has the check-box like simplicity to “add mobile” as is required in the early stages of adoption. But Google is also introducing new formats for more granular targeting such as pay-per-call, local extensions and others.

Reason 3: Premium Ad Rates
The above two factors will result in increased ad inventory and growth in the volume of ads that are sold. But in parallel, premiums on locally targeted mobile advertising will boost the dollar share shifts shown above.

Those premiums result from the higher performance we’re already seeing from location targeting. Several mobile local ad networks consistently report to me higher CTR multiples versus non-targeted equivalents.

xAd for example reports 6.5% CTR averages for locally targeted mobile ads. That compares with standard mobile banner ad CTRs which are .5- 1%. But more importantly, the firm measured secondary actions rates (SAR).

These include calls, directions, or others that offer better ROI measurement than clicks. They also continue to broaden, having different levels of appeal to different advertisers, depending on category or intended response.


Secondary actions (a.k.a. “post-click activity”) will continue to grow in step with aforementioned advertiser evolution. Meanwhile, like early stages of any medium, mobile is measured in the language of its predecessors.

That’s why the CTR keeps popping up in comparisons like those above (and CPMs, but that’s a different story). But when mobile — particularly local — establishes widespread credibility to stand on its own, it’ll get its own metrics.

CTRs and CPMs shouldn’t go away, but we’ll see more metrics around these secondary actions. They’ll also evolve with “closed loop” efforts like bar code scans, deals and payments. Mobile forecasters’ jobs just got a lot harder.

Mike Boland is senior analyst at BIA/Kelsey, where he heads up the firm’s mobile local coverage. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0 and others.

Mike Boland has been a tech & media analyst for the past two decades, specifically covering mobile, local, and emerging technologies. He has written for Street Fight since 2011. More can be seen at Localogy.com