Local mobile advertising is set to generate $9 billion in revenue by 2017, but it will take a smaller portion of total mobile ad spend than previously expected, according to a new study by BIA/Kelsey. The research firm revised its earlier estimates for local-mobile spend’s share from 44% to 38% of total mobile ad dollars in 2012 to account for slower-than-expected adoption of local strategies among national advertisers and an increase in mobile advertising as a whole.
The firm projects that mobile-local spend will increase more than seven-fold over the next five years, growing from $1.22 billion last year to $9.09 billion in 2017. Local’s percentage of mobile spend will actually grow as well, accounting for 57% of the total spend on mobile advertising within five years.
“National marketers’ spend on localized mobile campaigns actually grew from our last forecast,” Michael Boland, senior analyst at BIA/Kelsey, told Street Fight. “However, the localized share of U.S. mobile advertising went down… since U.S. mobile ad spending lately includes things that are less location-based.”
A big part of what drove local’s share downard was an explosion in mobile spend on social properties like Twitter and Facebook, which have focused primarily on branding and reach and lack advanced localization features, said Boland. eMarkater recently released projections that put Facebook’s mobile revenue at $1 billion for 2013, which means that the social giant could account for nearly 20% of all mobile revenues next year.
Even though Facebook COO Sheryl Sandberg has touted the company’s potential in local, Facebook’s local strategy remains nascent at best. The company has made some overtures recently to local media companies as it looks to find resellers to SMBs, but advanced location targeting (which has exploded in the mobile display world) is still largely absent in the platform. Its entry into the local discovery and search space with Nearby and Graph Search respectively set the company up for new local revenue opportunities down the road, but monetization is likely still far off.
“Currently, mobile search advertising that’s native to the experience (i.e. Facebook news feed ads) are based on relevance triggers other than location (i.e. social or contextual relevance),” said Boland. “But we believe that will change and over time mobile social advertising will have a bigger impact on our mobile local numbers.”
Beyond social, search still dominates in local as it does elsewhere in mobile. According to the study, mobile local search is set to bring in $2.4 billion in 2013, with its share of total mobile spend estimated to grow from 58% last year to 62% in 2017.
Boland said that the introduction of Enhanced Campaigns, Google’s attempt to tear down the barrier between mobile and desktop spend, will not have a substantial impact on mobile search spend anytime soon. Considering that the roll-out includes substantial improvements in location targeting capabilities, local spend should see a similar lift to the overall mobile market.
One key area to watch is how research firms like BIA/Kelsey incorporate spending on campaigns in which location is used as proxy for another indicator like audience in their model. It’s still minimal compared to traditional geo-targeting, but given the investment by local-mobile ad networks like Verve Mobile in audience targeting technology, it’s likely to be a growth area in the space.
Steven Jacobs is deputy editor at Street Fight.