The mobile gap is starting to shrink. A new report from the IAB finds that global mobile advertising revenue jumped 82% in 2012, growing from $4.84 billion in 2011 to nearly $9 billion last year as smartphone adoption ramped and blue-chip marketers shifted their budgets to mobile media.
The bullish numbers, which are in line with other estimates, were bolstered by exceptional growth in the North American market. Mobile advertising spending in North America grew by 111% year-over-year, compared to 90% growth in Western Europe and 60% growth in Asia-Pacific.
The growth in North America is even more acute on a per-subscriber basis. The amount marketers spent on a single mobile subscriber in North America grew to 7.1 per subscriber from 3.5 a year earlier. That’s more than three times the rate at which advertisers spend per subscriber in Western Europe and seven times more than those in Asia-Pacific.
“In some ways it comes back to a sort of technology leapfrogging effect that’s underway,” said Joe Laszlo, senior director at the IAB’s Mobile Marketing Center of Excellence, which commissioned the study. “Smartphone penetration is higher [in the U.S.] relative to other region which enables other things like rich media and video advertising on the mobile device. It’s difficult to attribute all of the growth to that, but clearly those ad formats are substantially more lucrative, and marketers are willing to pay more for them.”
eMarketer estimated that only six countries — Norway, Sweden, South Korea, Australia, the U.K., and the U.S.— saw smartphone penetration among mobile users break the 50% mark last year. The U.S., which added 28.1 million smartphone subscribers in 2012, boasts more than 141 million smartphone users today, nearly equal to the populations of the remaining countries combined.
Laszlo also points to growth in search and display advertising in more developed markets as a consequence of smartphone adoption and the availability of high-speed networks. Messaging, for instance, still accounts for over two-thirds of spending in Latin America, but its share has subsided in more developed markets where users spend more time in-app and on the mobile web. Globally, search and display advertising broke 90% market share as spending on messaging grew (though at nearly half the rate of mobile as a whole).
The decrease in spending, however, may veil a wider shift from paid to owned media in mobile: “We’re seeing brand marketers talk more and more about a shift toward an app-centric messaging strategy,” says Laszlo. “Some kinds of messages — say a note from a retailer about a deal — that used to be delivered in bulk by SMS; some of that is shifting to app-based messaging services, which, as a marketer, you don’t actually have to pay for.”
It’s a shift that presents a thorn in the side of the traditional model for measuring marketing spend. Marketers might invest in owned-media channels like social and application development, but that investment is not covered by traditional frameworks.
Owned-media is endemic to mobile for a number of reasons. Given the intimacy of the device, the opportunity for advertiser is in personalization and customization not scale and reach. Paid-media can provide reach, but the dissonance caused by relying on an in between limits what marketers can do in terms of personalization and targeting.
That problem is particularly acute in local. The value hyperlocal provides marketers rests in having a deep knowledge of consumers’ location, but given the deeply personal nature of those data, it’s a difficult relationship to manage via a third party (e.g. a publisher). For paid-media channels like banner or search advertising, the targeting capabilities will always be limited by the indirectness of the relationship between consumer and marketer.
In that sense, the deep technical advances in location analytics and positioning could remain out of reach for the mobile advertising industry. Instead, marketers will turn to direct channels like loyalty programs and social networking to implement these new tools and techniques.
Steven Jacobs is Street Fight’s deputy editor.