Mobile Ad Revenues Growing Faster Than Previously Expected
A new study from BIA/Kelsey finds that mobile advertising revenues may accelerate at a faster clip than previously thought. In its U.S. Local Media Forecast, the firm projects that mobile ad spending in the U.S. will rise from $7.22 billion in 2013 to $25.47 billion in 2017, a 20% increase from what the company projected last year. Meanwhile, the share of mobile ad spending spent on locally-targeted ads continues to grow as well — albeit at slightly slower rate than previously expected.
According to the projections released this morning, mobile advertising spending in the U.S. is set to grow at a compounded rate (CAGR) of 70.6% from 2013 to 2017, a slight increase from the 59% CAGR previously expected. A number of other research outlets have revised mobile marketing projections as well to account for a faster than expected increase in revenues.
Facebook, Google drive increase in mobile ad spending
Michael Boland, a senior analyst and VP at BIA/Kelsey, says the firm revised the projections to compensate for a recent push by Facebook and Google — the two largest stakeholders in the sector — to accelerate the amount which marketers spent on mobile products. Together, eMarketer says Facebook and Google are set to account for 55% of mobile ad revenue this year and 47% of all digital spending in the U.S.
According to an earnings report released in January, mobile accounted for more than half of Facebook’s advertising revenues in 2013. The growth of Facebook’s mobile business is due in large part to the introduction of sponsored stories, the social network’s native advertising format, which appear in the stream of a user’s newsfeed. A report released earlier this year found that the ads were over ten times more effective than the company’s standard ad units on mobile devices.
Facebook’s share of mobile revenue has grown in recent years, but it’s still dwarfed by Google. The search giant accounted for almost half of U.S. mobile advertising revenues last year, and last summer the company introduced Enhanced Campaigns, a new format that effectively tore down the wall between its mobile and desktop inventory. Boland says the bundling of mobile and desktop inventory has a dual effect: it forces marketers to shift spending to mobile, and, by increasing the amount of buyers in the marketplaces, increases competition for mobile ads, which causes prices to rise.
As mobile goes, so goes local — sort of.
The research firm revised its projection for spending on locally-targeted mobile ads upwards, but at a slightly smaller rate than mobile as a whole. According to the study, spending on locally targeted mobile advertising in the U.S. will rise from $2.87 billion in 2013 to $12.52 billion in 2017. That’s a slightly smaller revision to the compound growth rate than what the research firm made for mobile advertising market as a whole.
“A few of the areas [in mobile] where we’re seeing the largest amount of growth do not have a localized component yet,” said Boland, referring primarily to Facebook’s sponsored stories product. “Over time that will change, and we expect for the localized components to be folded in incrementally”
Today, search drives the lion’s share of revenue spent on locally targeted mobile ads. In 2014, the research firm expects search advertising to account for 55% of locally-targeted mobile revenues in the U.S., compared to display, which it projects to control roughly one quarter of the market. The report projects the two formats to retain their market share, but expects native social ads to grab a large portion of the market over the next few years.
The dominance of search in local, and mobile, is not new. A recent study showed that consumers who search on mobile devices tend to make make purchase quickly after. And, with 90% of consumer spending spent locally, it’s no surprise that location plays a critical role in the mobile search process.
Steven Jacobs is Street Fight’s deputy editor.