From my Forbes.com blog The New Persuaders:
Researcher Gartner today upped its forecast, already pretty heady, for mobile ad sales to $11.4 billion this year, up 19% from 2012. Gartner research director Stephanie Baghdassarian says that’s because of the rapid rise in the purchase and use of smartphones and tablets like the iPhone and the iPad.
But Gartner’s report has some interesting detail about the changing mix of mobile ad types and which parts of the world growth is coming from. Display ads will grow faster than search ads, overtaking them by 2016. That could be a challenge for Google, though it also has been investing heavily in display ads in recent years to become No. 1 or 2 with Facebook depending on who’s measuring.
Delving deeper into the details, here’s what Gartner’s expecting to see:
* Mobile search will continue to do well, but eventually display will lead the way:
Mobile search — including paid positioning on maps and various forms of augmented reality, all of which can be informed by location — will contribute to drive mobile ad spending across the forecast period, although it will diminish in strength as the period progresses. Gartner believes that mobile display ad spending will grow and take over from mobile search. It will initially remain divided between in-app and mobile Web (in-browser) placements — reflecting consumer usage — although after several years of in-app dominance, Web display spending will take over in-app display from 2015.
* Mobile ad prices will fall:
The rapidly growing share of time that consumers spend on mobile devices is generating ad inventory at a pace considerably faster than most advertisers can shift their spending to the medium. This creates a surplus condition that is driving down unit ad prices which in turn has led to a situation in which a significant portion of mobile ad inventory is taken up by app developers paying for ads to promote their apps and get them more downloads, a category known as “paid discovery.”
While the revenue basis of paid-for app store downloads provides some economic justification for this category, for many developers the outlay for ads is close to their maximum ad income or even exceeds it. This creates a circumstance, reminiscent of the early days of Web advertising, in which cyclical advertising arrangements among websites produced an inflated picture of revenue that may ultimately prove to be a bubble. “Some correction in the growth rate must occur before demand from brand and local advertisers catches up with supply, and more sustainable economics support a faster growth rate commensurate with consumer adoption,” said Ms. Baghdassarian.
Overall mobile ad revenues are forecast to hit $24.5 billion in 2016–about the same as Gartner’s earlier forecast, but with faster near-term growth than expected. And where is all this mobile ad money coming from? Not surprisingly, print–especially newspapers–as well as radio.
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