U.S. mobile local ad revenues will reach $4.5 billion in 2014, up from $2.9 billion in 2013, according to BIA/Kelsey. In its Annual U.S. Local Media Forecast (2013-2018), the firm projects mobile local ad revenues to more than triple over the next five years, reaching $15.7 billion in 2018.
According to the forecast, total U.S. mobile ad spending will grow from $11.4 billion in 2014 to $30.3 billion in 2018. By the end of the forecast period, locally targeted mobile ads will represent 52% of overall U.S. mobile ad spending.
Driving this localized share of mobile ad revenues is the adoption of mobile local advertising tactics (i.e., geo-fencing, click-to-call, click to map) by national advertisers, who currently account for most U.S. mobile ad spending, and who are expected to take advantage of increasingly available and currently undervalued mobile local ad inventory.
Location-targeted mobile advertising is included within total U.S. mobile advertising. Here, BIA/Kelsey projects revenue to grow from $7.2 billion in 2013 to $30.3 billion in 2018. This projection has increased from their previous forecast (November 2013). Increased projections result from guidance from mobile ad networks and ad share leaders such as Google (33% of paid clicks now come from mobile devices); and Facebook (53% of ad revenues attributed to mobile, up from 23% last March). Google’s Enhanced Campaigns, launched in July, will compound these factors by forcing mobile ads on search advertisers (default campaign inclusion). This will accelerate a mobile advertising learning curve and adoption cycle for all search advertisers, including SMBs.
Enhanced Campaigns will also notably close the current gap between mobile ad rates and desktop equivalents (rates are demand-driven).
This will play out as an influx of advertisers in Google’s bid marketplace for mobile keywords will naturally boost bid pressure and thus CPCs. There is shift is already underway, evidenced by data shared with us by search marketing agencies.
The share of the overall mobile ad revenue pie attributed to location based campaigns will grow from 40% ($2.9 billion) in 2013 to 52% ($15.7 billion) in 2018. This share shift remained fairly consistent from their previous forecast, as the factors driving localized mobile ad adoption have remained steady. These factors include advertiser demand, higher ad performance for location-targeted ad campaigns, and resulting increases in mobile ad rates (CPMs, CPCs).
Other important factors driving this localized share include the adoption of mobile local advertising tactics (i.e. geo-fencing, click-to-call, click to map) by national advertisers, who account for most U.S. mobile ad spending.
SMB adoption – a slow but growing share of localized mobile advertising – will likewise impact its growth.
“Advertiser demand will be driven by natural market forces to follow undervalued inventory,” said Michael Boland, senior analyst and VP of content, BIA/Kelsey. “Mobile advertising’s appeal includes higher performance, clearer ROI, tangible conversions and a shorter purchase funnel. These qualities of mobile content and advertising present a rare alignment between typical mobile user intent and advertisers’ stated objectives.”
Mobile Local Media Forecast by Format
This forecast comprises various mobile ad formats, including textual search, display, video, commercial SMS and native social advertising. Search advertising currently holds the largest share, followed by display and native social ads. Search’s dominant share indexes higher within this localized segment than within the broader of U.S. mobile ad revenue total, due to the high correlation between mobile search and local user intent. There is conversely a lower percentage of localization within the display category, due to the branding (as opposed to direct response) and reach-driven objectives inherent in display campaigns (i.e., in-app ads).
The forecast includes a breakdown of mobile local ad spending by format as follows:
–Search (advertising applied to search queries on mobile devices) will grow from $4.3 billion in 2014 to $10.9 billion in 2018.
–Native social (visual and textual brand messaging merged into organic feed-based interfaces of mobile social apps such as Facebook and Twitter) will grow from $3.3 billion in 2014 to $9.9 billion in 2018.
–Display (display advertising applied to app and mobile Web inventory) will grow from $2.4 billion in 2014 to $6.1 billion in 2018.
–Video (rich media ad units distributed within app and mobile web inventory) will grow from $1.1 billion in 2014 to $3.1 billion in 2018.
–SMS (commercial SMS messaging) will grow from $332 million in 2014 to $381 million in 2018.