Thoughts on Mobile Advertising

With an increase in network speed that has pushed major mobile carriers to provide 3G and now 4G communications, the amount of smartphones sold globally has expanded tremendously. Faster speed and a large diversity of mobile applications and mobile web use have prompted companies to move their advertising spending from traditional channels to this new field. The Kelsey Group, a provider of strategic research and analysis, found that mobile advertising in the United States had grown to $160 million in 2008, and is expected to increase to $3.1 billion in 2013, with a CAGR of 80.9%.

The Kelsey Group also considers that, as more people move to smartphones, revenue from mobile advertising will be concentrated in search, with 73% in 2013, and display, with 18%. With respect to the breakdown by operating systems of the market, Canalys research found that in the US, the iPhone’s market share had increased from 7% to 23% in the space of one year (as of October 2009). At the same time, Research in Motion, the market leader, has lost almost more than 4% market share (now at 52%).

The expected growth of the mobile advertising market is further underlined by Google's $750m acquistion of Admob, a leading provider of mobile ad technologies, and Apple's $275m acquisition of Quattro Wireless in response.

Being in the process of developing a location-based application for the iPhone and subsequently other smartphone operating systems, this topic is of great interest to me. While there seems to be no doubt that there will be a lot of growth in the value of the mobile advertising market, I believe that it is still more than unclear on how to effectively unlock this value and how to advertise effectively. The experience with internet advertising, which in my opinion is still largely inefffective, lets me believe that it will take some time until a successful model will be found. In the meanwhile, I am hopeful that various successful niche solutions will emerge, which will be integrated in various individual mobile applications.