U.S. Mobile Ad Spend To Pass $1 Billion For The First Time

Mobile advertising is still a small and young business when you compare it to how much money goes into digital—let alone offline—advertising and marketing campaigns. But there are some clear signs of it growing up fast: eMarketer says the U.S. is on track to have its first year of $1 billion-plus in mobile ad revenues.



EMarketer first floated its $1 billion prediction back in April, but now it is revising that number up to $1.23 billion.



What’s driving this fast growth? Increased confidence from advertisers in the medium, for one. But also the fact that these advertisers are getting better scale for their investment: by the end of this year, some 38 percent of all U.S. consumers will be using a smartphone, accessing the mobile internet at least one time each month, says eMarketer.



The $1.23 billion figure is nearly double the investment made by advertisers into mobile ads in the U.S. in 2010, which was $743 million. And eMarketer believes that by 2015, that number will go up by another $4 billion to reach nearly $4.4 billion.





In its calculations, eMarketer includes the three main areas of advertising on mobile today: display ads, search ads and messaging-based advertising, with ads viewed both on phones as well as tablets. But within that, some areas appear to be growing faster than others:
Search advertising has seen the most growth over last year, and eMarketer predicts it will nearly double in its revenue in 2011, to $349 million from $185 million in 2010. Video will also see 100 percent growth, although the starting point is very small indeed: it will make nearly $58 million in revenues, compared to $28 million a year ago. Video, in fact, will see the most growth in the next four years and by 2015 will be generating more revenue than banners/rich media generates today.



Display (which includes rich media and banner ads) is also showing strong growth, and is currently the second-largest format. Display will generate $376 million of revenue in 2011, it predicts, compared to $202 million in 2011.



And as you would expect, the oldest format, messaging, grew the least but it remains the biggest format for mobile ads today. Messaging will generate revenues of $443 million this year, compared to $327 million in 2010.



(The full breakdown of how each format will balance out compared to the others is detailed at the end of this post.)



What we cannot see from eMarketer’s figures is how advertising distribution/consumption—and crucially engagement—is comparing across smartphones versus tablets, and whether some platforms encourage more interaction than others. Given that tablet penetration is still low compared to smartphones, it’s likely that they are still carrying only a small part of traffic, but that they will be key to the rich media and larger (more premium) format growth over time.
eMarketer says that it bases its calculations on a “meta-analysis of mobile advertising estimates from research firms,” as well as company data from mobile ad networks, smartphone and tablet usage trends and interviews with executives.



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