SEO News
Mobile

Will Local Make up 70% of Mobile Ad Spending?

boland-michael
by , Comments

Last week, BIA/Kelsey released its latest forecast, projecting U.S. mobile advertising to grow from $790 million in 2010 to $4 billion in 2015. Full disclosure: I am the author of that forecast.

In a past column, we focused on breakdowns in mobile ad formats (search, display SMS), and reasoned that search will be the largest growing revenue driver (Gartner agrees). This particular forecast release – and this column – highlights another data subset: local.

Specifically, BIA/Kelsey sees the local portion of the total mobile ad market to grow from $404 million to $2.8 billion. In other words, using the aforementioned totals, local’s share will grow from 51 percent to 70 percent by 2015.

How do we define “local”? The definition and forecast methodology are nuanced, but in general terms, local ads are defined as being geotargeted to reach users in a specific location, or having location-specific calls to action.

local-vs-national-mobile-ad-spend

Think Local

To elaborate on that definition and – more importantly – the reasons why local will command such a large share of overall mobile ad spending, the sources of that spending need to be identified.

In short, mobile local advertising, like most local media, includes both “national-local” advertisers (brands and agencies that target locally) and “local-local” (SMBs that advertise within their markets or service areas).

Both groups will evolve with mobile advertising and drive the revenue growth outlined above. Here’s the reasoning behind each.

"National-Local"

Brands and agencies are the largest source of mobile ad spending in the U.S.; they will increasingly evolve campaign objectives and targeting parameters to the capabilities of the hardware and local user intent.

This includes native device capabilities like the accelerometer, touch screen, camera, voice, and – most of all – location awareness (i.e., GPS). Mobile web capabilities such as HTML5 will further that shift, and from all of this will come more location targeted advertising.

This will be a matter of advertiser education and evolution to build mobile campaigns from the ground up for the new form factor. There are also some drawbacks any time you start to segment audiences (by location for example) because that sacrifices reach, which has always been a major objective for a lot of brand advertising.

So it has to be evaluated to see if higher performance and clearer ROI outweigh the almighty reach. It's a new medium and requires new thinking for not only the way campaigns are built and executed but also how they're measured and deemed successful.

Some mobile brands and mobile ad networks (i.e., iAd, Greystripe) are already sinking their teeth into this, while others still have a ways to go.

"Local-Local"

Mobile advertising will move down market to SMB and mid-market segments, where it currently makes up a very small portion of the overall ad spend. This will be similar to the shift we saw online over the past decade as advertising was "democratized" through tools like AdWords.

In mobile it will be driven by a combination of self-serve tools (i.e., AdWords, Foursquare), as well as local sales organizations (i.e., newspapers, yellow pages) that increasingly bundle mobile marketing with existing advertising. Unlike national advertisers, 100 percent of SMB ads target specific geographic areas and are thus defined as local.

Mobile Dollars and Sense

These factors will result in volume growth for mobile ads, while smartphone growth and local search queries (40 percent) increase inventory. But ultimately it’s the premiums placed on locally targeted mobile ads that will really boost the dollar share shifts projected above.

Those premiums will develop as a result of the higher performance we're already seeing with location targeted mobile ads (when compared to non-targeted). Several mobile ad networks are consistently reporting higher CTR multiples and other metrics.

Higher Performance Higher Premiums

It will be a combination of these factors that push mobile ad spending toward local. Whether it will be 70 percent remains to be seen, but weeks locked away with complex formulas of mobile usage, advertiser behavior, and ad buying economics gives me more confidence.

Meanwhile, additional affirmation has come from extrapolating mobile ad revenues reported by major ad networks such as Google, in addition to figures reported by the Interactive Advertising Bureau

But arguments continue on both sides: This is very bullish to some and very bearish to others. Where do you stand? Let us know in the comments below.


The Original Search Marketing Event is Back!
SES AtlantaSES Denver (Oct 16) offers an intense day of learning all the critical aspects of search engine optimization (SEO) and paid search advertising (PPC). The mission of SES remains the same as it did from the start - to help you master being found on search engines. Early Bird rates available through Sept 12. Register today!

Recommend this story

comments powered by Disqus