Blog Post

The Good News: Mobile Ads Will Grow. The Bad News: Mobile Ads Will Grow

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

One more analyst house is adding a vote of confidence in mobile advertising: Enders Analysis says that after years of marginal numbers, 2011 will be the year that the mobile advertising finally starts to grow. In the UK, it will account for four percent of all online advertising in 2011. But there’s a big cloud attached to that silver lining. Because the unit prices for mobile ads are even cheaper than the already-low prices attached to online advertising, the growth of mobile ads will depress average prices for online ads even further.

Enders predicts that by 2015, mobile advertising will account for 9.5 percent of all online ads, according to the FT. That equates to a value of £419 million ($648 million) and represents an explosion in growth from Enders’ figures for 2009: £46 million ($71 million).

A lot of this growth will be fuelled by the increasing popularity of smartphones, and the subsequent rise in the web and app browsing that these devices will bring. Enders predicts that smartphones will account for 75 percent of all mobile devices in the UK by 2015. Smartphones, by that time, will also account for 28 percent of all web browsing.

It’s not just future growth, either: some numbers released in December from the ad network InMobi underscore how the shift in mobile ads is already well underway. In a 90-day period covering July-October, European mobile ad impressions grew by 88 percent to 845 million ad impressions. InMobi says this was driven by increases in Android OS monthly ad impressions (+256 million) and iPhone OS impressions (+260 million). iOS is currently the dominant OS in Europe with a 31.9 percent share, with the iPhone the single most popular ad device in Europe — meaning that users are most likely to view ads on these devices — it had a 29.4 percent share of the market.

And although Android is collectively growing, no single device is showing to be as popular for web and app browsing as the iPhone. In the period covered by the InMobi research, the Nexus One is the second-largest device, but it only has a 2.5 percent share of the market. These figures do predate the launch of several more Android devices, though.

And for the record, Nokia (NYSE: NOK), which InMobi had said was historically the market leader in Europe, is now a “distant second” in the browsing space. It currently accounts for 19.7 percent of consumption, losing six share points in the period.

Yet all this good-sounding news for mobile could turn out to be a double-edged sword.

“If a significant proportion of mobile browsing replaces existing PC-based browsing, the overall effect could be negative due to the lower display yield on mobile internet pages,” reads the Enders report.

In other words, there is less real estate on mobile pages, so it sells at a cheaper price. The FT also notes, anecdotally, that news publishers say more people are browsing on mobile, but they are spending less time on each page, and are therefore less likely to click through on the advertisements, which will also translate to less revenue.

So too will the type of advertising that is shaping up to be the most popular kind on mobile: Enders says that search ads will make up one-half to two-thirds of all mobile ads, with display ads, which are typically priced at a premium to search ads, only the second-biggest category.

One thing that might prove to be an antidote to the dragging trend of mobile advertising are tablets. These deliver a larger ad format and potentially offer a variety of different ways of interacting with the media — something that we are already seeing with some of the early iAds for the iPad.