On a panel today talking about the power of apps at the Mobile World Congress in Barcelona, the CEO of WPP, Martin Sorrell, called location services the “holy grail” for mobile advertising. Mobile ads are still just a small part of digital ad spend, and a tiny fraction of ad spend worldwide, but WPP is hoping that, in the face of ad networks run by companies other than WPP, it can remain a relevant partner in that ecosystem. WPP is also planning “middle stage investment in interesting companies that will enhance our mobile offering” he said.
There have been a number of location-based app integrations with announced this week during the show — for example, three from Skyhook, adding location support to Intel’s AppUp developers’ platform, Citysearch and PriceLine apps for Android devices.
Gartner predicts that apps will make revenues of $15 billion this year on downloads of 17 billion.
Sorrell took that one step further and said that by the end of 2014 advertising will generate a third of all revenue in apps. But given that this will bring a price in the billions, compared to a media industry worth trillions world-wide, “we still have a long way to go,” he said. “The most popular app today is only a $30 million dollar business,” he said. Is that an Angry Birds reference?
Sorrell said that while people are currently spending betwee 20 percent and 25 percent of their time online, WPP’s clients are only spending about 14 percent of their budgets online, and only “a small portion of that on mobile.”
WPP’s role in mobile advertising. WPP has made some key investments in the digital space, and formed a separate division in 2007 to run them, but it has yet to invest in any of the big mobile advertising networks, which have become one of the main routes to advertising on mobile platforms.
Independent companies like Millennial Media are also seeing enormous growth. Also the platform operators are very much dominating this space: Google’s Admob, for example, is on a run-rate to make more than $1 billion in the space this year, and Apple (NSDQ: AAPL) has cornered the premium advertising space on its platform with its own iAd product.
All of these take a different approach to mobile advertising, which can cut out the WPPs of the world. So as the mobile advertising market continues to grow, are these new-style ad platforms posing a threat to WPP and other big Madison Avenue firms?
Sorrell maintains no — at least for now. He says that WPP has a big role to play in ushering in big media brands further into the space. Sorrell also said that WPP is looking to make “middle-stage investment in interesting companies that will enhance our mobile offering” although he did not elaborate further on that for now.
One clue of where we could see WPP doing more: Sorrell, who spoke mostly from a script filled with an avalanche of stats, seemed to change tone when he called location the “holy grail” of mobile advertising, with services like “virtual shops” growing in ubiquity.
Another is a stat that Sorrell revealed about China, which is one of the biggest mobile markets in the world. According to WPP’s GroupM, between in 2000 and 2015 the growth in Chinese digital advertising will be greater than the growth in the UK and Germany combined. WPP will want to see if it too can have a part of that.