A new J.P. Morgan report predicts U.S. mobile ad spending will roughly double to $1.2 billion this year, fueled by growing mobile usage.
That forecast is in line with an eMarketer projection that U.S. mobile advertising will reach $1.1 billion in 2011. The Internet Advertising Bureau estimates that mobile ad dollars totaled in the range of $550 million to $650 million last year.
In an analysis focusing on top Internet companies, JP Morgan analyst Douglas Anmuth says the firm expects mobile to be the single biggest factor accelerating Web growth for the next several years. He points out that mobile data traffic is already three times the level of the wired Internet globally in 2000. In addition, the build-out of next-generation networks will increase connection speeds tenfold by 2015.
The J.P. Morgan report estimates mobile ad revenue in 2011 comes to $7 or $8 per user -- well below the $35 per Internet user during the post-bubble days of Web advertising in 2002. (The roughly $600 million in mobile advertising last year was equal to only a fraction of the $26 billion in Internet spending.) The smaller real estate of phone screens and limitations on ad creative also present obstacles to higher spending.
Driving demand for faster mobile data delivery is the spread of smartphones.
Despite rapid growth, the report points out that global penetration will only approach 30% this year, indicating that there is still plenty of room for expansion. (A Pew study released this week estimated U.S. smartphone penetration at 35%.) Worldwide, IDC predicts smartphone share will reach 45% in 2015.
Even so, Anmuth argues that advertising on smartphones and tablets will ramp up much faster than on the PC-based Web, especially given the established online ad market. And based on the growth of mobile users and location-based services, mobile advertising could ultimately become larger than Web-based advertising.
When it comes to major Internet companies, Google has been among the most aggressive in pushing into mobile through Android, search and mobile payment initiatives like Google Wallet. Mobile likely accounts for 5% of the company's gross revenue in 2011, according to the J.P. Morgan report. Google earlier this year said revenue from mobile operations had reached $1 billion on an annualized basis.
Anmuth noted that Yahoo has a stronger mobile presence overseas through a host of carrier deals, including with operators such as Vodafone. But mobile texting represents a threat to Yahoo's traditional strength in email, which represents about half of its page views. Likewise, the rollout of mobile app versions of key properties like Yahoo Finance and Fantasy Football could undermine the portal model the company is built on.
In the online retail sector, eBay is viewed as well-positioned for mobile. The company is on track to generate $4 billion in mobile transactions this year, while payments unit PayPal will do $3 billion in mobile. eBay this month also acquired mobile payments provider Zong for $240 million to add carrier-based billing to its payments arsenal.
Amazon has a variety of apps including Amazon Mobile, Deals, Kindle, and Price Check, but is still at an early stage in m-commerce. Amazon a year ago said customers had spent more than $1 billion on mobile devices (including via the Kindle) in the prior 12 months. If the company introduces its own tablet in the next few months, as reported Wednesday, that would provide another connected device to help drive sales.