Brazil, India, China To Outpace U.S. Mobile Ad Growth

by Mark Walsh, May 11, 2012, 8:58 PM

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The U.S.’s place at the forefront of mobile advertising is quickly coming to a close as Brazil, China, and India (the BRIC nations minus Russia) prepare to take center stage.

That's the conclusion of a new Yankee Group study projecting that mobile ad spending across the three countries will grow sixfold to more than $6 billion by 2016, while the U.S. total flattens to about half that amount in four years. Europe will see even less expansion, with mobile ad revenue expected to rise little from the estimated $1 billion total this year.

Yankee Group analyst Jason Armitage argues that ad dollars will increasingly flow to emerging markets where mobile is the primary digital platform, rather than the PC. He predicts, for example, that mobile will make up more than half (51%) of digital ad revenue in India in four years, compared to just 11% in the U.S.

A recent Interactive Advertising Board estimate put U.S. mobile ad spending at $1.6 billion in 2011, or about 5% of total online ad sales of $31 billion. But given growing opportunities in the “BRIC” countries, the research firm projects that growth here will slow as mobile ad investment spreads out internationally.

The study finds that ad spending per mobile device in the U.S. is still at a low level, with dollars going to PC-based Web campaigns 70 times higher than those on handsets. It attributes that disparity in part to time spent on the two platforms. U.S. consumers averaged 1.3 hours daily usage of mobile Web and text, compared to 3.8 hours online on a desktop computer, in 2011. 

But Armitage also points to two other factors: the mismatch between traditional online ad formats and the quick-check patterns of smartphone usage, and the lack of user data in the mobile sphere. In the latter case, he suggests that things are improving rapidly as mobile operators and technology providers find ways to generate data tied to demographics, location, and user behaviors.

“This is enabling better targeting of ads, frequency capping and contextual promotions,” the report states. In particular, it points to in-app ads as the best bet for mobile advertising because of the greater targeting capability they afford. Roughly a quarter of U.S. app downloaders across smartphones and tablets have clicked on an ad this year, according to a Yankee Group survey.

Targeting on the iOS platform, of course, has become more challenging for developers since Apple’s decision last year to begin phasing out access to unique device identifiers (UDID) for tracking user activity across apps.

When it comes to devices, the report highlights the emergence of tablets as a favored mobile ad vehicle. It shows that tablets in the first quarter generated $13.43 on average in ad spending compared to $5.06 for smartphones and $2.05 for feature phones. “Low creative costs and high click-through rates (CTRs) attract brand advertisers and deliver CPMs over three times the smartphone level,” the study says of tablets.

By 2016, Yankee Group estimates that tablets will account for 38% of smart devices in the U.S., providing wider reach to match up with promising early results in ad performance. Regardless of device type, Armitage stresses that user-first focus will by central to success in mobile advertising given the personal nature of handheld gadgets.

Mobile differs fundamentally from online advertising in making consent a key element of marketing programs, posing a higher bar to advertisers in reaching consumers. That’s especially true in mature markets, where privacy-related regulations around mobile are more likely to influence ad activities.

“Data on context and personal circumstances provides enormous potential for mobile, but the winners will be companies that implement strategies that start with the user,” wrote Armitage. Considering the series of mobile privacy controversies that have erupted in the last year from iPhone location-tracking to address booking-grabbing by the Path app, it seems that message hasn’t taken hold as companies scramble to suck up all the user data they can get.

The Yankee Group findings were based on interviews with more than 15 mobile ad-related companies, its U.S. and European consumer surveys on mobile advertising, and its quarterly data on device usage.

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