• by Michael Oiknine , November 13, 2012

In the mid-90s, I recall reading an article that estimated Web-based advertising to be an inconsequential $50 million. Roughly 15 years later, however, online advertising is a business of over $70 billion. With tablet-based advertising, I believe we're starting to see a shift that will be just as dramatic, but its transition will happen at far faster speeds. Due to a categorical misunderstanding, however, few people in tech have grasped how significant this change will be. Let me explain.

The hard numbers behind the rise of tablets

By the end of this year over 74 million tablets will be in use in the U.S., and over 115 million next year, according to a report from OPA. By 2017, the total market may grow as large as 400 million worldwide, according to NPD. In late 2011, U.S. mobile ad revenues were $1.2 billion, and are projected to be $4.4 billion by 2015, according to eMarketer. With those numbers, even if tablet spending only represents 25% of mobile advertising in the U.S. alone, then we’re already looking at a sector of $1 billion+ a year.

I believe the tablet space can and will become much larger than that. Far too often, tablets and smartphones are placed in the same category, and this is a fundamental error. Here’s why.

Tablets offer an immersive, multi-engagement experience

Our tracking data suggests that tablets are most often used at home for entertainment, which backs up recent research by both IAB and OPA suggesting that short-form entertainment and news video content are king among tablet users, with magazine readership much higher than that for smartphones.

Tablets create a deep level of interaction with the consumer, where content is literally delivered to their fingertips. This makes the user interaction unique -- especially when we’re talking about a brand engagement experience. On a tablet app, an ad is not segregated to a separate ad box next to the piece of content you really want to see -- but instead, can be a rich media ad format that takes up the entire screen, creating an intimate experience between the brand and the end user.

Even more noteworthy, while most ads on laptops are delivered during a time when meaningful consideration is not likely, ads on tablets can be experienced during periods of peak receptivity. Not surprisingly, a recent study suggests that tablet-based activities are more commerce-related. What’s more, since tablet ownership tracks to the more affluent and tech-savvy, we will be seeing disproportionately high rates of upscale shopping and travel conducted on tablets.

Where tablet advertising needs to go from here

Despite all this growth and potential, tablet-centric advertising is still in its infancy. As app developers continue the process of learning to work on the format, I recommend experimentation. However, I also want to emphasize how important it is to start doing this now; if you don't begin in the next 6 months, your firm stands a strong chance of falling behind its competitors.

Few brands are thinking big about tablets, let alone mobile. Of the $70B spent on desktop advertising, only $1-2 billion is spent on mobile, and just a fraction on tablet-specific ad campaigns -- although the report from IAB this summer suggests that tablet consumers are twice as likely to interact with ads compared to mobile users. I suspect that major sponsors will soon be in a desperate scramble to catch up with smaller and more agile competitors on tablets.

There are reasons why advertisers are slow to take advantage of this opportunity: While mobile advertising is directed at people willing to make in-app payments or download an app, the big brands aren’t looking for either of those things. Brands want to engage their audiences. They want to find the market that fits their product best. None of that data readily exists now, but it’s coming. Also, brands had to wait for iOS6 to have access to a clean (i.e., non-UDID) way to track attribution and therefore ROI of their in-app mobile campaigns. Indeed, the recent iOS 6 update comes with the IFA (Identifier For Advertising), which offers an opt-out framework for the user. In this way, Apple seems to finally be creating the right platform for advertisers who want to leverage mobile and tablets far more.

For now, however, one thing is certain: Those who do not begin to innovate in this space next year will soon wonder why they lost touch with their customers.