• by Mark Walsh  @markfwal, November 1, 2007

North American and European mobile ad revenue will surpass $5 billion in 2012--up from an estimated $106.8 million at the end of 2007, according to a new study. Local Mobile Search, an arm of Opus Research, predicts the North American market--primarily the United States--will account for $2.3 billion of the total.

The report projects a combined annual growth rate of 116% for North America and Europe. In terms of ad categories, the forecast includes voice-based search, text messaging, application downloads, CPM-driven banners and pay-per-click and pay-per-call advertising.

"The mobile market is quickly evolving," says Greg Sterling, senior analyst of the Local Mobile Search program at Opus. "We're not just talking about competition among the major search and portal providers like Google, Yahoo, Microsoft, and AOL, but carriers and OEMs like Nokia, which bought Navteq for $8.1 billion, and mobile ad network Enpocket."

Rapid growth has been predicted for the mobile ad business for years, but the total is still a rounding error on the advertising budgets of major U.S. marketers. Sterling says the assumptions underlying the bullish forecast are on the conservative side.

For instance, it projects there will be roughly 269 million handsets with mobile Internet access in the U.S., and 357 million in Western Europe by 2012. In estimating mobile revenue, "we've assumed the minimum likely value per call and a flat per-click figure of $1.27 thoughout the forecast period, which is at the low end of the average online pay-per-call range today," says Sterling. The study also foresees click-through rates growing from 7% in 2007 up to 10% in 2012.

Strong growth ultimately depends on industry stakeholders creating a better mobile experience for consumers, he says. The iPhone is a start, and Google's stated goal of making mobile its next major focus could accelerate adoption of the mobile Web.

"The ad infrastructure and sales channels already exist," notes Sterling. "Unlike the early Internet, they don't have to be built or gain credibility with advertisers. The users just need to start showing up and the ads will follow."

Industry advocates have long touted the mobile ad market's vast potential because of its huge built-in user base, however. And the ads still haven't followed. How much consumers want to use mobile devices for more than just talking remains to be seen.