• by Joe Mandese  @mp_joemandese, June 4, 2010

Imagine a medium with the ubiquitous reach of television, but an advertising marketplace half the size of outdoor, and what you might end up with is something that looks like the current state of mobile media. That's the conclusion of an in depth report released this morning by the equities research team at J.P. Morgan.

Despite the fact that U.S. mobile phone penetration is now on par with television, the J.P. Morgan team notes, "we are still in the early days of the mobile ad cycle growth curve.

"We estimate that only $3.8 billion will be spent on advertising on the U.S. mobile Web in 2010."

While that is up from an estimated $2.6 billion in 2009, it still is a fraction of overall ad spending, and the vast majority of it is concentrated on the relatively rudimentary format of SMS text, not the richer advertising formats capable via the mobile Web and new smart phone applications.

"Of the ad dollars allocated to mobile, we estimate that 85% is spent on SMS (text) advertising, 8% on mobile search, and 7% on mobile display," the J.P. Morgan report notes.

Nonetheless, the securities firm is optimistic for its long-term potential, noting, "It is not a large leap of logic to conclude that advertisers will be attracted to mobile media as cell-phone adoption has reached critical mass; well over 50% of cell-phone users take advantage of non-voice features, and smart-phone launches and consumer purchases are increasing exponentially."

In the near term, and certainly for the remainder of 2010, the equities researchers projected advertisers would look at their mobile advertising expenditures as "experimental," as the marketplace strives to come to grips with its seminal and highly fragmented nature.

The key impediments, according to the J.P. Morgan team, include:

1) The small screen.
2) Lack of a standard mobile platform.
3) Multiple players in the value chain.
A different set of user expectations and needs from a mobile device.