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new mobile ad forecast from research firm Macquarie Securities takes a closer look at what a mobile boom could mean for ad agencies. It starts with a bullish projection of worldwide mobile ad revenue
growing from an estimated $2 billion in 2009 to $14 billion in 2015--a 38% average annual growth rate.
That's based on eMarketer's estimate of a U.S. market of $416 million in 2009 and $743
million in 2010, plus Dentsu's projection of a Japanese market totalling $1,140 million in 2009, and our rounded assumption of $500 million for the rest of the world. In this scenario, mobile, which
is only 1% of ad spending today, would rise to 3%-4% in the next five years and 5%-8% over time.
The firm envisions a big opportunity for agencies because of the layers of complexity mobile
entails that call for outside expertise. Apple discovered this during the course of its iAd rollout and "has been forced, reluctantly, to adjust to work better with agencies who represent ad budgets,"
notes the report written by analyst Ben Schachter.
It also points out that unlike the Internet, mobile search and display advertising are being led more by large branded advertisers than
local search marketers. "This is an agency business -- mobile ad networks like AdMob and Millennial Media rely on agencies to bring client revenue through the door, and Apple and Android won't go
straight to the blue-chip advertisers, just as Google, Microsoft and Yahoo don't now for internet search and display," the report states. If mobile grows to account for 3% of global media spending in
the next five years, Macquarie calculates it could add between 0.2% to 1.3% to agency growth. "This is a lot on current average annual organic growth forecasts of about 5%," according to the firm. Its
report lays out three scenarios:
Conservative: Assumes mobile ad spending takes share from traditional media but total ad spending remains the same. The impact for agencies
is the arbitrage between the 25% fees they take for mobile media and 16.4% for other media. That leads to the 0.2% growth estimate. Optimistic: Assumes mobile ad spending is in addition to other
media and no cannibalization of revenues -- so overall ad spending rises above current forecasts. That would bring a 0.6% revenue gain.
Aggressive: This model uses a a 57%
annual growth rate for mobile ad spending instead of 38%, producing the 1.3% growth rate. (It doesn't assume mobile cannibalizes other spending.) Macquarie is betting on the optimistic outlook in the
long run. It also points out that agency pricing for mobile work is similar to that for the Internet, where there's a fee for service plus typically some incentive-based piece to reward successful
campaigns. But the firm expects a growing portion of agency compensation for mobile to come on the performance-based side, "given the highly targeted nature of the work."