Contrary to popular belief, mobile video inventory is now far outstripping the demand from advertisers -- and many players in the ecosystem have an incentive to present mobile inventory as being constrained. (BrightRoll noticed a similar dynamic as the online video advertising business matured.) Well, the jig is up.
As Ray Kurzweil says, we tend to think linearly but information technology scales exponentially. The confluence of three factors have driven this massive growth in mobile video inventory:
1. Proliferation of iPhones, iPads & Android mobile devices. Let's be honest, nobody thought these devices would be as widely adopted as they have, but the stats are staggering. According to comScore, 69.5 million people in the U.S. owned smartphones by the end of February 2011. Android apps have been installed more than three billion times -- Apple passed 10 billion downloads in January -- and more than 350,000 Android devices are activated every day, according to Google. And Apple reported in its Q1 2011 earnings report that it sold 16.24 million iPhones and 7.33 million iPads during the quarter.
2. Video Advertising As Monetization. Frustrated by miserable sub $0.25 CPMs in mobile display and capitalizing on the slow rollout of mobile video content, non-video developers are rapidly including video advertising as a key part of their monetization strategy. BrightRoll estimates that mobile social gaming is already five times larger as a source of mobile video ad inventory than all mobile video content publishers combined.
3. Video Exchanges. By providing mobile developers a single integration point to access video advertising demand from hundreds of buyers, video exchanges make buying mobile video as easy as buying online video. This means that mobile can be included as part of any digital buy.
In six months, the entire business of mobile video advertising has emerged, and the trends are clear: inventory is growing, standardization is taking hold and both buyers and sellers are treating online video and mobile video as one in the same. The implications of these trends are significant:
· CPMs will fall, as they did online, and will reach equilibrium with online video. $30-plus CPMs in mobile video will disappear within 12 months. If your business is banking on those rates, you will lose.
· As rates fall, advertisers will likely allocate more money to mobile. BrightRoll saw this in online video previously. It is much easier to say mobile is "more TV" than it is to say it is "better than TV" or, even worse, "two to three times better than TV."
· Lastly, total revenue in the ecosystem will start to scale aggressively even with lower rates. This means that all the demands on vendors, such as targeting, analytics and research, will be raised to meet other mediums.
It is exciting to be part of such a dynamic and growing part of the video advertising business. We estimate that mobile video advertising will grow tenfold during 2011, and perhaps as much as five times during 2012. Game on!