MMA Updates 'Optimal' Mobile Budget Share To 16%

Two years ago, the Mobile Marketing Association issued a report recommending mobile ad spend should be 7%, on average, of ad budgets at the time, instead of the 1% at the time.

The MMA arrived at its mobile allocation estimate through a formula that looked at the actual market costs and effectiveness of mobile ad campaigns, as well as factors such as media consumption, smartphone penetration and reach and frequency in mobile.

Since then, the clamor over mobile ad budgets not keeping pace with the growing share of traffic and time spent on mobile devices has only increased. The perceived imbalance was highlighted in a slide in Mary Meeker’s annual Internet trends report showing that while U.S. consumers spend 20% of their media time on mobile, the category only commands 4% of total ad dollars.

Given mobile growth since 2012, the MMA on Tuesday issued a new report updating its “optimal” mobile budget allocation from an average of 7% to 16%, using the research methodology, dubbed sMoX, developed by independent research firm Market Evolution. That proportion would be more than five times the current 3% assigned to mobile as a share of total U.S. media spend of $177 billion this year, according to a 2013 eMarketer estimate cited.

"Recent empirical field work and cross-channel analytics from the Mobile Marketing Association suggests that total mobile spend is sub-optimal,” states the report, noting that the SMoX studies are designed to determine the value of investing in mobile compared to other media categories. Specifically, the MMA pointed to a recent study of a 2013 AT&T campaign in which mobile was just 1% of the budget but delivered twice the impact per dollar spent versus TV.

With the optimal modeling mix, the report suggests that instead of the projected $5.9 billion in U.S. mobile ad spending (excluding search) this year, the amount would instead be far larger, at $28.5 billion. And the total worldwide would be $86.8 billion out of total spending of $543 billion.

Within a decade, the MMA says the optimal mobile budget would increase to 29%, translating into more than $71 billion in the U.S. and almost $219 billion globally. Keep in mind those are the trade group’s projections based on budget at what it considers the appropriate level to maximize ROI, as opposed to a forecast of what future mobile ad spending will actually be.

eMarketer currently predicts that U.S. mobile ad spending, including display and search, will reach $19 billion this year and almost $59 billion in 2019. The Internet Advertising Bureau, by contrast, doesn’t make any projections of future digital spending, including mobile. It estimated mobile ad revenue last year at $7.1 billion in the U.S. and $19.3 billion worldwide.

Brian Wieser, a senior analyst at Pivotal Research Group, raised doubt about the very idea of establishing an optimal budget for mobile because different media are effective in different ways depending on the type of marketer. “Further, a host of other factors will inform why spending goes where it goes beyond conventions of media optimization, such as the need to support sales channels uniformly with mass reach media,” he said in an interview.

"Person using a Smartphone" photo from Shutterstock.

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