5 Trends In Mobile Advertising

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by: Louis Rhéaume

Spending in the mobile advertising sector will be approximately $4 billion worldwide this year, so it is an important, growing industry. GigaOM identified five trends that in particular stand out:

1. More Relevant Behavioral Targeting

Currently, mobile advertisers use traditional methods of ad targeting: device, demographic group or context. But in five years, mobile ad targeting will become more relevant to a person’s behavior and current location. For instance, online advertising network Adverline has an AdNext server that builds a prediction model of spatial and temporal relevance for delivering ads to mobile users. The company has tested this with the COEX Mall in South Korea, and it found a 70 percent confidence level that ads displayed are spatially and temporally relevant.

2. Growing Mobile Search

Mobile search advertising is already a big driver of ad spending; this is where Google (NASDAQ:GOOG) currently makes much of its money in mobile. In five years, this will still be the case, as people continue to use mobile devices to search for products and services. What will change is that, coupled with better targeting, search advertisers will deliver more relevant ads based not only on location and relevant keywords but also on more accurate predictability engines.

3. Better Analytics

Right now, the tools for measuring mobile ad campaigns lack the sophistication that advertisers expect. The Mobile Marketing Association and other groups, such as the Interactive Advertising Bureau, have set up good guidelines. But these are still evolving, and not everyone plays by the same rules. In five years, the standards will have matured. Companies will agree more about what gets measured, and analyzing mobile campaign effectiveness will not be as big a hurdle.

4. Greater Interactivity

Most mobile ads today are delivered as relatively simple text or banner formats. They are clickable but not very interactive. Rich-media ads are available too, but they are not as widely deployed for a variety of reasons: more cost, and not all devices render them well. In five years, interactive ads will be common, and users will be expanding, collapsing and manipulating them in ways that are still unfolding. This will unleash creative minds to show off their capabilities. Also, technology like augmented reality will make the interaction with brands and the world around consumers more interactive: Imagine looking at your mobile screen and playing a Zynga game sponsored by Coca-Cola (NYSE:KO), based on your physical surroundings.

5- Mobile-Social as the “Personal Cloud”

Today the mobile and social worlds already collide with services like Foursquare and Gowalla. In five years, though, this functionality will likely evolve into what some Stanford researchers suggest is the personal cloud, which will be personal data that surrounds us wherever we go. It will also be shareable with whomever we choose and will be used to make purchases, among other things. Savvy advertisers will leverage this trend with relevant offers that provide value but still respect user privacy.

The Leaders in Mobile Advertising

Meanwhile, companies like Google, Apple (NASDAQ:AAPL) and Millennial Media currently rule the mobile advertising space, and some of those will continue to have an impact over the next five years. Google now has activated some 190 million Android devices worldwide. It generated around $2,500,000,000 in mobile advertising revenues (ttm). It is a figure that’s gone up 2.5 times over the past 12 months. It may not be hard to imagine this number could easily double to $5 billion over the next 12 months. On the other hand, Apple launched their iAd network in 2010.

According to Mobithinking, mobile ad spending worldwide was predicted to be US $3.3 billion in 2011, sky rocketing to $20.6 billion in 2015, driven by search ads and local ads. In the US over half of U.S. mobile ad spending is local. Asia – Japan particularly – continues to dominate global mobile ad spend.

“As the adoption of smartphones and media tablets extends to more consumers, the audience for mobile advertising will increase and become easier to segment and target,” Gartner research vice president Andrew Frank said. Previously, advertisers targeted other media because the audience could be better classified, where the mobile Internet was a homogenous blob of consumers.

Although mobile advertising, either iAds or in-app, was a mere $1.6 billion market in 2010, that figure should mushroom to $20.6 billion by 2015, according to the research firm. Mobile ad budgets are expected to comprise 4 percent of total advertising spending by 2015, up from just a blip of 0.5 percent last year.

Mobile ads in North America should grow to 28 percent of the global market by 2015, with revenue jumping to $701 million this year and $5.7 billion in four years. Western Europe will spend $569 million on mobile advertising in 2011 and $5.1 billion by 2015, Gartner said. Asia/Pacific and Japan remain leaders in mobile advertising, comprising 49.2 percent and 33.6 percent of the world market.

What Do Consumers Use Their Mobiles For?

The most popular mobile destinations are news and information, weather reports, social networking, search and maps.

  • In all countries surveyed more consumers used their browser than apps and only a minority will use Web or apps exclusively.
  • US consumers prefer mobile browsers for banking, travel, shopping, local info, news, video, sports and blogs and prefer apps for games, social media, maps and music.
  • Mobile searches have quadrupled in the last year, for many items one in seven searches are now mobile.
  • Around 71 percent of smartphone users that see TV, press or online ad, do a mobile search.

MobiSocial Lab

The lab is a Stanford engineering research team that asks fundamental questions about the marriage of mobile communications and social networking, and begins to design the future of open-source social networking. MobiSocial is working to create a new class of mobile and social computing technology that works in consumers' interests while enabling all the positive aspects of social media – from e-commerce to closely knit social circles.

The Personal Cloud

Other apps gather, manage and protect the ether of personal data that surrounds us. This ether – known as the "personal cloud" – will follow us wherever we go and will be sharable with whomever we choose.

"We'll be able to use this data to make purchases, to swap contact information, to share photos and video. It will be very powerful," said Lam. "The team at MobiSocial is working today to ensure that tomorrow the personal cloud is white and puffy with a shiny silver lining."

Among the most likely firms to leverage the potential of the personal cloud for mobile advertising revenues are Apple, Google, Amazon (NASDAQ:AMZN), Facebook, and Groupon (NASDAQ:GRPN).

Disclosure: I am long AAPL.