The rapid evolution of mobile advertising is challenging accepted norms and creating new business models

The rapid evolution of mobile advertising is challenging accepted norms and creating new business models

The huge popularity of hyper-mobile devices, such as smartphones and tablets, is giving a major boost to online advertising revenues, now that users are increasingly going online via mobile, rather than on desktop PCs – a platform that is symptomatically in decline.

The rapid evolution of mobile advertising is challenging accepted norms and creating new business models.

By 2020, mobile will account for more than three-quarters of all revenue generated by online display advertising, according to market research firm IHS Markit.

This is a global trend, emphasizes IHS and IAB (Interactive Advertising Bureau) Europe, with global mobile advertising surging 68.2% to €37 billion (US$49 billion) in 2015 from €22 billion (US$29 billion) in 2014.

According to IHS and IAB Europe: “The share by region of the global figure of €37 billion (US$49 billion) for 2015 is:

North America: 45% (€17 billion / US$22 billion)

Asia-Pacific: 34% (€13 billion / US$17 billion)

Europe: 19% (€7 billion / US$9 billion)

Middle East & Africa: 0.9% (€0.3 billion / US$0.4 billion)

Latin America: 0.7% (€0.3 billion / US$0.3 billion)

Growth year-over-year was led by APAC, which saw a 69% leap in 2015. All regions, excluding the Middle East and Africa, grew by over 50%:

Asia-Pacific – 69%

North America – 67%

Latin America – 60%

Europe – 58%

Middle East and Africa – 37%

The outlook in China

IHS Markit points out that with some U$33 billion in revenue for 2016, the Chinese online advertising market is the second largest in the world. Online video is a strong driver, and in this segment IHS expects growth 32% in 2017.

IHS acknowledges that Baidu, Alibaba and Tencent, “known collectively as the B.A.T. in China”, are the market leaders and have cemented their dominance with numerous investments and acquisitions.

Interestingly, IHS notes that between 2009 and 2016, “Mobile app companies received most investments from the trio for that period.”

The trend to in-app ads

The recognition, by China’s B.A.T. trio, that mobile apps are potentially a very important vehicle for mobile online, is reflected in developments at the two 800-pound gorillas of online advertising, Google and Facebook.

According to Eric Stein, writing as a contributor to website TechCrunch, mobile ad revenues accounted for some 82% of Facebook’s total advertising revenues in Q1 2016, up 73% year-on-year.

Notes Stein, “…app install ads already were accounting for more than half of its mobile revenue in 2015 — and the percentage can only go up.”

At Google, says Stein, app installs, driven by its Universal App Campaigns product, now total 2 billion. Observes Stein, “With an estimated US$1.5 per install, that’s about US$3 billion in total revenue.”

Apps the preferred UX

Stein identifies the user experience on mobile as the crucial factor: “…the app is a much preferred user experience”, and that “traditional marketers” will realize “that they need to use this channel to fully engage today’s consumer.”

While Stein acknowledges that customer-acquisition costs can be high, “Consumers engage at higher rates — at every step of the funnel — in a mobile app than they do on the mobile web (and even better than desktop), and convert at anywhere from 100% to 300% better than [they do on the] mobile web.”

Likewise, mobilemarketing.com notes that, “With users already spending more time online via apps than either mobile or desktop web, it is little surprise that in-app advertising spend already surpasses mobile web spend. In-app advertising is already so large that research shows that in-app ads make up more than half of all app revenue in most countries.”

Mobile migrates to video

This is no longer simply a case of static display advertising, notes mobilemarketing. Video is now very much an important driver. “Mobile video is another one of the fastest growing areas of digital advertising. Mobile video is expected to achieve a CAGR of 73% leading up to 2018…. Video formats have proven to be extremely effective at delivering compelling brand stories and fully engaging users.”

Links:

https://technology.ihs.com/589162/by-2020-mobile-is-majority-of-online-display-advertising-revenue-ihs-markit-says