Mobile Advertising. An extension of the fixed, or a brand new market? Telecom & Over-The-Top. M13111MRA September 2013

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1 Telecom & Over-The-Top Mobile Advertising An extension of the fixed, or a brand new market? M13111MRA September 2013 This study includes: - a report - a slideshow - a database

2 IDATE creates the DigiWorld Institute Founded in 1977, IDATE has gained a reputation as a leader in tracking telecom, Internet and media markets, thanks to the skills of its teams of specialized analysts. Now, with the support of close to 40 member companies which include many of the digital economy s most influential players the newly rebranded DigiWorld Institute has entered into a new stage of its development, structured around three main areas of activity: IDATE Research, an independent observatory whose task is to keep a close and continual watch on digital world industries, collect relevant data and provide benchmark analyses on market developments and innovations in the telecom, Internet and media sectors through its comprehensive collection of market reports and market watch services. IDATE Consulting, time-tested analysis and consultancy solutions: Our multi-disciplinary teams of economists and engineers established their credibility and independence through the hundreds of research and consulting assignments they perform every year on behalf of top industry players and public authorities. DigiWorld Institute, a European forum open on the world: The DigiWorld Institute will take existing IDATE initiatives, such as the DigiWorld Summit, the DigiWorld Yearbook and the monthly clubs in Paris, London and Brussels, to the next level. Members have the opportunity to participate in think tanks on the core issues that will shape the industry s future, drawing on the knowledge of outside experts and our own teams. Contributors > Soichi NAKAJIMA, Senior Consultant Soichi joined IDATE as a senior consultant in January His main area of endeavour is the mobile communications market, such as the mobile Internet, applications, contents and services, the analysis of strategies employed by the various players, scenario building and forecasts. He also works on other business potentials for the mobile Internet, such as smart grids and VoIP. Before coming to IDATE, Soichi worked for NTT DoCoMo, Japan s largest mobile network operator by subscriber numbers, where he played a leading role in the strategic planning of the roll-out of Japan s first 3G M2M data-only tariffs. Soichi holds a Bachelors degree in mathematics, from the University of Nottingham in the UK. s.nakajima@idate.org > Vincent BONNEAU, Head of Internet Business Unit > Julien GAUDEMER, Consultant ISBN Copyright IDATE 2013, CS 94167, Montpellier Cedex 5, France All rights reserved. None of the contents of this publication may be reproduced, stored in a retrieval system or transmitted in any form, including electronically, without the prior written permission of IDATE. IDATE, DigiWorld, DigiWorld Institute and DigiWorld Yearbook are the international registered trademarks of IDATE.

3 Contents 1. Executive Summary Mobile advertising market to continue growing A market dominated by familiar names from the Internet world Mobile advertising as an extension of fixed web advertising rather than a new market enabled through apps Methodology Market structure & Key factors Market overview Definition Market segmentation Product / service trends Current market estimates Market by geographical zone Key drivers Key technologies Privacy and regulatory environment Mobile advertising consumption and usages Market structure and player strategies Industry structure Value chain and Player typology Competition structure / landscape / environment Business models Company profiles Summary tables Facebook Google Apple Amazon Orange Vodafone Telefónica Deutsche Telekom SingTel (Amobee) Verizon AT&T Flurry Rubicon Project StrikeAd LeadBolt Strategic analysis Mobile advertising is mainly conducted through mobile web, due to easier convergence from fixed compared to all-new app advertising Mobile advertising market still in its infancy but can be expected to grow in the coming years IDATE

4 5. Markets and forecasts Market development factors Analysis of growth drivers Forecast hypotheses Market forecasts Forecasts IDATE

5 Tables Table 1: Examples of mobile applications offering location-based services Table 2: Worldwide mobile advertising revenue by company, 2011 to Table 3: Mobile display advertising revenue in the US, by company 2011 to Table 4: Mobile advertising activity benchmark for telcos Table 5: Mobile advertising activity benchmark for telcos Figures Figure 1: Advertising revenue split between search and display formats; a comparison between fixed and mobile Figure 2: Integration of iphone functionality in the Nissan campaign Figure 3: Google AdWords click-to-call function Figure 4: Examples of location-based ads on mobile phones Figure 5: The SoLoMo concept Figure 6: Example of an app install ad on Facebook mobile Figure 7: Regional mobile advertising revenues, 2008 to Figure 8: Mobile advertising revenues by country, 2008 to Figure 9: Regional annual mobile advertising revenue per mobile Internet user, 2008 to Figure 10: Annual mobile advertising revenue per mobile Internet user by country, 2008 to Figure 11: Main mobile advertising key technologies by categories Figure 12: Eye tracking attention evaluation on Facebook (website and application) Figure 13: 24/7 Real Media's Open AdStream platform Figure 14: Advertising that targets the main audience of the website lesnumeriques.com Figure 15: Contextual advertising for the Shazam music application via AdSense Figure 16: The Blinkx un-roll Figure 17: How contextual advertising is integrated into an Internet video Figure 18: Sponsored pages displayed on the Facebook mobile application, taking into account the Facebook user s profile Figure 19: The retargeting process Figure 20: Personalized recommendations on mobile, by Amazon Figure 21: Pull-based advertising in the WHERE application Figure 22: Push-based or geofencing advertising for Starbucks (sent by SMS) Figure 23: Advertising on the Metro Paris application Figure 24: The Real-Time Bidding process Figure 25: Various kinds of data sources Figure 26: Figure 27: While using your smartphone or tablet, how often do you fully pay attention to advertisements when? How often do you notice advertising when you are using the browser or an app on your smartphone? Figure 28: Which types of ads do you pay attention to on your smartphone or tablet? Figure 29: Results of a survey question about mobile ad usefulness Figure 30: Advertising perceptions depending on the physical medium and the device Figure 31: Mobile users attitude regarding the advertising format Figure 32 : The initial online value chain Figure 33: The introduction of ad networks Figure 34 : Hundreds of ad networks complicating the value chain Figure 35 : The introduction of ad exchanges IDATE

6 Figure 36 : Addition of ad exchanges further complicates the value chain Figure 37: The introduction of DSPs and SSPs Figure 38: The mobile advertising value chain Figure 39: The mobile advertising networks market map, by MobyAffiliates Figure 40: The main players dominating the mobile search and display advertising markets Figure 41: Advertising ecosystem revenue sharing percentages Figure 42: Verizon Precision Market Insights Figure 43: The four steps to Business Success on Facebook Figure 44: Mobile advertising inventory managed by Orange Figure 45: Tailored media packages by Vodafone Marketing Solutions Figure 46: Ad products offered by Telefónica Global Advertising Solutions Figure 47: SingTel imedia does not mention Amobee Figure 48: Amobee still operates independently from SingTel Figure 49: Examples of analyses by Verizon Precision Marketing Insights Figure 50: AT&T AdWorks' click-to-fill ad unit Figure 51: Flurry AppCircle Re-engagement Figure 52: Rubicon targets publishers who are 6 th to 100 th for total ad display impressions Figure 53: The StrikeAd Fusion platform Figure 54: Ad units available from LeadBolt Figure 55: Advertising revenue split between search and display formats; a comparison between fixed and mobile Figure 56: Percentage of mobile RTB ad requests by Adfonic, May to October Figure 57: Key forecast figures in a nutshell Figure 58: Regional mobile advertising revenues, Figure 59: Mobile advertising revenues by country, Figure 60: Regional annual mobile advertising revenue per mobile Internet user, Figure 61: Annual mobile advertising revenues per mobile Internet user by country, (EUR) Figure 62: Mobile advertising revenues as a share of total online revenues, Figure 63: Breakdown of mobile advertising revenues by format, USA Figure 64: Breakdown of global mobile advertising revenues by format, Figure 65: Figure 66: Comparison of fixed and mobile advertising revenue per user, 2013 and 2017, for EU27, USA, Japan and Worldwide Comparison of mobile advertising revenue per user and mobile app revenue per user, 2013 and 2017, for EU27, USA, Japan and Worldwide IDATE

7 2. Methodology The methods employed by IDATE s teams of analysts and consultants are based on an approach that combines: research and validation of data collected in the field; the application of classic industry and market analysis tools: segmentation, competition analysis, strategic strengths, modelling, assessment and forecasts ; the expertise of specialists who contribute their own analytical capabilities and those of their network of market analysts. More specifically, the tools employed by IDATE s teams are as follows: 1/ A multi-disciplinary team of full-time consultants, specialised by sector of activity IDATE s analyses are performed primarily by our in-house consultants, and very occasionally by freelance market analysts. This approach allows us to capitalise on our pool of expertise through teamwork, sharing knowledge, ideas, contacts, viewpoints and key data. Each report is drafted by a team of specialists, overseen by senior consultants with a proven track record in their field. 2/ Primary and secondary research IDATE reports and databases are compiled based on primary data obtained from one-onone interviews with the sector s decision-makers, and on secondary data which is established by cross-referencing public sources and external databases. 3/ An integrated information centre sustained by a number of tools and proprietary databases Over the past 30 years, IDATE has established working and data organization methods and proprietary databases that trace the central chapters in the history of our sectors of expertise. Companies: IDATE s in-house data service tracks the latest news and events to come out of the top telecom, Internet and media industry companies around the globe. Innovative firms and start-ups are monitored by the market experts in the different Practices. Markets: IDATE s databases are derived from rigorous processing of fundamental economic variables (GDP, investments, exchange rates, demographics, etc.) and their relation to decisive sector-specific and national elements (capex, national market dynamics, etc.). Technologies: IDATE s organization by Practice provides us with an efficient means of tracking innovation. IDATE s engineers ensure in-depth understanding of the changing shape of products and services and of the latest innovations in the marketplace. IDATE

8 4/ Contents of the published reports Each IDATE market report details the structures and issues at play in the market being examined, the decisive forces (technologies, regulation, consumption) and the players involved. Particular emphasis is given to market assessments and forecasts, as part of the central premise. All market reports are laid out in a clear and concise manner, and illustrated with tables and graphs of key market data and trends. The process of drafting of a market report includes the following stages: analysis of the information available in the in-house databases, and review of analyses performed in the recent past; based on a preliminary segmentation and assessment of the market, and as part of an validated interview guide, analysts conduct interviews that enable them to validate working hypotheses; a market model is then established, making it possible to test the hypotheses that have an impact on the market s development, and validated by a new round of interviews; and, finally, the report s conclusions are debated with the team responsible for the project and with expert consultants from the various fields involved; a final proofreading and editing/revision process, prior to the production of the final version of the report which is delivered to the client. 5/ Market assessment and forecasts Primary data gathering worldwide. Market models which isolate key service consumption parameters and service pricning assumption. IDATE