Mobile Advertising - The Fastest Growing Market
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1 open mobile advertising The USmA: The United States of Mobile Advertising WHITE PAPER Prepared by Nick Lane Chief Analyst, mobilesquared
2 Mobile is a conversation that all DDB clients want to have now. And we are happy to share our experience that when Mobile is used effectively it makes all media work harder. We believe that mobile can be an integral component of a larger campaign as long as it works to connect people with people, not just people with brands. Jeff Swystun Chief Communications Officer, DDB Worldwide DDB Worldwide Communications Group Inc., known internationally as DDB, is a part of Omnicom Group Inc. Omnicom is the advertising holding company with the highest revenue in the world, at US$12.69 billion, according to Advertising Age s agency rankings of April I ve got a vision that these mobile phones could have a greater effect than even television advertising. I couldn t quite see my way through it because it still seems rather misty to me, but I get the feeling that these could be incredibly powerful as an advertising medium. I must say, mobile was all gobbledegook to me but I m beginning to get a little bit of what mobile means and can do for me as a brand. But what I would say to [the mobile industry] is that we need to understand more clearly how this all works, why it works, how you use it, the best method of use and we need somebody to talk to us in layman s terms. Mike Godwin Managing Director, Mövenpick Ice Creams Mövenpick Ice Creams is part of Nestlé, and represents the next wave of brands looking to invest in a mobile strategy.
3 Summary The US is all about numbers, big, big numbers. It has a mobile population exceeding 300 million, and a mobile internet user base on the verge of surpassing 100 million. With this level of scale, mobile advertising budgets are high especially in relation to Europe with the average mobile advertising campaign in the US between $75, ,000. At this level, it ensures there is sufficient budget available to release the creatives on the campaign and deliver a truly compelling, rich advertising experience. Presently, the US is the second largest mobile advertising market in the world, behind Japan. In 2010, the US mobile advertising market will be worth $797.6 million, rising to $5.04 billion in Aligned with this increase in mobile advertising spend, will be an increase in US mobile users engaging with advertisements on their mobile. Consumer research for mobilesquared by Lightspeed Research reveals that 53% of US mobile users claimed not to have seen an advert on their mobile. User engagement with mobile advertising will inevitably increase. Primarily because 49 million mobile users already claim to have actively engaged with an advert on their mobile, and if just one-third of that 53% start to engage with mobile advertising, that would contribute an additional 50 million mobile users. USA Mobile Advertising Market Size $1.24BN $5.04BN
4 The 75,000 dollar question The US mobile advertising market is a very exciting market to be operating in right now. It has scale like no other developed mobile market and that is making for a hotbed of activity. The US has a population approaching million, and there are a fraction over 300 million active mobile subscriptions in the US, of which, almost one-third use their mobile phone to browse. mobilesquared research has highlighted that around 50% of the US mobile internet users are doing so on a frequent basis on a daily or almost daily basis. 300 Million US active mobile subscriptions $797.6 Million US Mobile Advertising market worth The mobile internet is becoming a very popular and powerful platform throughout the US, and this is creating an opportunity for content producers and publishers to capitalize through the delivery of creative and rich-media-based advertisements to consumers. Because of the country s vast population, the average mobile campaign spend is significantly larger than anything witnessed in Europe, for example. In the US, the average mobile advertising campaign spend is between $75, ,000. On average, creatives receive 10-15% of the budget which could total $15,000 and provide the scope to develop an ad delivering a rich consumer experience. In the UK for instance, the average creative budget would be approximately $5,000 maximum. The richer advertising content is helping to fuel the mobile advertising marketplace even further. In 2010, the US mobile advertising market is expected to be worth $797.6 million, second only to Japan which is the world s only billion dollar mobile advertising economy. US Mobile Ad Spend, % 29% 3% 2% Opt-in Messaging Mobile Games/Music/Video/TV Apps Search 46% Banner Ads Source: mobilesquared, October
5 For the US, this equates to a little under 8,000 mobile advertising campaigns, and an average of 21.8 new campaigns per day. But the market has to brace itself for unprecedented growth. The US market will join Japan next year, when revenues are forecast to top $1.24 billion, and increasing to $5.04 billion by $5.04 Billion US Mobile Advertising revenues by 2015 Total mobile banner spend (US$) of Europe s Big Five Banner Ads Search Apps Mobile Games/Music/Video/TV Opt-in Messaging Source: mobilesquared, October 2010 Yet mobile remains a fraction of total advertising spend in the US. According to ZenithOptimedia, part of the Publicis Groupe, the US is set for a 2.4% increase in advertising spend to $151.5 billion in 2010 with global ad spend for 2010 expected to be worth $449.5 billion. For the US advertising industry, mobile represents 1% of total spend. Aside from the phenomenal increase in mobile advertising activity during the forecast period, as a medium, mobile is yet to penetrate over 50% of the US mobile population in terms of advertising. 5
6 The consumers are coming: millions of them A nationally-representative survey of US mobile phone users conducted by Lightspeed Research for mobilesquared, revealed that one-sixth of US mobile users (49 million), have engaged with an advertisement of some description on their mobile phone. A breakdown of those users reveals that 12.3 million mobile users have clicked on the advertisement and went on to purchase an item, million users have clicked on the advertisement and looked at the item advertised but did not buy it, while a further 7.82 million mobile users have clicked on the advertisement and looked at the item advertised on their mobile phone and ended up buying it online using their PC/MAC. Not only does this highlight that an increasing number of mobile users are willing to commit to a purchase there and then over their mobile phone than those opting to delay until in front of their PC, the total number of mobile users engaging with mobile adverts in the US is incredibly high. But it has to be said, that that figure will only increase. The consumer survey revealed the now expected naysayers, with 21.6% of users doubt they will ever click on an advertisement on their mobile, or 64.9 million mobile users. However, 53.1% of espondents claimed to have never seen an advertisement on their phone. This suggests a little over 50% of the US population is yet to form an opinion with regards to mobile advertising. Put another way, million mobile users in the US are yet to experience mobile advertising. Realistically, it is only a matter of time until they do. Therefore, the number of mobile users in the US that will engage with mobile advertising can only increase. Even if one-third of the million indulge in engagement, that will deliver an additional 53 million mobile users, taking the total number beyond the 100 million mobile user mark. 49 Million Already engaged with an advertisement 12.3 Million Users clicked on the ad and purchased an item Million Users clicked on the ad but did not bought it US Mobile Populations Propensity to Mobile Advertising Source: mobilesquared, October
7 The American Dream Following years of promise, the US mobile advertising marketplace has sprung into life, and will become the second billion dollar market after Japan during Yet the true potential of mobile, and the market realisation of advertising on the medium, remains some distance away. By the end of 2010, mobile advertising will represent 1% of total ad spend in the US. And although mobile is growing faster than online, that is only to be expected given digital was an entirely nascent medium 10 years ago, and has laid down the foundations for mobile to florish. And florish the United States of mobile Advertising will. The State of Mobile Advertising According to the data collected by Smaato choosing the right ad network is a complicated decision, as publishers should consider fill rates, operating systems as well as response times of ad networks, to name a few criteria. Smaato s metrics are published monthly to show the state of the mobile advertising ecosystem according to data from over 50 ad networks globally & inventory of 9,000 registered publishers. The metrics demonstrate the performance of mobile ad networks globally and the fill rate is measured as the percentage of ads delivered per ad request and varies by different factors like country, device and content type. Smaato Mobile Advertising Metrics are published monthly at: Chart: Fill Rate of Mobile Ad Networks (USA), September 2010 Nick Lane, Chief Analyst, mobilesquared Nick has been described as the leading commentator on UK mobile media (Adam Smith, Futures Director at GroupM). But Nick s experience extends well beyond the UK. He specializes in mobile market intelligence and heads up the research and analysis at mobilesquared ( Prior to launching mobilesquared, Nick was Head of Research Services and Principal Analyst at Informa, where he oversaw the group s leading industry newsletters, reports and forecasts that have helped shape the mobile industry. In this role, Nick established himself as one of the leading authorities on the mobile content, services and advertising space, regularly speaking and chairing at conferences and events around the world. While in this role at Informa, Nick wrote a number of reports, from consumer behavioral analaysis to mobile advertising. 7
8 open mobile advertising About Smaato Smaato is a pioneering mobile advertising company that operates the mobile ad optimization platform called SOMA (Smaato Open Mobile Advertising) and partners with mobile publishers, developers, ad networks and operators. Smaato s SOMA mobile advertising platform aggregates more than 50 mobile ad networks worldwide and optimizes mobile advertising revenues according to automated rules overseen by an experienced ad operations team. More than 9,000 publishers have signed up with Smaato as a partner to monetize their content in 220+ countries and Smaato is managing 16 billion ad requests per month. SOMA s unique feature is the aggregation of multiple leading ad networks globally to maximize mobile advertising ARPU. SOMA can be easily integrated with ad networks, ad inventory owners (publishers, developers and operators) and 3rd party ad technology providers. Smaato is an active member of the Mobile Marketing Association and the German Digital Media Association BVDW. Smaato received a Top 100 Private Company Award by AlwaysOn Media (2009 & 2007) and was recently named a company to watch 2010 by Financial Analyst company GP Bullhound, among other awards. Smaato Inc. is based in Redwood Shores, California. The privately held company was founded in 2005 by an experienced International management team. The European headquarters are in Hamburg, Germany and the Asia-Pacific presence of Smaato has been established in Singapore. Redwood Shores, CA T: +1 (650) americas@smaato.com Hamburg, Germany T: +49 (40) emea@smaato.com smaato.com/blog metrics.smaato.com Singapore, SG apac@smaato.com twitter.com/smaato facebook.com/smaato Smaato White Papers info@smaato.com
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