Today, more than 80% of people in developed countries use mobile phones. More than 280 million Americans, over 86%, have at least one mobile device, and 95% of those devices can send and receive text messages. Mobile phones outnumber TV sets by more than two to one, and Internet connections by nearly 14 to three. Mobile devices provide users a portable, convenient, targeted and highly personal connection to the digital world. Always handy and always on, mobile devices also serve as a measurable, clutter‐free, marketing vehicle.
The Kelsey Group, a leading market research firm, reports that mobile advertising revenue was $160 million in 2008 and should grow to approximately $3.1 billion by 2013. As of 2008, about 63% of mobile ad revenue came from Short Message Service (SMS), 24% from Search and 13% from Display. By 2013, Kelsey estimates that 73% of the $3.1 billion in mobile ad revenue will come from Search, 18% from Display and 9% from SMS. The continued shift from traditional advertising to digital is fueling this growth. Kelsey also predicts that local mobile will have a material impact on mobile search revenue. Given the nature of mobile devices, local queries (i.e. searches limited to an immediate geographical vicinity) conducted on mobile devices are expected to outnumber local queries on the desktop. Local queries on mobile devices made up about 28% of total mobile queries in 2008, and this figure is expected to grow to over 35% by 2013. Local queries made up about 50% of total mobile search ad revenue ($20 million) in 2008, and Kelsey predicts that they will make up over 56% of mobile search ad revenue ($1.27 billion) by 2013.
According to telecommunications giant Verizon Communications, mobile display ads have a click-through rate (CTR) of about 2%, while desktop display ads have a CTR of just 0.2% to 0.4%. In addition, GfK Group, one of the largest market research companies in the world, reports that mobile ad recall rates are 33% (41% for iPhone users), response rates among recalled ads are also 33% (50% for iPhone), and purchase or store visit after seeing a mobile ad is 14% (25% for iPhone). Industry analysts believe these metrics exceed online ad metrics — and as use of smartphones increases, these metrics will likely improve.
A quick look across the venture and M&A landscape confirms that “Hyperlocal” is emerging as a major hotbed of deal-making activity. Calling local services “hugely important” to the future of the mobile user experience, Google product SVP Jonathan Rosenberg said that location-based services will become more deeply integrated with mobile advertising and commerce services in the “not-too-distant future.”
Anil Vasagiri
Director, Investments
View comments / leave a comment
Posted under From the Deal Team
This post was written by admin on February 3, 2010
Anil,
Thank you for your research and update on status of mobile environment. It appears that it is exploading right now, but look around and think about all of the very young children you see with their own mobile devices. I think we are seeing the begining of a generation that may never know what a desktop PC is; maybe not even a laptop.
With the ‘need it now’ age upon us, I think growth is the only thing that is certain, whether you are talking from an investment point of view or marketing perspective.
Thanks again for your article.
Allen