With the increasing saturation of other channels, mobile advertising has seen an emphatic rise in prominence over the last few years, in line with the consolidation of the smartphone as an integral part of modern daily life. The last couple of years have seen an impressive increase in mobile advertising revenue as a result of rising smartphone adoption alongside greater 3G and 4G market penetration, and an increase in time spent by users on their mobile devices. Although the market is dominated at present by a handful of key players, the obvious potential for growth indicates a prime opportunity for investors to dip into this exciting and relatively young industry.
Global smartphone shipments have grown by 45% since last year, from 172.8 million units in Q3 2012 to 251.4 million units in Q3 2013. More than 1.5 billion people in the world currently own a smartphone; it is estimated that 80% of people worldwide do not leave home without one, with over 66% of people worldwide accessing the Internet from their smartphone at least once a day. Businesses are fast recognizing the benefits of engaging consumers through mobile, and are therefore making it an essential part of their strategies.
Thanks to this increase in smartphone use, the device has naturally become a critical shopping tool with 96% of users having researched a product or service on their devices. Figures show that smartphone-based research has an increasingly powerful influence on consumer decision-making. Research
conducted by Google
(NASDAQ:GOOG) indicates that 37% of smartphone users have made a purchase via computer after conducting research on their smartphone, and approximately 32% ultimately complete the purchase in offline stores. In addition, nearly 35% of smartphone users have purchased a product or service on their device.
This rising trend in proactive mobile-based consumer behavior has naturally led to an increase in the prominence of mobile advertising. The global mobile advertising industry was valued at $8.3 billion in 2012, 9.5% of which is attributed to Internet expenditure and 1.7% of which is attributed to advertising across all media. According to a ZenithOptimedia
forecast, the market could show growth of up to $33.1 billion by 2015. This forecast also indicates that mobile advertising will grow by 77% in 2013, 56% in 2014, and 48% in 2015, while Internet advertising is expected to grow at an average of 10% a year globally. Revenue from global mobile advertising is expected to grow at 400% between 2011 and 2016.
According to figures published by Gartner
research, the Asia-Pacific region, which includes Japan, currently leads the world in mobile advertising revenue with an estimated $4.8 billion, followed by North America with $3.8 billion, Western Europe with $1.9 billion, and the rest of the world with $788 million.
Google and Facebook
(NASDAQ:FB) are at present the key players in the mobile advertising industry. Current figures compiled by eMarketer
show that Google dominates the market with a share of 53.17%. Mobile ads generate 17% of the company’s total revenue, and it is the company’s strategy to level up this figure to reach almost 30% by 2016. The key reason for Google’s domination lies in the fact that it happens to own the world’s most widely used operating system – Android – which operates on more than 900 million mobile devices worldwide, from such manufacturers as Samsung
(OTCMKTS:SSNLF) and HTC
(TPE:2498), accounting for nearly 80% of the market. Add to this the continued popularity of its services on Apple
(NASDAQ:AAPL) iOS-based devices, and it’s easy to see how Google will remain the dominant player in the marketplace for the foreseeable future.
(See also: Google Finally Outpaces Apple -- in Obnoxious Fans
It’s no secret that since its IPO, Facebook has been under pressure to more effectively monetize the mobile arm of its operation, a task it now seems to be accomplishing rather well. In Q2, 2013, Facebook reported that its market share in this space had increased to 15.8% from 5.35% in 2012, and its continuing focus has seen that mobile advertising now accounts for 49.1% of the company’s total revenue, up from around a third of that in May and just over 23% in the previous quarter. Correspondingly, the company’s stock price has increased by 17%.
Of course, the key question currently affecting this sector will be how effectively Twitter
(NYSE:TWTR) can monetize its operation in the wake of its recent IPO, and how integral a part mobile will play in its monetization strategy. The newly public company, whose stock opened 73% above its IPO price of $26 per share on the first day of trading, recently announced its acquisition of mobile advertising company MoPub for $350 million, indicating the growing emphasis in its strategy toward mobile advertising. At present, 75% of Twitter users access the service via a mobile device, with mobile advertising accounting for around 55% of its revenue. It remains to be seen how effectively the company can monetize this side of its business, particularly considering that only a fraction of its users are based in Asia-Pacific, which happens to be the region with the highest mobile advertising revenue. However, if the company can successfully grow its user base in the Asia-Pacific region, and with such a large proportion of its existing users already coming from mobile, the signs are good that its total share of global mobile advertising revenue will see a dramatic increase from the current 1.85%.
No positions in stocks mentioned.