Why Mobile Ads Are About to Explode

Source: Sean Gallup/Getty Images

Sean Gallup/Getty Images

Smartphone use has grown astronomically in the past few years, prompting the rise of mobile Internet access. Aside from the latest Android and iPhone models, tablets have also contributed to the mobile world. Desktops might still be the mode of choice for the workplace, but recent data shows that more and more people are relying on their mobile devices to access the Web. In some cases, a smartphone is the only link people have to the Internet at all.

Paired with this is the money trail that follows. If mobile access is the new black, advertisers want a chunk of that audience paying attention to their brands. As a result, the growth of mobile advertising closely follows the trends of increasing mobile users over time. Even if you rely on your laptop or desktop to access the Internet for a portion of the time, this trend means that you’re likely to see more mobile ads when you are using your phone or tablet. Cue extra clips of Kate Upton promoting Game of War on mobile game apps and additional promoted content on social media.

It’s important to recognize why mobile ads are becoming more popular. According to surveys conducted by the Pew Research Center and the John S. and James L. Knight Foundation, nearly two-thirds of Americans own a smartphone. About 19% of Americans rely to some degree on using their smartphone to access the Internet, including online services such as health information and other needs. That 19% includes people that either don’t have broadband Internet access at home, or have a limited number of devices with which to go online. Ten percent of Americans, for example, own a smartphone but don’t have another other form of high-speed Internet besides what is available on their smartphone’s data plan. Of the more than 2,000 people surveyed, 7% of respondents said they had virtually no alternatives to using their smartphone as their sole Internet connection.

Pew refers to this group as “smartphone-dependent” users, and discovered a few key demographic factors about that particular population. For one, it tends to skew younger, as 15% of Americans ages 18-29 are heavily dependent on their smartphones for Internet access. The group also tends to be affected by income. About 13% of Americans with an annual household income of $30,000 or less are smartphone-dependent, compared to just 1% of Americans earning $75,000 or more per year. In addition, 12% of African Americans and 13% of Latinos are dependent on the mobile technology, compared with 4% of white Americans, the surveys show.

Source: comScore

Source: comScore

No matter the level of mobile use, the range of activities on phones in particular covers a wide array. About 62% of smartphone owners report they used their phone in the past year to look up information about a health condition. Mobile banking is common among 57% of respondents, and 43% of mobile owners have used their devices to look up information about a job. Another 44% researched real estate listings, and 30% used their mobile devices to take an online class or access educational content.

It’s not just that more people are accessing the Internet through their devices — they’re also spending more time using mobile Internet than other digital access points. Industry insight firm comScore reported that in May 2014, mobile platforms (including smartphones and tablets) accounted for 60% of total digital media time spent, an increase from 50% in 2013. Mobile apps officially crossed the threshold of more than half of digital time spent, coming in at 51%.

As mobile usage has increased, advertising dollars have followed, and are expected to continue in growth before reaching landmark levels in 2016. According to forecasts by research firm eMarketer, the mobile advertising market will surpass $100 billion in 2016, and also account for more than half of all digital advertising spending for the first time. Worldwide, advertisers are expected to spend $101.4 billion on ads served to mobile phones and tablets by 2016, a 430% increase from mobile expenditures in 2013. Mobile ad spending is expected to double between 2016 and 2019, hitting $195.6 billion. With that figure, it would equal about 70% of digital ad spending and more than a quarter of worldwide media ad spending.

The United States spends the most of any country in terms of media advertising, and all of its forms. About 35% of all digital ad sales in 2014 were spent in the U.S. out of $145 billion spent in online advertising. America’s share of mobile Internet ad spending was even higher, equaling $18.9 billion out of $42.6 billion in worldwide sales, or about 44%.

Source: AdAge

Source: AdAge

Though social media isn’t the only destination on mobile devices, comScore argues it is the most important. It is the category that has the highest user engagement, with 20% of total digital time spent going toward social networking. More than 70% of social networking activity now happens on mobile devices, and its rapid shift toward smartphone and tablet platforms means its advertising dollars will also shape the digital atmosphere. “It’s clear that mobile usage is a tidal wave that’s completely transformed the way we consume digital content, particularly in just the past year or two. And we know that as eyeballs move to mobile, ad dollars will eventually have to follow suit,” comScore’s article said. What this means is that as advertisers seek to grow their audience, you’re more likely to see frequent ads when you’re using your smartphone or table.

In some cases, however, that might not be true. Facebook, for example, has been the exception to the rule by cutting the number of advertising slots it sells while also increasing its advertising revenue. In the last quarter of 2014, the company served 65% fewer ads than compared with the fourth quarter of 2013, but the cost of those ads to advertisers increased by 335%, according to AdAge. One of the reasons Facebook can do that, AdAge said, is because of its mobile audience. In the fourth quarter of 2014, 84% of the company’s audience visited the site using a smartphone or tablet, and AdAge reported that 69% of the company’s ad revenue came from those on mobile devices.

Essentially, the company is playing with advertiser supply and demand. By consciously limiting the number of ads a user will see on their mobile device (or any device that hosts Facebook), advertisers pay top dollar to ensure they win an ad slot on the newsfeed or right rail section of the site. Facebook also launched its in-app mobile ad network last year, which means that marketers can target Facebook users in other apps based on the users’ interests.

Analysts like comScore believe that the mobile ad industry will have a bumpy ride if monetization structures and ad measurements don’t catch up to the explosion of ads that marketers want to use. But it’s clear that some companies, like Facebook, are already investing in figuring out a model that works. It’ll be up to the other to catch up, or miss out.

Follow Nikelle on Twitter @Nikelle_CS

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