The mobile advertising industry outlook
Summary
- The $2bn mobile advertising industry (which currently represents just a fraction of online advertising revenues) will witness two dramatic changes: the rise of Apple’s iOS and Google’s Android platforms to a position of dominance, with Android scoring a clear advantage over the former; and the emergence of Asia as the industry’s future growth engine.
- Business Insights forecasts that the global mobile advertising market will grow at a CAGR of 47.75% between 2008-12 to record revenues of $8,100m in 2012. The industry will rebound from 2010 onwards, driven by increased smartphone usage and Android platform penetration.
- The balance of power will shift to the Asia Pacific region, resulting in its share increasing from 28% in 2009 to 39.3% by 2012. The primary reason for this growth will be the high rates of mobile penetration in India and China.
- The search and display segments will improve their shares of total revenues to 36.6% and 31.5%, respectively, by 2012. However, the share of the SMS segment in total revenues will substantially decline, from 57.2% in 2008 to 32% in 2012.
- Apple is building a closed proprietary app ecosystem around its iPhones and iPads and launching its own ad network, iAd, to position itself as a major competitor in the mobile ad space. Google is attempting to transfer its online advertising capabilities to the mobile ad space and aims to position itself as a key player through its in-house operating system, Android. Its core competencies include an open platform and handset vendor versatility.
- Symbian’s OS is a market leader by default since it is carried on Nokia, which is the world’s largest handset seller. However, this position is currently under threat from agile players such as Apple and Google. Research In Motion, meanwhile, is shifting its focus away from enterprise business, foraying into the consumer space to gain traction in the mobile advertising industry.
Mobile advertising market size
Business
Insights forecasts that between 2008-12, the global mobile advertising market
will grow at a CAGR of 47.75% to record revenues of $8,100m by 2012. The
industry, which grew at a slow pace until 2009, will rebound sharply after
2010, driven by increased smartphone usage and Android penetration. The slow
growth of the industry to 2009 can be attributed to advertisers’ lack of
confidence in the medium as an effective marketing tool. Moreover, the industry
faces a strong threat from the ongoing financial crisis.
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Table 15: Global mobile advertising market size ($m),
2008–12
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2008
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2009
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2010
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2011
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2012
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CAGR 2007–12
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Market size ($m)
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1,700
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2,167
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4,100
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6,000
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8,100
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47.75%
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Growth (%)
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27.5%
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89.2%
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46.3%
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35.0%
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Fiscal year end December, 2009.
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Geographic segmentation of the industry
Business
Insights forecasts that the balance of power will shift in favor of the Asia
Pacific region, with its regional share projected to improve from 28% in 2009
to 39.3% by 2012. The US, meanwhile is forecast to register a marginal decline
in regional share to 34.1%. Another region that is expected to record high
growth rates is the rest of the world (ROW), consisting of the Middle East,
Africa, and Latin America, which together are projected to increase their share
to 10.4% by 2012.
The key driver of Asia’s growth will
be the high rates of mobile penetration in the region. For instance, at the end
of February 2009 there were 413 million mobile subscriptions in India, and this
figure is projected to increase to 650 million by 2012. China is another
powerhouse in the region, with subscriptions amounting to 640 million in 2008.
Its mobile internet penetration rate as a percentage of mobile subscribers is
14.3%.
In Japan, there were 121 million
individual subscribers in 2009, translating into a penetration rate of 95.4%
(this means that 95 out of every 100 persons had at least one mobile phone).
Mobile internet penetration in Japan, meanwhile, is the highest in the world at
62.3%, compared to 12.3% for the entire globe, 31.3% for the EU, and 29.2% for
the US. Moreover, mobile advertising expenditure in Japan was $1bn in 2009,
according to estimates by Dentsu.
For several Asian economies the
emerging trend is that mobile subscribers surpass internet subscribers. For instance, in 2008 India had 375m mobile subscribers
compared to 75m internet subscribers, while in China there were 650m mobile
subscribers compared to 350m internet subscribers. This is because the
burgeoning middle classes in these economies demand affordable, easy-to-use and
portable ICT systems, which better fit their budgets and living conditions.
