Local-Mobile Ad Revs about $1.6 Billion Today

BIA/Kelsey just published an updated local-mobile ad forecast. The firm says that “U.S. mobile local advertising revenues will reach $4.5 billion in 2014, up from $2.9 billion in 2013.” It also estimates that US local-mobile ad revenue will reach nearly $16 billion in 2018.

That projection is probably too aggressive. But more importantly, the current numbers are overstated.

This morning the IAB released its 2013 full year digital ad revenue figures. These figures are more reliable than the various analyst forecasts in the market because they’re based on direct surveys of advertisers.

Ad revenue by format/segment (IAB/PwC)

IAB revenue formats 2013

According to the IAB data, mobile ad revenues grew from just under $3.4 billion in 2012 to nearly $7.1 billion in 2013 — essentially doubling. BIA/Kelsey’s estimates argue that $2.9 billion (41%) of this $7.1 billion was geotargeted or location-based in 2013.

I’m a big proponent of the “local” market and the value of location-based targeting. But these numbers are inflated.

The top 10 ad networks/publishers control about 71% of online advertising revenue according to the IAB. In mobile it’s “worse.” There are fewer than 10 companies that basically own 75% to 90% of mobile ad revenue: Google, Facebook, Twitter, Pandora, YP, Millennial Media.

Search is the biggest component of mobile advertising today (as it is online), and perhaps as much as 50% of mobile revenue. If that’s correct it would mean paid search was responsible for nearly $3.5 billion of mobile ad revenue in 2013. Roughly 95% (or more) of that money is Google’s.

Not long ago I asked Larry Kim, founder of Wordstream, about use of location extensions in AdWords. He told me that about 15% of the total population of AdWords advertisers were using location extensions. That doesn’t mean that 15% group constitutes all mobile paid search advertisers using location. Marketers can bid on geomodifiers (“San Francisco,” “SOHO,” etc.) outside of location extensions. However it’s at the very least a “directional” indicator.

Among Facebook, Twitter and Pandora locally targeted mobile ads are growing but represent a minority of ads — and nothing like 50%. By comparison all or nearly all of YP’s $350 million mobile-attributed revenues are location-based or have a location component. That’s also true for xAd, Verve, JiWire, PlaceIQ and a few others.

It’s probably accurate to say about 20% to maybe 25% (on the high end) of mobile display revenue generally carries a geo-targeted or location-based component today. That percentage will grow. However there are complications and emerging nuances.

One challenge is that location is now being used to generate audience profiles and in many instances pushed into the background, which creates a bit of an “accounting problem” in determining accurate local-mobile ad revenue. For example, does a mobile campaign that targets business executives 30 to 50 years old (using location to profile the audience segment), but doesn’t explicitly use location in the creative, count as a “local campaign?” Should 94% all mobile ads involving traditional retailers (independent of the targeting or creative) count as “local” ads because 94% of retail spending is in stores and mobile users convert mostly offline?

More on all this to come. But putting the totality of these things together it’s probably more accurate to say that between $1.4 and $1.8 billion in mobile ad revenue in 2013 was location-based or geotargeted. However those figures may also be high.

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3 Responses to “Local-Mobile Ad Revs about $1.6 Billion Today”

  1. Mike Boland says at

    To be clear, the 41% isn’t the number of campaigns that apply location targeting (that number is smaller as you say). It’s the dollar amount associated with these campaigns.

    The difference is a result of higher ad rates for location targeted campaigns (in search, display and all formats). These inputs — such as ad rates, search volume, fill rates, etc. — are all carefully devised in weeks of surveying advertisers, publishers tech companies (including Google). Then they’re plugged into a pretty intricate forecast model that i’d be glad to share.

    Its accuracy in hindsight over the years is supportive. And If it grounds its veracity any further, the same methodology created my overall U.S. mobile ad figure for 2013 which was $7.2B — pretty close to IAB’s fresh $7.1B figure you espouse. Either way, thanks for the notes & analysis.

    More here - http://blog.biakelsey.com/index.php/2014/04/10/fresh-biakelsey-data-u-s-mobile-revs-grow-from-7-2b-to-30b-by-2018/

  2. Greg Sterling says at

    Understand re the dollar amounts vs percentage of campaigns. However in paid search, mobile CPCs (on average) are still undervalued and less than PC-based CPCs (for example). Yes mobile CPMs are higher with they involve premium or enhanced targeting.

    I’m sure the forecast is thoughtful and has lots of inputs. However, based on my understanding of the data and conversations with publishers and networks, $2.9B as location targeted mobile ad dollars in 2013 strikes me as too high.

  3. Mike Boland says at

    You may be right that it’s too high. I respect that viewpoint because I know you to be thoughtful about this stuff, as opposed lots of hacks throughout the tech blogosphere and analyst corps we occupy.

    The discrepancy here could come down to definitions of what constitutes an ad as being location targeted. Glad to discuss definitions, methodology and “open book” on my forecast model. Thanks again for the coverage.  

  4. Local Advertising | Advertisingworld.co says at

    […] Local-Mobile Ad Revs about $1.6 Billion Today – Screenwerk http://screenwerk.com/I'm a big proponent of the “local” market and the value of location-based targeting. But these numbers are inflated. The top 10 ad networks/publishers control about 71% of online advertising revenue according to the IAB. […]

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