Tuesday, November 13, 2012

Mobile Ad Revenue Outlook: Local Search Leads the Way

Mobile advertising will also move down market to SMBs through a combination of self-serve tools, and local media direct sales channels. We'll also see premiums develop for location-targeted ads – a function of higher performance that's already evident from data shared by mobile ad networks.
Another important breakdown of these mobile local ad revenues involves format. Though mobile continues to broaden into different forms of "native advertising" (i.e., Facebook News Feed Ads), most mobile ad formats today fall into the main categories of search, display, SMS, or video.
The story here is that search eclipsed display last year as the leading format, and will continue to increase its share in the coming years. This has a great deal to do with evolving devices that are search friendly. But it also has a lot to do with user evolution to brave the mobile web, where search is central.
In this way, search's fate as a mobile ad format is tied closely to the "apps vs. mobile" web debate that faces app developers and publishers. For users, apps have created a warm and fuzzy environment (so search isn't relied upon as heavily). But look for the mobile web to grow at a faster rate.
Much of that will result from its economics: It's cheaper and easier to build and update a mobile website than a native app. And one can reach many more users in avoiding platform fragmentation. Meanwhile app-like functionality can increasingly be achieved with things like HTML5.
It's true that apps still beat mobile web in functionality – especially for media-rich mobile experiences such as gaming. But for lots of app categories like social, local, and news, sufficient functionality can be seen on the mobile web. Here the debate shifts from functionality to discoverability.
App stores have proved to be a safe and easy place for early smartphone users to find things. This is compared to the wild west atmosphere that is the current state of the mobile web. But as the above developer economics set in, the mobile web itself will become more user-friendly and optimized.

That will create more usage, which will in turn boost search volumes; as search is the front door to browser based experiences. Google – with its 95 percent share of mobile search – will benefit greatly from this. That's a clear reason it's pushing for a more user friendly and optimized web (see GoMo).

But back to our forecast, all of these factors will converge and ignite mobile search query volume in the coming years. In addition to volume, the dollar share shift will accelerate from the premiums placed on search ads (compared to display) – a function of their intent-driven and pull-based nature.

Local intent will boost that even further. Once again, 50 percent of mobile search queries have local intent. One year ago that was 40 percent, and the year before that, it was about 30 percent. This should tell us something about mobile local search and its impact in shaping the ad revenue opportunities of the next few years.


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