Mobile advertising revenues to grow at a faster pace than any other media.

Reading the interesting post of our good friend and colleague at Diamondcluster, Julio Alonso, regarding the effect of the Spanish recession on the total Spanish advertising budget in 1Q 2008, I decided to recover a topic you might like from our latest media related project in Europe: advertising revenues and media split.

Over time marketing and advertisement activities transform as new digital media streams emerge. The first major digital transition took place when advertisement extended from broadcast media such as television and cinema to the PC Internet. In the last couple of years we have seen an expanding transition into the third screen represented by the mobile handset. What distinguishes this new channel from digital predecessors is the ability to influence consumers at the very moment they are ready to take action, thus closing in on the last mile of transaction.

As we explained in our previous post related to mobile advertising (mobile advertising and the telco success factor in the value chain) brands and marketing agencies play a key role in the nascent mobile marketing ecosystem. Their decisions on the distribution of advertisement spending ultimately decide the total monetary value of mobile marketing. Global advertisement expenditure in 2006 was approximately € 303 billion and global Internet advertisement expenditure reached € 18 billion in 2006. The year-on-year growth rate was a 25% higher in 2007 and expected to be above 30% in 2008. Online media consumptions today accounts for almost 20 percent of overall media consumption, hence it is not difficult to realize why Internet advertisement is the fastest growing advertisement media.

In the last 12 months there has been an increase in the momentum around mobile advertisement. As the market is starting to move mobile operators are now partnering with mobile advertisement and content stakeholders to build competitive new business models. An important note is also that free content has never wiped out paid-for content in any other media channel and the most probable scenario will probably be a mixture of the two business models in the mobile channel.

SMS is currently the most widely used messaging vehicle for mobile marketing. Overall the worldwide SMS traffic increased with approximately 50 percent to more than 620 billion messages per quarter. However, only a small fraction of messages consists of commercial messaging. Another emerging marketing channel within mobile is the mobile Internet.Historically advertisement has played a critical role in driving the mainstream adoption of PC based Internet services. The service areas that are beginning to take off on the mobile Internet are very similar to the online world and consist of search, communities and web mail services. The shift of advertisement expenditure into new digital channels is a very complex process where traditional thinking clash with new, innovative and unexplored advertisement and marketing territory.

The mobile marketing ecosystem is far from being mature. Since the mobile advertisement channel is still fairly new there are a number of new ventures entering the market space. The supply side is consolidating with major corporations positioning themselves to take substantial market shares on this emerging marketplace. Still there are formidable barriers – primarily the lack of popular mobile media channels – that threaten to divert marketing expenditure to substitute digital channels.

We estimate that mobile channels will account for 0.5 percent of the total digital advertising expenditure worldwide in 2008. By 2012 the share for mobile media is expected to have reached 2.7 percent, while at the same time the digital advertising market more than doubles in size. In monetary terms, the value of all mobile channels combined is forecasted to grow to €3,606 million by 2012.

We’ll see. Best


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