The latest IAB/PWC Mobile Adspend report shows a sector in rapid growth. Alex Kozloff looks at the main findings of the report and their implications for publishers.
Mobile has unquestionably come a long way in the last few years, establishing itself as a medium that can no longer be ignored. Nothing has done more to bring this about than the advent of the smartphone. Most of us in the UK currently own a smartphone (61% - comScore MobiLens, October 2012), but it’s easy to forget how different the world looked in 2007.
Hello from Apple
Back then, the Nokia 1200 was the world’s bestselling handset with shipments of 150m, but things changed very quickly during the ad break for the 79th Academy Awards of that year. Apple’s “Hello” ad gave viewers the first taste of the phone that Apple went on to launch in June 2007. By 2008, the iPhone 3G became the world’s bestselling phone, and the consumer appetite for smartphone technology has not slowed since.
This pace of change in mobile technology and the phenomenally fast rate of consumer uptake have caused ripples in the marketing world, from agency bars to advertiser boardrooms. The bi-annual IAB/PWC Mobile Adspend Report has charted this transformation by measuring the amount spent on mobile marketing since 2008. The study is undertaken by collecting actual revenues from the sell side of mobile advertising, including publishers, networks and others, and aggregating and de-duplicating the data to produce one dataset to understand the size of the market.
Looking back to the first IAB/PWC Mobile Adspend study in 2008, it’s a telling reminder to see at that time the market for mobile advertising in the UK was worth £28.6m. During the last four years, the market has increased over twelve fold, to be worth £181.5m in the first half of 2012 alone. Predictions from analyst First Partner suggest by the end of 2012, the full year figure could break the half billion mark to reach £511m – 18 times bigger than the entire market in 2008!
Examining further the details of the H1 2012 study reveals some interesting insights. Comparing the H1 2011 figures to H1 2012, the like-for-like growth of mobile marketing in the UK is 132% - an amazing achievement when you consider that most other media growth is in single figures and UK GDP growth remains in the red.
This growth story is consistent across every format on mobile. Mobile search revenues currently take the lion’s share of the market with 73% share - making mobile search worth £131.3m for just half of 2012. This is up from £52.2m in H1 2011, and this growth can be attributed to the amazing consumer uptake of mobile search. As an example, according to Google, 46% of Olympics searches happened on a mobile device and for some key Olympic events, mobile searches actually overtook PC searches.
Display formats on mobile have also seen a phenomenal increase. The total display share of the market is 27% - the remaining £49.9m in H1 2012. Banners and text links are the biggest display format, and saw a like for like growth of 87%, to be worth £41.8m in H1 2012. Other display formats include ‘In SMS/MMS & other’ (worth £5.9m in H1 2012), video pre and post roll (worth £1.7m in H1 2012), and tenancy deals (worth £0.5m in H1 2012).
Rich media advertising
An interesting trend is the movement towards rich media advertising on mobile devices. We define rich media advertising as ad formats that when clicked, provide another level of interactivity within the ad format. This could include, but is not limited to, the ad format expanding to the full screen, interacting with other parts of the phone such as the accelerometer / GPS / screen etc, so long as the activity remains in the ad format itself. According to the IAB/PWC Mobile Adspend study for H1 2012, 20% of standard display advertising revenue was spent on rich media - up from 18% in H1 2011. These formats are becoming more popular with both consumers for the better mobile experience they provide, and publishers for the prices they can command - but more on the importance of rich and interactive ad formats for publishers later.
The study also is one of the few sources to provide any understanding of the type of advertiser that is investing in mobile display advertising and how this is changing with time. Only two years ago, entertainment advertisers were buying up two thirds of the mobile inventory being sold, and this has changed dramatically as other more mainstream advertisers are increasing their spend. Now entertainment advertisers make up 23% of the display spend on mobile - and this is not to say they are spending less, but only that their share is decreasing as others increase their spend more quickly. The top five spending advertiser categories on mobile display are currently Entertainment & the Media (23%), Consumer Goods (14%), Retail (13%), Finance (12%) and Telecoms (11%).
So what does the future hold for mobile advertising in the UK?
The analysts First Partner have forecasted that in just twelve months, mobile advertising could break the £1bn mark. The rise of mobile marketing does not look likely to slow down, and is predicted to be £1.6bn by 2016.
In recent years, there is only one other technology that has caused more of a stir to the advertising industry, tablets. When the first iPad was launched in April 2010, few people predicted the path it would pave for the success of tablets. Currently, 14% of people own a tablet in the UK (comScore MobiLens, October 2012), and experts agree that Christmas 2012 was going to be a key moment to launch tablets into the mainstream, helped in particular by low prices and easy availability from players such as Amazon and Google as they launch competitively priced devices to the market.
Since 2011, we have tried to gain a measure of the impact of this consumer uptake on the advertising investment in tablets. For H1 2012, the IAB/PWC measured £2.4m worth of tablet specific advertising investment in the UK. This figure, however, comes with a few caveats. As this figure relates to tablet specific advertising only (ie. not including internet advertising displayed on a tablet by default), we can be sure that there is a large amount of advertising being seen on a tablet that is not counted by this study. The figure is based on revenues reported by companies participating in the IAB/PWC Digital Adspend study who were able to report this figure separately, and the reality is that many currently struggle to split this information out and can thus underestimate the overall size of the tablet dedicated advertising spend. However, even with this in mind, we can see the rate of growth as the figure was coincidentally also £2.4m for the whole of 2011 - showing 100% growth.
With increased penetration of tablets, the investment into, and understanding of tablet specific advertising seems likely to increase. Several studies undertaken at the IAB (Three Device Lives, Tablet Ad Format Study) have proven how, amongst those that own them, tablets have established themselves as a unique device used in a different need state from both PC and mobile. Key differences include more evening and leisure time usage - entertainment is a key driver for tablet usage and, as a result, people are more likely to turn to the tablet during their downtime to fulfil this need. Perhaps more surprisingly, retail and shopping stand out as different tablet behaviours - and one that could have huge implications for how people shop in the future.
Mobile & tablet strategy
So what are the implications of these trends in mobile and tablets for publishers? Firstly, there is a clear call to action for publishers that do not yet have a mobile and tablet strategy. Mobile is growing so quickly, it is a medium that cannot be ignored, and publishers must build mobile and tablet specific offerings. Research from Compuware shows that 71% of users expect a mobile site to load as fast as a desktop site, and 78% will retry a site two times or less if it does not load initially.
There are some exciting ways that publishers can create great mobile specific content - HTML5 is one that is much discussed. The Financial Times are trail blazers in this area and used HTML5 to create a web based app to provide scale quickly across different devices and platforms. More recently, ‘responsive design’ is another way that publishers can build successfully for mobile. This technology automates the overlay of contextually relevant content matching the profiles of mobile users. By optimising the content according to the user preference say for social media feeds, or vouchers, or location based content, the publisher can be sure to provide the optimal experience for the user.
There are also some specific implications for publishers in terms of mobile and tablet advertising strategy. Research from the IAB has shown the positive reaction consumers have to interactive advertising. According to the 2012 Tablet Ad Format Study, respondents that saw interactive formats were 140% more likely to find the advertising engaging and 90% more memorable than those that saw a static ad. The IAB/PWC Mobile Adspend study shows how rich, interactive ad formats are increasing as a proportion of display spend - and publishers who can incorporate the unique and interactive elements of mobile and tablets into their advertising offering will be the most likely to succeed.
Lastly, specifically the opportunities on tablet are hugely exciting for publishers. We know that consumers are turning to the tablet for entertainment, and it seems a sensible strategy for publishers to build specific content tailored to those needs. Tablet advertising is still in its infancy - but consumers already have high expectations from tablet content and tablet advertising; 55% agree that advertising on tablets can do things that advertising on other media can’t. It is never too early for a publisher to start thinking cleverly about incorporating advertising that provides a fun experience for consumers, and engagement for advertisers.
Overall, increased mobile and tablet adoption provide some hugely exciting opportunities for publishers, and it’s never too late to get involved. With mobile and tablet advertising revenues set to grow to over £1bn by the end of 2014, every publisher could benefit from optimising their content and including creative and interactive ad opportunities.