Mobile ad revenue to grow 400% by 2016, will be worth $24.5bn

Well now, it looks like mobile advertising is no longer the young upstart desperately trying to convince people of its merits. This year, it’s set to bring in US$11.4-billion in revenue, growing by 400% a year to hit US$24.5-billion in 2016.

Those numbers, from tech research company Gartner, are however meaningless without a little context. By way of comparison, fellow research company Forester estimated that online advertising was worth US$12.7-billion in 2012. Mobile is catching up to online in a big way.

According to Gartner, mobile search — including paid positioning on maps and various forms of augmented reality, all of which can be informed by location — is driving growth in the sector, as it has for some time now.

As time goes on however, its role will diminish, with Gartner pegging its bets on mobile display ad spending to grow and take over from mobile search. It will initially remain divided between in-app and mobile web (in-browser) placements — reflecting consumer usage — although after several years of in-app dominance, web display spending will take over in-app display from 2015.

Stephanie Baghdassarian, a research director at Gartner, says that the growth of online advertising has been pretty spectacular, noting that it even took the research house by surprise:

“The mobile advertising market took off even faster than we expected due to an increased uptake in smartphones and tablets, as well as the merger of consumer behaviours on computers and mobile devices,” she said.

One factor fueling the growth in online ad revenues, says Gartner, is the sheer amount of time people are spending on their phones. It adds that smartphones and tablets make it much easier to effectively target people, making it more appealing to advertisers and brands and fuelling further growth.

The countries driving that growth are also set to change over the coming years, especially as smartphones become more ubiquitous in emerging markets. Historically, Japan and South Korea’s appetite for bleeding edge devices has given the Asia/Pacific region an early lead in mobile advertising worldwide. Looking forward, high-growth economies of China and India are expected to contribute increasingly to mobile advertising growth, as their expanding middle classes present attractive markets for global and local brands. In the rest of the world — Latin America, Eastern Europe, and the Middle East and Africa — mobile advertising growth will be aligned with technology adoption and the stabilisation of emerging economies, but will mostly be driven by large markets such as Russia, Brazil and Mexico.

This rapid growth is not however consequence free. The amount of time we spend on mobile devices means that ad inventory is popping up faster than advertisers can buy it up. This has led to a “paid discovery” whereby a significant portion of app developers pay for ads to promote their own apps.

It’ll also kill off advertising in other industries. As Gartner notes, growth in mobile advertising comes in part at the expense of print formats, “especially local newspapers, which currently face much lower ad yields as a result of mobile publishing initiatives.”