There’s growth in the global ad industry, but massive problems with mobile ads

Ingrid Lunden reports on the latest forecast on global advertising markets from advertising agency ZenithOptimedia.

Global ad spend in 2013 will see steady growth of 3.5% to reach US$503-billion by the end of the year…In the U.S… digital in 2013 will account for 21.8% of all ad spend ($109.7 billion), up from 19% the year before.

Meanwhile, mobile remains a solid minority of activity: in the US, mobile ads will account for 3.7% of all ad spend (US$6.2-billion).

TV advertising is managing to hang on quite well:

Television advertising is still by far the biggest piece of the pie — 40% in 2012, and declining by a mere 0.5 percentage points by 2015.

The fact that internet advertising is increasing and that mobile ad markets are the fastest growing is to be expected. And the company’s forecasts on the size of future growth paint a very rosy picture.

But the future is far from rosy because there is a massive problem with mobile advertising that has yet to be solved: how to make mobile ads work. Ads on a small screen are far less effective and there’s far less money to be made from them. It’s a very serious problem.

Matt Sanchez, CEO of San Francisco based ad network Say Media, recently wrote about this issue:

Digital publishing is headed off a cliff … There’s a five fold gap between mobile revenue and desktop revenue. In other words, for every page viewed on a mobile device, publishers currently see only 20 percent of the revenue they’d receive from a desktop visit.

What makes that gap even starker is how quickly it’s happening. By the second half of next year, we predict that greater than half of all time spent with online content will happen on a mobile device. On the industry’s current course, that’s a recipe for disaster.

Online advertising hasn’t been doing that well on the desktop anyway and now that mobile ads are even less effective there’s a very real danger that marketing budgets will move away from all forms of advertising towards the many alternate marketing strategies made possible by numerous startups with new marketing services and technologies.

And if online publishers can’t survive on mobile ad revenues, then the only places left for online advertising will be next to Google’s search box.

The ineffectiveness of mobile ads challenges the entire advertising market because companies will seek more effective means of generating brand attention and getting sales done. And there are plenty of startups with new marketing technologies and services, that offer alternate ways to spend ad dollars.

Mobile is a very disruptive media technology. Far more disruptive than expected.

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This article by Tom Foremski originally appeared on Silicon Valley Watcher, a Burn Media publishing partner.