Interactive Local Media Advisory

U.S. Mobile Advertising Forecast, 2007-2012
Matt Booth , 9/5/2007

Summary: U.S. mobile advertising represents a promising future market opportunity that has remained largely out of reach for many years. Often-cited statistics about how many more mobile phones there are versus computers suggest we are on the verge of a market transformation akin to the early days of the Internet’s growth. While forecasters and pundits have touted the potential of mobile advertising for years, the U.S. market failed to materialize. We believe this is about change. The question is: Why now? We believe the market is converging around several important themes that will drive mobile ad adoption. Top-line search growth is slowing. Portals and search companies must move their monetization products into markets where they can utilize existing ad products (e.g., paid search links) to promote top-line revenue growth. Google, the largest search engine in terms of share and revenues, has considerable ad overhang, meaning advertisers want to spend more money than current traffic levels can support. The mobile and search markets are linked, and we believe market share in one could affect the other. Therefore, Microsoft will push hard into mobile, and Google will attempt to retain its dominant search position. Meanwhile, U.S. carriers understand the market position that Internet search dominance affords will not allow their products to be relegated to a secondary market position. GPS handset devices are shipping en masse this year, and 50 percent replacement is expected within five years, allowing improved mobile applications. Apple’s iPhone represents a transformative device, and many manufacturers will enter the market with similar form factors driving down prices. Finally, Yellow Pages companies such as AT&T are executing on a mobile channel ad business. Mobile represents a critical market these companies will try to dominate. Over the next five years, we will see tremendous innovation and investment in mobile platforms. Numerous large players will work to define this market in an effort to consolidate their market position or drive meaningful changes in competitors’ share. The Kelsey Group’s forecast creates an analytical framework for our future work in this area and defines our view of the emerging mobile landscape. Interactive Local Media clients may access the forecast by logging in and clicking on the “View PDF file” icon that appears above this summary box.

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