By Shailendra Pandey

In terms of generating substantial revenues for value-chain participants, 2010 still won’t be the year of mobile advertising. However, we are now seeing increasing examples of successful mobile advertising campaigns and market activity including in-house innovation, partnerships, mergers and acquisitions. Media and FMCG brands are also experiencing growing consumer engagement on mobile and together these developments are starting to provide the much needed momentum the mobile advertising industry needs. This will no doubt lead to accelerated growth of mobile advertising in 2011 and beyond.

Rapid growth in mobile search

Mobile search is growing rapidly with Google seeing 500 per cent growth in mobile search queries from 2008 to 2010. Further, it is estimated that 1/3rd of mobile search requests are for local content, which clearly shows that consumers are looking for local information on their mobile phones and highlights the opportunity this presents for delivering relevant mobile ads based on a user’s location.

As Internet traffic on mobile grows, brands and ad agencies are realizing that they need to advertise on mobile. In developed markets such as the US, smartphone shipments are expected to surpass feature-phone shipments in 2011. The growing penetration of smartphones and subsequently the increasing adoption of data plans are contributing to the growth of a large addressable market for mobile search and Internet advertising.

Mobile Apps offer new opportunities

Apple has taken a major step into the mobile advertising space with the announcement of its iAd mobile advertising platform. Apple will sell and serve the ads, and developers will receive 60 per cent of iAd revenue. It is believed that Apple now already has $600m worth of mobile advertising commitment from brands and agencies for the iAd platform in 2H 2010.

Mobile advertising in apps presents a huge opportunity but its early days. Most brands run campaign to reach the mass market and therefore companies will use mobile apps more as a branding, CRM and marketing exercise rather than for running mobile advertising campaigns.

Mobile advertising as part of multi-screen consumer engagement strategy

From listening and speaking to many industry professionals it seems that the best way to drive the mobile advertising market, at least now and for the next couple of years, is to consider and use mobile advertising as part of integrated (print, TV, online and mobile) advertising campaigns and for driving multi-screen consumer engagement.

Brands and advertisers now increasingly want to reach to their target audience through multiple devices. A mobile phone is the only device that a consumer carries all the time and therefore it can play a key role in increasing the effectiveness of advertising campaigns by extending the consumer engagement period. For example, according to John Zehr, Senior VP and General Manager for ESPN Mobile, a large number of users access their mobile app and mobile site on weekends to access sports updates, news, and other information on their mobile phones while they are outside on a beach, at a restaurant, or shopping.

The reality today:  mobile advertising is not yet a high-volume high-revenue business

Despite all the positive developments, for the ad agencies, the revenues from designing a mobile banner/display ad is very little compared to working for TV, magazines and online advertising campaigns. As a result, ad agencies at present don’t find the mobile platform attractive enough and operators should consider offering them a higher revenue share.

Average spend on mobile advertising campaigns is creeping up but not at a very strong pace. In terms of who the big companies are that are currently spending on mobile advertising, it’s the same big budget companies that spend the most on all forms of advertising. Almost 70 per cent of the top 20 brands in the UK have run a mobile advertising/marketing campaign, spending in the range of US$5,000 to US$1 million.

Also, the limited knowledge of the mobile industry amongst brands and advertising agencies is restricting the market growth. Brands and advertising agencies are showing more interest in mobile but the high industry fragmentation and fast innovation is confusing to them. These players have limited knowledge of the various mobile network technologies, handset considerations and OS platforms. As a result, currently the ad spending on mobile in most cases is still limited to a few thousand dollars on trial campaigns.

What needs to be done

Educating brands and advertising agencies about the mobile medium and making it easy for them to advertise on mobile will be the key to drive the mobile advertising market growth over the coming years. To achieve this, mobile operators and ad networks need to partner and work with a wide assortment of technology vendors and content publishers to address both the demand side, and the supply side market fragmentation.