Mobile advertising isn’t brand new — perhaps the most recognizable name in the US, Admob (since acquired by Google), was founded back in 2006 — but not until recently it has really kicked into high gear. In fact, the mobile ad market started heat
ing up even as ad revenues were falling last winter. At that time, two drivers had emerged that were going to change the game.
Already in November 2008 Admob’s Jason Spero told us: “The iPhone market is exploding, Inventory is growing and advertisers are hungry for it. It’s mainly (1) apps using CPC ads to drive downloads and (2) brand advertisers eager to reach iPhone users.” According to our sources, by April 2009 these two drivers were strong enough to push revenues up again at some ad networks that were tuned into the changes — particularly Admob and Quattro Wireless, which was recently acquired by Apple. (I’ll get back to the topic of these acquisitions below).
And those drivers have only become stronger. For one, the promotion of apps has grown into a full-fledged business. Many of these campaigns center around getting a particular application in a “Top” list on the Apple App Store. For an example of how such a campaign works, check out this Admob case study on Flixster. The aim of these campaigns is to get an application into a “top app list”. After a larger one-time push, an application is expected to stay on it with less ongoing spending. Large games companies like Zynga, EA, Gameloft, Digital Chocolate, Glu, SGN, and some of the well-known consumer ones like Phillips and Flixster use display advertising to acquire customers through such tactics.
An even bigger testament to the demand for these types of campaigns is that the price of running them has been going up. In March 2009, analytics company Pinch Media (which recently merged with Flurry) published some impressive numbers on how the prices of such campaigns were on the rise. In October 2008, it took a free application $10k to get on a Top 25 list. In December 2008, it took $11k. And by March 2009, it took $20k. To get to the coveted No 1 spot in the App Store, it cost a company about $150,000. And when I asked my sources for recent prices, I found they’d gone up again: As recently as a couple of weeks ago, it took $250,000 to get a particular application to the No. 1 spot.
Secondly, “brand advertisers” have increased their spending on iPhone users. Back in the autumn of 2008, we identified that an increasingly larger chunk of spending is coming from four industries — TV and Hollywood, car manufacturers and dealerships, retailers, and financial services companies. These advertisers increasingly were buying ads based on experience they gained testing the medium in the summer of 2008. While the brand advertisers were mostly running so-called “multi-channel mixed campaigns” (campaigns that spread the message in various media channels like TV, events or mobile for that matter), the main driver for mobile were successes brand companies had particularly with iPhone users. It’s hard to estimate some numbers to quantify the trend. From conversations with mobile ad network executives, I’d say it has grown considerably. Examples of “brand advertisers” — non-mobile brand-name advertisers — who drive this trend are companies like CBS, Disney, Ford, Sears, Procter & Gamble and Bank of America.
Millenial Media’s monthly reports sometimes disclose figures of mobile ad spending on its own ad network. The company’s October report indicated that spending from gaming, music and movie sectors made entertainment the top vertical for mobile advertising. Retail and consumer packaged goods were also rising.
The trend is also supported by more and more so-called “premium” publishers developing applications for the iPhone. Premium publishers are non-mobile brand-name publishers like CBC, NBC or Elle. Brand advertisers are more willing to advertise with “brand” publishers and are also willing to pay higher prices. Smartphone-orientated mobile development platforms (like Appcelerator or Phonegap in the US or Golden Gekko’s Tino platform in Europe) have been getting sizeable traction with brands and marketing agencies in recent months, further confirming the trend.
As I said, Admob and Quattro Wireless were the most aggressive mobile ad networks to take early advantage of these trends. Admob, for example, focused early on smartphone-related product development like the iPhone download exchange or iPhone specific ad formats. Quattro is the no. 2 in in-app advertising after Admob, according to a source. In a research call for our MobileBeat conference in June 2009, Quattro Wireless VP Lars Albright disclosed to us that Quattro revenue had doubled in the 12 months up to that point, to a large extent due to its iPhone developer activities. Quattro had a particular program tailored to get brand advertisers to create campaigns around the iPhone. Essentially, mobile display advertising’s main growth driver in 2009 has been the growing number of smartphones and respective apps — specifically of apps designed to be free to the user by virtue of ad support. As more people were using apps, more people were seeing in-app display ads on their smartphones.
We also know that free applications supported by display advertising are the main driver of downloads from Google and Apple’s mobile app stores. Free applications outnumber paid applications in both app stores, with both companies putting a lot of effort into supporting the free app model. To support its search engine, Google prefers iPhone (and Android, Palm WebOS) users surfing the mobile web and using mobile search much more. In a phone call last September, a Google spokesman told us: “People are 50 times more likely to use Google search on the iPhone than on a WAP device.”
The contenders
While Admob and Quattro may have taken the early lead, they’re by no means the sole players in this market. There are more than a twenty other contenders vying for market share here.
Below is an estimate of U.S. mobile advertising spending for 2009, valuing the market at a total of $287 million, which names some of them. It was published by research company IDC a couple of weeks ago. Bear in mind that, as the market is still very early, mobile advertising revenue estimates/rankings are fraught with uncertainty. The bases of these calculations have been, and continue to be, challenged by the companies represented in them (for a discussion of the fairly reasonable IDC estimates see here, and for a discussion of a Nielsen estimate see here). According to Mobile Marketer, the IDC ranking calculated the revenue sizes of the mobile ad networks as follows:
• Millennial Media: $51 million, 18 percent
• AdMob: $40 million, 14 percent
• Yahoo: $32 million, 11 percent
• Google: $28 million, 10 percent
• Microsoft: $23 million, 8 percent
• Quattro Wireless: $21 million, 7 percent
• Jumptap: $11 million, 4 percent
• AOL/Third Screen Media: $7 million, 2 percent
The remaining 26 percent of market share is made up of other players such as Mojiva, InMobi and Greystripe, according to IDC.
As rankings such as these are often disputed, we also asked the mobile ad networks to comment. Mojiva decided not to answer. According to an Inmobi spokesperson, Inmobi is on track for a $15m revenue run rate based on its current business. Greystripe, which started as a mobile game ad network and switched to iPhone ads last November, told us it has tripled its business since then. Buzzcity — an ad network that’s missing in this overview — told us that it would have to report more than 80 billion ad requests annually for a potential revenue of $40m/year if it had reported its revenue on the basis of the IDC calculations. We already had estimated Admob’s revenue for 2008 at $42M, so the 2009 one is likely higher. Jumptap’s CMO Paran Johar told us that in Q4 2009, the company earned more revenue than all of 2008, suggesting momentum.
Mobile marketing and advertising company Velti (which bought AdInfuse in 2009) reported a revenue of €52.5 million in 2008. According to a source, the revenue will be north of €100M for 2009. Another ad network that’s not named in the overview, Amobee, does not disclose revenue numbers but says it has the largest inventory of operators globally across over 25 countries, thus possibly placing its revenue figure ahead JumpTap, the leader in the North American operator market. Also, what few Adwords and Adsense customers know, Google frequently re-purposes web PC ads for mobile. Ads that users mean to be displayed at the PC get transcoded and run on mobile. This means that calculations based on mobile web impressions like the one done by IDC make Google’s mobile advertising business appear bigger than it actually is.
So with all these players seeing growth — and given the recent acquisition of Admob by Google and Quattro by Apple — it’s clear that some of the behemoths out there are watching the space for a strategic way in. Which raises the question: After Admob and Quattro, who’s next — which of these mobile ad companies are particularly suited for the next acquisition?
Well, stay tuned. I’ll be answering that question in a follow-up story shortly.
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