Publishers threaten to cut out ad networks in mobile display advertising
April 11, 2013
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Facebook and Twitter are among a handful of publishers that control 52 percent of mobile display spend, showing how media brands could push out ad networks if they can offer advertisers strong value propositions, according to a new report from research firm IDC.
According to IDC’s new “2012 U.S. Mobile Advertising Market Sizing and Vendor Market Shares” report, mobile publishers including Facebook, Twitter and Pandora controlled more than half of mobile display ad spend in 2012, pointing to some of the initial success that these companies are seeing with mobile. The trend towards native advertising and more control over inventory could point to brands working more closely with publishers in the near future.
“For advertisers and agencies, they have another option to buy mobile advertising,” said Karsten Weide, program vice president of media and entertainment at IDC, San Mateo, CA.
“A year ago, they had to go through the networks because publishers did not have inventory or mobile advertising options,” he said.
“You have presumably higher-quality ad inventory and better customer service because publishers have a adequate understanding of their inventory.”
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Race to the top?
According to the report, the 52 percent display advertising control from publishers last year is a jump from the 39 percent in 2011.
In particular, the numbers highlight advertiser interest with Facebook and Twitter — both of which did not offer mobile advertising opportunities before last year.
Facebook generated $234 million in gross revenue from mobile advertising last year, making it the No. 1 company in the report making money off of mobile display.
Pandora claimed the second spot with $229 million, and Twitter brought in $117 million as the No. 3 company.
Other publishers that are pulling in strong mobile advertising revenue include AOL, The Weather Channel, Microsoft and Yahoo.
Per the report, brand advertisers are likely buying ad inventory directly from publishers because they are more in control of placements and campaigns than ad networks. At the same time though, these brand advertisers expect higher-quality mobile inventory.
Up until 2012, the lack of inventory forced publishers to sell mobile advertising directly through ad networks. The growth of independent ad networks including Jumptap and Millennial Media in the past few years can be partly chalked up to this.
However, there are still challenges for publishers with mobile display around scale and standardization.
“In theory, there are a few advantages of taking the ad network out of the value chain,” said Sephi Shapira, founder/CEO of MassiveImpact, Tel Aviv, Israel.
“In reality, other than a few large players – and I think this is a global market change – it is extremely fragmented with publishers taking a share of the market,” he said.
“Publishers need to be extremely large to directly sell space to advertisers, and there are only a handful of publishers around that can.”
On the ad network side, Google still reigns as the No. 1 lucrative company, making $243 million in 2012 off of mobile display.
Millennial Media moved from the No. 3 seat to No. 2 with $151 million in revenue in 2012.
Apple got bumped down to the No. 3 spot last year, raking in $125 million with Jumptap following at $90 million.
Velti came in as the No. 5 ad network, followed by InMobi, ValueClick's GreyStripe, Mojiva and Navteq/Nokia.
One of the biggest challenges for mobile ad networks going forward will be to track and optimize campaigns based on advertisers’ performance metrics.
“The mobile ad network space is very crowded and the perception is that they are all the same,” said Dirk Rients, senior vice president and director of mobile at DDB Chicago, Chicago.
“Networks need to innovate and differentiate themselves with new product offerings, targeting capabilities, and analytics solutions in order to grown and drive revenue,” he said.
By the numbers
Display advertising claimed a 38.6 percent share in total mobile advertising in 2012, which is an increase from 31.2 percent in 2011.
IDC forecasts that the mobile display industry will grow 55-65 percent year-over-year this year in the United States. Mobile display is expected to generate approximately $7 billion this year.
Other findings from the report show that while mobile display spend continues to grow, it is growing at a slower rate than previously.
The mobile display market in 2012 grew by 88 percent year-over-year in 2012 to total $4.5 million. Mobile’s market share made up 11 percent of all digital advertising last year, which is an increase from 7 percent in 2011.
This compares to 2011 when the mobile display industry grew by 125 percent year-over-year and generated $2.4 billion.
Mobile ad spend in 2010 grew by 172 percent and brought in $1.1 million.
Search on mobile
The report also points to a slowdown with mobile search spend.
In 2012, marketers spent $2.8 billion on mobile search with a year-over-year growth rate of 68 percent.
Mobile search spend in 2011 represented a 127 percent year-over-year growth and brought in $1.6 billion. Mobile search spend in 2010 hit $0.7 billion and represented a 195 percent yearly growth.
The slower growth rates are attributed to the growth of tablets, which are primed for bigger and more interactive display advertising campaigns than mobile search.
When it comes to market control, Google claims a gross market share of 79 percent and $2,166 million in revenue.
Yelp, Yahoo and Microsoft are all competitors but only contribute to roughly 16 percent market share together. The remaining 5 percent came from other mobile search vendors.
One area that gives Yelp a potentially lead is with local search. Yelp’s massive database of local businesses means that all search engines depend on its data.
According to IDC, Facebook could be a strong threat to Google in mobile search, especially if the social media giant used the Bing platform to leverage its reach.
“Facebook is a very strong competitor for Google in the mobile space, and that is something that Google has to take seriously,” IDC’s Mr. Weide said.
Lauren Johnson is associate reporter on Mobile Marketer, New York
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