BIA's The Kelsey Group forecasts that U.S. mobile search advertising revenues will grow from $39 million in 2008 to $2.3 billion by 2013, a compound annual growth rate of 125 percent.

Kelsey anticipates a tenfold increase in the number of mobile Internet users during the forecast period -- from 5.2 million in 2008 to 56.2 million in 2013. The attendant increase in searches per user and the percentage of search results that are served with ads will drive the growth in mobile search ad revenues, according to Kelsey.

"I don't want to keep saying the iPhone, but clearly the iPhone is driving mobile Internet adoption," said Neal Polachek, CEO of The Kelsey Group, Princeton, NJ. "The Palm Pre, HTC G1, all of those handsets, the new wave of phones, are changing the consumer experience with mobile devices from text and voice to increasing level of browsing and apps usage.

"With apps that have been built for the iPhone and will be built for the Palm Pre and all of the other devices, you've got a mobile Internet experience very different from the mobile phone experience that you could occasionally check out the Internet on," he said. "It's flipping it from a voice device to an Internet device."

The notion that the mobile device with GPS capabilities knows where consumers are offers tantalizing possibilities for marketers.

"The ability down the road to target if they opt in, plus the geotargeting, it makes it about as targeted a message as possible for the advertiser," Mr. Polachek said. "Marketers could send me something that fits my profile and fits my location, and the likelihood of a conversion to a sale is probably as high as any ad in any platform.

"People do have to opt in, because without opt in of some sort there will be privacy issues, which are not insignificant," he said.

In addition, a business proposition unique to mobile is still being worked out, according to Kelsey.

"What's the ad model, the performance model, is it a CPM model?" Mr. Polacheck said. "Those issues will have to be dealt with.

"Plus, there's the real estate issue, because there's only so much space on these devices for ads, which will drive CPM or cost per click or the per-performance cost up pretty high, because only so much real estate advertisers will be able to buy," he said.

Despite some remaining obstacles, the growth of mobile advertising will not slow down any time soon.

"There are hurdles, but like everything in the media business, it's like water, it'll find its way to the right place," Mr. Polachek said. "As far as models, some players make it free to have a device if you're willing to view ad messages.

"Clearly the usage case is there for consumers to be on these things, as the adoption of these devices doesn't seem to be slowing down," he said. "Over time, as we've seen with search, local will become really critical, and a lot of players that want to compete for that space have to figure out, where will local advertisers fit into that ecosystem?

"Maybe an ad from a local service provider will be as relevant and interesting as that of a national advertiser, so it will be interesting to see how it evolves."

Kelsey's Winning Media Strategies
BIA Advisory Services LLC, a subsidiary of BIA Financial Network, provides research, data, analysis and financial and strategic consulting to media, telecommunications, technology, directory publishing and local search companies.

The Kelsey Group, a division of BIA Advisory Services LLC, will present its mobile advertising forecast during "Winning Media Strategies," its first conference to focus on the new media landscape and the opportunities for traditional media businesses and online companies, May 20-22 in Washington, DC.

The National Association of Broadcasters recently partnered with Winning Media Strategies to demonstrate the importance of mobile and other online methods of distribution to the broadcast industry.

The Winning Media Strategies program will examine the role of mobile advertising in multiplatform business models and focus on how local advertisers can find income through cross-platforms, including online, social and mobile media.

Rick Ducey, BIA's chief strategy officer, will lead a panel titled, "How Broadcasters Can Get the Local Edge in Mobile Advertising," featuring Sam Matheny, general manager of News Over Wireless, and Ivan Braiker, CEO of HipCricket.

The panel will discuss specific opportunities for broadcasters to win new segments of the advertising pie, including local content, mobile video, messaging and interactive applications for mobile devices.

In addition to advertising revenue models, subscription revenue models will also be explored.

This discussion will be front and center at Winning Media Strategies, where attendees will examine how to leverage local content and sales forces and develop cross-platform media campaigns to add unique value to their sales and marketing solutions and drive new forms of revenues.

The Winning Media Strategies agenda features speakers from many key market segments, including broadcast and Internet media, mobile platforms, print media, government, academia, finance, lobbying companies, law firms and trade associations, who will share their insights on what it takes to remain relevant in the changing local media industry.

Attendees will learn from industry leaders and innovators from both traditional and new media, including keynote speakers John Kannapell, vice president of AOL Search and Directional Media; Marci Ryvicker, vice president of Wachovia; Jeff Smulyan, CEO of Emmis Communications; Mark Walsh, CEO of GeniusRocket; and Dick Wiley, a partner at Wiley Rein.

"People would rather leave their wallet or their keys at home than their mobile device -- if they could have one of the three with them, they'd rather have their mobile device," Mr. Polachek said. "Someday we'll have a mobile wallet to make purchases, my phone will turn on my car and there will be a digital version of my driver's license, insurance verification and registration.

"Now my phone's also the ignition of my car, now I can leave my house without my wallet and without my car keys," he said. "As these devices get smarter and easier to use and faster, these devices will become extensions of our being."