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Mobile to grow to $1.2B by 2011 ? faster than PC, Web advertising: J.P. Morgan

Mobile advertising has reached critical mass and will double this year to reach a total of approximately $1.2 billion, according to a new report by J.P. Morgan.

The Internet Sector Initiation report points to figures from the Interactive Advertising Bureau that mobile advertising was a $550 to $650 million industry in the U.S. last year. Not only will that number reach more than $1 billion in 2011, but J.P. Morgan expects that mobile advertising will grow much faster PC and laptop Web advertising going forward and could ultimately become larger than Web-based advertising.

?We believe significantly higher volume of projected mobile users, along with device ubiquity and superior local presence, suggests mobile advertising could ultimately become larger than web-based advertising,? the report said.

Critical mass
Currently, there are approximately 73 million  mobile users in the United State with mobile Internet access, according to the report.

This is the critical mass needed for the mobile ad market to become a meaningful contributor to Internet revenue, per J.P. Morgan.

The report points to the lower ad revenues in mobile compared with the Internet.

J.P. Morgan?s analysis suggests that the annual mobile ad revenue per user is between $7 and $8.

Additionally, the report compares the stat with the $35 per Internet user during the early ? post-bubble ? days  of Web advertising in 2002.

J.P. Morgan expects smartphone and tablet advertising to grow much faster than PC and laptop Web advertising, especially since there is an  established online ad market.

The hurdles facing mobile include its smaller screen real estate and possible creative limitations.

Other challenges are the need for consistent ad formats and ROI metrics.

However, the high concentration among Android and iOS provides some level of standardization for ad networks, advertisers and agencies, according to J.P. Morgan. 

IAB findings
The growth in mobile advertising budgets is also reflected in a report from the IAB, which found that 35 percent of key ad spend decision makers will increase their mobile advertising budgets by over 50 percent in the next two years.

The majority, 72 percent, say there will be some sort of increase in mobile advertising budgets during the same period.

Several factors are contributing to the growth in mobile ad budgets, per  IAB.

?I think, first of all, that smartphone penetration and iPad penetration is growing day by day,? said  Anna Bager, vice president and general manager of the mobile marketing center of excellence at IAB.

?It?s reached the point now where it is so vast that CMOs are starting to investigate mobile for real.

?Also, it?s taken some time to build up an understanding for what mobile could be and that?s there now,? she said.

Broad acceptance
The future growth will come on top of a good couple of years for mobile, with 29 percent of brand marketing executives reporting that their companies? mobile advertising spend increased over 50 percent in the past two years while 63 percent said their companies? mobile advertising spend has increased to some degree during the same period.

In addition,  51 percent of brand marketers already treat mobile platforms as an integral element of their overall advertising strategy, while 35 percent are experimenting with mobile and 14 percent are using mobile on an ad hoc basis.

Brand marketers like the benefits provided by mobile, with its immediacy considered of high importance by 57 percent of respondents. Mobile?s cost effectiveness was named a key benefit by 54 percent of respondents while 52 percent pointed to the increased engagement provided by mobile.

By device, 60 percent of brand marketers are currently reaching smartphones with their mobile ad campaigns; 31 percent are reaching tablets; 22 percent feature phones; 10 percent ebooks and 3 percent connected games consoles.

Mobile does face some challenges as it moves forward.

?There are a number of issues we have to work on,? Ms. Bager said. ?Measurement is probably the key one.

?Also, companies need to understand that mobile is not a standalone, that it can act as a boost for TV, print and other strategies. Getting companies to really understand this is a challenge,? she said.

The challenges in mobile include device fragmentation (72 percent), privacy issues (70 percent), a lack of standardized metrics (69 percent), and a limited opportunity for creative (69 percent).

The IAB and Ovum Consulting surveyed 300 top-level brand marketing executives currently using mobile in their media mix from seven verticals: travel, financial services, FMCG, retail, media and entertainment, hospitality and restaurants and automotive. The survey was conducted between and April and June.

?The survey shows very positive results, more positive than we expected ? it shows a great future for mobile,? Ms. Bager said.

Final Take
Chantal Tode is Assoc. Editor at Mobile Marketer