The evolution of advertising has gone through several memorable phases, such as billboard and radio ads back in 50s, TV ads in 70s to online ads in late 90s and finally to mobile ads, which took off after the Apple’s revolutionary iPhone launch in 2007. The purpose of mobile ads remains to be the same as it was with billboards in 50s – to connect products and services with people who need these goods. But there is a tremendous difference between how people interact with those ads, both in terms of frequency and context.
Back in the day people could see several billboards throughout a day, now they may see a mobile ad every time they launch an app on their smartphone or a tablet computer. And of course ads targeting has seen some really dramatic improvements, today Facebook mobile ads can be tuned to reach out people of particular gender, age, location, level of education, interests, online behavior and with a particular smartphone model in their pocket and other mobile ad platforms do their best to match Facebook ad targeting capacity.
Let’s look at several overarching statistics to draw a comprehensive picture of today’s mobile advertising market and a forecast for the next several years.
Key Mobile Advertising Statistics:
- Global mobile internet ad spending in 2016 – $101 billion
- US mobile advertising spending in 2016 – $40 billion
- China mobile ad spending in 2016 – $27 billion
- Cost of a mobile app install in April of 2016 – $2,5 billion
- US mobile video ad spending in 2016 – $4 billion
- Content blocker impact on mobile app advertising in 2016 – $74 billion (an estimate)
- Content blocker impact on mobile web advertising in 2016 – $22 billion (an estimate)
As we look at the mobile advertising spending for the last several years and a forecast for the next three years, we see two distinctive trends. Number one, it’s been growing and will continue to grow, reaching about $200 billion by 2019, a 10 times increase from 2013. Number two, a rate of this growth will decrease over time and reach 17% by 2019, 7 times less compared with 117% in 2013. The reasons behind this growth decline are simple, on one hand – more and more companies get on board of mobile advertising and so the competition grows over time, on the other – there is well established trend, which states that app users tend to use only 5 apps regularly. So in this environment it becomes harder and harder for ad companies to increase their ad revenue.
Global Mobile Advertising Spending Forecast, 2013-2019
A regional mobile advertising spending draws a picture somewhat similar to the global one we’ve just described earlier. The US mobile ad market presents the biggest portion of the total market and has reached 30 billion in 2015. But if we look at year-over-year growth, we see a slowdown at its growth. From 2013 to 2015 it tripled, from $10 to 30 billion, meanwhile it’s projected to double by 2018 and reach only $57 billion. On the other hand, China had a much lower start, with only $920 million in 2010 and it reached 14 billion in 2015, in other words it’s seen more than order of a magnitude growth. Other countries on the list have demonstrated similar to Chinese growth but on a smaller scale. Obviously, the mobile advertising spending growth dynamics mirrors a country’s overall economy size and growth.
Mobile Advertising Spending, by country, 2013-2018
Now let’s take a closer look at the Chinese total media ad spending market and how mobile contributes to the general picture. The total digital media spending in China went from $23 billion in 2014 to $40 billion this year and a forecast for 2020 to reach $84 billion. Among all types of media ad spending, mobile is the only one that’s been growing really fast, it went from $8 billion in 2014 to $27 billion this year and it’s projected to reach a whopping $70 in 2020. In the meantime we see a decline for pretty much all other types (except radio) of media ad spending in China and it mirrors a global trend of a switch from traditional media and desktop to mobile.
Total Media Ad Spending in China, 2014-2020
Now let’s look at what different mobile ad formats at the US mobile ad market and how they stack up to each other. The first thing to notice is that SMS, MMS and P2P messaging has actually shrunk over time, from almost 20% in 2011 to only about 5% this year. Video ads have doubled in volume from 5% in 2011 to 10% in 2016, and so once again it demonstrates the growth of Video as a format over the years. It’s interesting to note that Search format has grown very little for the last 5 years, it seems like due to high level of competition, companies are cautions with their ad spending on ads with mobile ad platforms such as AdMob, Opera MediaWorks, MoPub and others. The Display format has been seeing very modest growth, roughly 1-2% year-over-year.
US mobile ad spending, by format, 2011-2016
One of the important metrics to mobile app industry has been CPI Index by Fiksu mobile app marketing agency. On April of this year the company has decided to pull the plug from its monthly mobile app cost per install metric computing and publishing effort. According to the last published Index, a mobile app install in April of this year costed $2.5. The reason behind of this Fiksu decision was acknowledging of the fact that a mobile app install has lost its significance for mobile app owners, they are much more interested in knowing a cost of specific action within an app or an average revenue per user.
Cost Per Instal Index by Fiksu, Inc., April 2016
As we said before, video ads have been the fastest growing component of the mobile ad spending over the last several years. So let’s look at what this growth looks like in numbers, in particular in US.
The US mobile video ad spending has increased 7 times from about $1.5 billion in 2014 to $4 billion this year and by the year 2019 it’s projected to reach $7 billion. Such rapid growth can be explained by the fact that all major media players, such as Google, with its YouTube video hosting platform, and Facebook that recently reported generating 10 billion video views daily, even though 85% of those billions of views are muted, have shown an exponential growth of video content consuming.
US digital video ad spending, mobile and online 2014-2019
The picture of mobile advertising statistics wouldn’t be complete if we wouldn’t look at the consumer side. Specifically, how people respond to ads, how well those ads lead them to take an action and how people of a different age and in different regions react on different ad formats.
Firstly, let’s analyze how mobile stack up against traditional (offline) and online formats. On the graph below you can see the data from the Nielsen report that compares level of people’s trust to different ad formats. The data set demonstrates the change between the data from 2013 and 2015. Among all ad formats presented on the graph, two formats are relevant to mobile – Ads on mobile devices (in-app ads) and Text ads on mobile phones (SMS). For in-app ads we see a two percent drop and it can be attributed to the overall rate of in-app ads growth, people become more irritated by those ads, for SMS format we see one percent decline. Of course those numbers aren’t look good for mobile advertisers but we need to see these in the general context – all ad formats are either in decline or have very insignificant increase of people’s trust.
Percent of global respondents who trust ad format
Certainly, level of people’s trust in ads is an important metric for mobile advertisers to know but actual action people take as a result of those ads is even more significant. According to the same Nielsen study, the same mobile-related ad formats – in-app ads and SMS ads reveal that there are 7-10% more of people who take action, lead by mobile ads, than the ones who trust those ads.
Percent of global respondents who trust ad format vs. take action
One of the most interesting pieces of data revealed by Nielsen report are how people of different age and location trust to different ad formats.
83% of people of age 15-20, so-called Generation Z, heavily rely on social cues, what their friends have to say about products or services, their trust to in-app and SMS ads are way lower – 42% and 32% respectively. Among all age groups, the highest level of trust in-app and SMS ads have with Millennials, people of 21-34 years old – 48%, 41% respectively. Overall, Recommendations from people I know and Branded websites formats enjoy the highest level of people trust, which goes to show you the significance of social media, where they actually can communicate those recommendations and the power of brand. It still works. It works really well.
Percent of global respondents who trust ad format, by age group
When it comes to a region, in-app and SMS ads see the biggest trust among population of Asia, 50% and 42% respectively. Social recommendations and branded websites have the highest level across the board, in every region of the world. It comes as no surprise that North American population has the lowest level of trust for in-app ads – 39% and it’s even worse for SMS – only 37%. Those kinds of mobile ads were launched originally in US and hence people in US and Canada have the longest exposure to these kinds of advertisement and so they are really fed up with ads on their mobile devices.
Percent of global respondents who trust ad format, by region
Finally we need to address one of the most important issues that mobile advertising has today – ad blocking. The data accumulated by Opera MediaWorks, StatCounter and UBS allow to draw the following picture. This year the greatest impact ad blocking has on desktop advertising, according to the estimates it results in $116 billion in loss, mobile advertising comes next with $74 billion and mobile web advertising has suffered $22 billion in loss.
Content blocker impact on global digital advertising in 2016
Mobile advertising growth has been outpacing other sectors growth and it will remain on this trajectory because of a mobile devices explosive growth. The fastest growing sector is video ads, driven by Google’s YouTube, Facebook, as well as Twitter, Instagram and Snapchat.
As of today, out of 7,3 billion of the world population only about 2 has a smartphone, clearly there is a room for growth. But the bulk of remaining 5 billion live in Africa, countries like India and Bangladesh in Asia, places where owning a smartphone capable of displaying ads presents a problem. Both Google’s Android OS and Apple’s iOS will continue to penetrate these mostly untouched markets, via technical innovation to drive a smartphone pricing down and partnership with local mobile providers to subsidize it and make affordable for a local middle class consumer.