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Mobile advertising: the law of small numbers

May 12, 2009 7:04pm
by Tim Bradshaw

Many predicted that mobile advertising would suffer in the downturn, as marketers looked to allocate shrinking budgets to more proven media.

But that hasn’t prevented the UK market from almost doubling in size last year, according to a report by PricewaterhouseCoopers for the Internet Advertising Bureau.

PwC’s Eva Berg-Winters said that growth of 99.2 per cent was greater than she had expected. “We have now passed the tipping point where things start moving in the mobile internet,” she said, adding that mobile was taking off faster than internet advertising did at a similar stage of its development in the late 1990s.

Nonetheless, at just £28.6m, the market remains tiny, especially considering the UK’s total online adspend is £3.4bn, just under a fifth of the total advertising market. Advertisers are spending just £2.60 to market their wares to each of the UK’s 11m mobile internet users.

And there’s bad news for operators, who remain the biggest players in the market. While PwC thought that operator portals would make up the majority of mobile advertising, they were surprised to learn that search ads already make up half of the market.

Mark Curtis, chief executive of Flirtomatic – which marries social networking with dating and is among the UK’s most popular mobile sites – admits the medium remains “in the rounding error category”.

“It is still difficult [for mobile] to get the full attention of agencies and clients,” he told the FT. Mr Curtis estimates the recession has delayed by six months the time when mobile is a regular fixture in advertisers’ media plans. Until next year, only mobile operators and mobile content vendors will be making regular use of mobile ads.

But he insists it is effective as a medium. “We spend quite a lot on mobile ads every month and they deliver very good returns for us,” he said. “If we could buy more cost effectively we would.”

Indeed, buying at scale remains a problem for mobile advertising. Multiple handsets and operators make the market highly fragmented.

Perhaps with that in mind, Velti – a London-listed provider of mobile marketing technology – has today acquired Ad Infuse, a US provider of mobile advertising services.

Velti last year saw revenues increase 156 per cent to €52.5m with pre-tax profits of €5.5m, but according to VentureBeat, Ad Infuse has not been so successful. It put itself up for sale after raising $18m from venture capitalists, but analysts at RBC Capital Markets estimate Velti snapped it up for “a few single-digit millions of dollars”.

For investors as with advertisers, mobile is still proving a tricky medium to monetise.

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May 12, 2009 7:04pm in Digital media, Europe, Mobile | Comment

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