by Nima Wedlake on February 5, 2016
We regularly conduct research within our focus areas, both to deepen our expertise and identify trends and opportunities. Today we’re publishing our latest research, focused on mobile advertising.
Unsurprisingly, mobile is top-of-mind across our portfolio of ad-tech companies – it’s by far the fastest growing digital ad format. This growth is the result of a dramatic shift in consumer attention away from TV, radio & desktop PCs to mobile. Adults in the U.S. spend more than three hours on mobile devices each day – playing games, connecting with friends and consuming media. As ad-tech investors, this shift in consumer attention creates opportunities to fund companies that are building the ad infrastructure to reach consumers on mobile.
It’s no secret that advertising dollars follow eyeballs, and the rise in mobile ad spend illustrates this shift. In fact, mobile will drive all of the growth in digital ad spend over the next several years (as illustrated in the chart below). We can look to social networks for a clear example of this shift, where both users and advertisers have embraced mobile. In Q4 2015, Facebook reported that mobile ads made up 80 percent of the company’s total ad business, compared with 23 percent in the same quarter of 2012. Similarly, 86 percent of Twitter’s ad revenues come from mobile.
Our mobile research is designed to provide a broad overview of the mobile ad-tech ecosystem, including market size & growth, emerging ad formats & standards, and key ad-tech vendors. In the report we cover three trends contributing to mobile’s continued rise in 2016:
- The mobile ad spend will surpass desktop spend
We’ve reached a tipping point in digital advertising, where consumer attention is moving primarily to mobile devices (supply) and marketers are becoming more comfortable spending their ad dollars on mobile (demand). As the scale tips, expect to see more media planning dollars being allocated to mobile.
- Mobile real-time bidding (RTB) spend is ramping up
Mobile accounted for more than half of programmatic in 2015, and will rise to over three-fourths of total programmatic spend by 2017, according to eMarketer. As we’ve seen in the desktop world, programmatic brings real benefits to advertisers, including better targeting, efficiency, scale, and ultimately performance. The breadth of data to inform programmatic buying on mobile is also growing – which will help drive incremental mobile spend.
- Brand ad dollars are flowing into mobile
The mobile advertising ecosystem has evolved considerably in the past few years. Much of the early ad spend has been driven by app developers looking to drive installs. The market has exploded in terms of download dollars, with companies like Facebook relying heavily on app downloads to drive early mobile ad revenue growth. While performance-based ad spend was first to the party, we expect brand dollars on mobile to ramp up significantly over the next several years. According to MoPub, 60% of its top 25 private marketplace advertisers are brands (as opposed to performance advertisers). Expect this percentage to grow over the coming year.
It’s an exciting time to be at the convergence of mobile, programmatic & brand advertising. We look forward to continued innovation in mobile, especially as formats more engaging ad formats like native & video grow in popularity.