November 1, 2016 was a big day for mobile milestones with a couple of firsts. Statcounter announced that for the first time global internet traffic on mobile exceeded desktop. On the same day, PwC released its IAB Internet Advertising Revenue Report for the first six months of 2016. One headline from the report suggested “Mobile surpasses Search as the lead ad format for the first time.”
How should marketers think about the meaning behind these trends? Mobile ad inventory is increasing, but demand for that inventory is growing at an even faster rate. Mobile data traffic is expected to grow 68% this year while the PwC data show an 86% mobile advertising growth rate. That means there will be more competition for mobile ad inventory and marketers will need to ensure they are maximizing the value of their ad spend to stay within budget projections.
A First – Global Mobile Internet Bigger Than Desktop
Just five years ago, the global mobile internet usage worldwide was under 10% of the total. That jumped to 51.3% in October 2016.
Desktop internet traffic still outpaces mobile in the US and other developed countries, but it is nearing parity everywhere and the trend lines are similar to those for global usage.
Another First – US Mobile Advertising Surpasses Desktop Search Spend
Desktop search has long been the dominant factor in online advertising because it works. However, with mobile usage increasing advertisers are increasingly chasing these on-the-go audiences. So let’s unpack this data. Desktop search revenue actually fell 13% between Q2 2015 and Q2 2016 and mobile now accounts for 46% of the total in the search advertising segment. Mobile accounted for all of the gains. Similarly, total display revenue was up 25% between 2015 and 2016 and mobile accounted for a 55% share. Also notable is that mobile now accounts for 48% of all advertisings spending in the US. The takeaway: mobile is growing and desktop is shrinking.
Comparing Mobile Advertising to Consumer Time Spent
At the same time, we know from KPCB’s Mary Meeker the proportion of time spent on mobile is much higher than its share of advertising spending. Meeker’s analysis suggests that U.S. advertisers are over-indexed in traditional media and under-indexed by 100% in mobile. That means they should be spending double what they do today on mobile based on the consumer time used in the medium. The spending may transition from desktop, but the reality is that it should largely shift from current print and television spend.
Another important point about Meeker’s analysis is that time spent increased only from 24% in 2015 to 25% in the 2016 report. During that same period mobile advertising spend grew from 8% to 12%. Advertisers are now closing the gap between time spent and allocated advertising.
What it Means for Advertisers
It is an obvious conclusion that the mobile usage trends will continue to grow and that marketers need to follow the audience. However, there is something new here. The ad spending trend growth is now outpacing usage growth. That is likely to introduce higher prices and some scarcity in the future as more advertisers chase mobile audiences.
The other consideration is whether advertising strategies used for desktop migrate well to mobile. On desktop, you can only align marketing spend based on a consumer’s online behavior. Mobile introduces new opportunities because it can reveal consumers’ real-life behaviors based on what they do and where they go. When you would like to target audiences with specific interests and intentions, mobile provides insight that was never available on desktop. So as marketers shift spending to mobile they need to consider changes to their targeting approaches as well.
Moreover, performance based pricing remains the preferred model with advertisers, accounting for 65% of the total advertising spend during the first half of 2016. Needless to say, accurate targeting of audiences is a key priority for advertisers. At Gravy we believe that what one does in the physical world is a far better indicator of interests and buying propensities than just clicks in the digital world.
Gravy’s location-based consumer intelligence platform helps identify interests and affinities based on verified attendances at events and activities. We believe that Gravy’s TruLife Audiences are the most effective way to reach target consumers and convert real-interest into real-life purchases. Gravy branded direct to consumer and B2B audiences are now available to brands and agencies on all major media buying platforms. To learn more about Gravy TruLife Audiences please request a demo by clicking the button below.