More Than Half Of Mobile Ad Dollars Will Be Location-Based By 2018
Local media is growing faster than previously anticipated, says analyst BIA/Kelsey. A lot faster. The reason is geo-marketing.
The local digital media marketplace is no longer untapped. In fact, the spigot of dollars flowing into the local space is practically a flood, according to BIA/Kelsey’s recently released five-year outlook.
The forecast calls for local media ad spend to jump from $133.2 billion in 2013 to $158.6 billion in 2018, representing a compound annual growth rate (CAGR) of 3.6 percent. Digital media continues to increase its share of total local media revenues, growing from $31.7 billion (23 percent) in 2014 to $52.7 billion (33.2 percent) in 2018.
We spoke with Mike Boland, BIA/Kelsey senior analyst, about the drivers behind these numbers. The takeaway: the rise of mobile advertising has lifted the local market; and the use of location-oriented targeting methods will push both those areas even higher, as geo-data becomes an integral part of the way consumers are marketed to.
GeoMarketing: What has had the biggest impact on location-based mobile advertising this past year?
Mike Boland: Both Facebook and Google own so much of the space, and much of the revenues in mobile advertising are going to them. Each has done something impactful in the last year that has kind of caused us to dial up the numbers. With Google that was its [cross-screen AdWords program] Enhanced Campaigns, which included causing Cost-Per-Click rates to go up, as a result of more advertisers in the bid marketplace. With Facebook, its Sponsored Stories native/mobile ad units is an interesting story in itself.
Facebook is pioneering where mobile advertising needs to go. This is a true mobile-first mindset at work. By integrating ads into the Newsfeed, Facebook is causing the world to really think and innovate from the ground up in creating ad units that are fit to the device and not something that was a desktop mindset that just slapped on a smaller screen. And it’s worth pointing out that Facebook, in its Q1 earnings report, noted that 59 percent of their $2.3 billion in quarterly ad revenue came from mobile, including these native ad units. To put that in context: mobile comprised 30 percent of Facebook’s ad dollars in Q1 2013.
How has Google’s Enhanced Campaigns moved the needle in spending on location-based advertising?
There’s a natural adoption cycle of any new technology. Mobile advertising is going though that that pace of slow adoption. Madison Avenue is saying, “Okay, what does this mean for us? What do these ad units look like?” Usually Madison Avenue is slower than consumer adoption and then it catches up. Google decided that Madison Avenue’s adoption of mobile advertising wasn’t happening fast enough. With enhanced campaigns, they essentially forced inclusion of mobile ads.
For example, AdWords advertisers don’t have to ask themselves anymore, “If I’m running my search campaign, do I also want to do mobile?” And it’s not like a contrived or evil push. They’re forcing advertisers to become more adept at multi-platform: how does mobile work as part of a larger campaign? How do I formulate bids that are separate or ad groups that are separate based on the way users are searching in mobile?
How is being forced to include mobile into Enhanced Campaigns forcing up CPC prices within location-based advertising?
Ad rates are demand-driven. More advertisers in that marketplace will drive up CPC rates. We’re already seeing evidence of that. The combination of, one, more advertisers coming into the space, and two, higher CPCs as a result of greater demand, are dialing up overall mobile ad revenue.
But how much of that spending is being aimed at geo-targeted ads?
We’re seeing that location-targeted segment of the overall mobile advertising pie grow from around 40% currently of total mobile revenue. That’s going to grow to 52% by the end of the forecast period in 2018.
What’s driving that growth?
It’s the realization that these ad units and these ad strategies are more organic to the mobile experience and what mobile devices are capable of.
To be clear, mobile devices are capable of a lot of location-targeting just based simply on the inherent hardware capabilities in the GPS chip. Plus, you can factor in user-intent and the way that people are using mobile; the advertising is starting to reflect the way consumers are searching and using their smartphones. They’re out and about. So people looking for things to do or buy in their local vicinity are starting to mean something to advertisers., the share of local intent searches in mobile is 40-to-50 percent. On the desktop, the share of local intent searching is only about 17 percent.
Are there any particular groups of advertisers that are leading the charge on location advertising?
Most of the spending is coming in from national brand advertisers. They naturally have deeper pockets and large marketing departments for that kind of planning, as opposed to small business segment. Usually, when we’re talking about local advertising, it tends to be synonymous with SMBs. But in the case of location-targeting, we’re talking about both national and SMB advertisers.
That said, we’re still in the early days of mobile and location-targeted ad spending. As it often happens, the adoption starts at the brand level. In terms of specific categories, we’re seeing quick-serve restaurants and auto companies doing a lot of location-targeting. Another good one is consumer packaged goods products, including the Procter & Gambles of the world but also their retail affiliates like Walgreens. They’re kind of working together in ways that engage users to kind of find the closest store.
Lastly, there are other categories like financial services and insurance that have large call centers. They’re using location to want to drive phone calls. We’re seeing this play out in lots of interesting ways, but the point is that a lot of these advertisers are really starting to realize it’s not just about branding; it’s a new kind of combination of reach-driven branding and targeting.