BREAKINGVIEWS-Mobile advertising will boom in 2013

Wed Dec 19, 2012 2:09am IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

By Robert Cyran

NEW YORK, Dec 18 (Reuters Breakingviews) - An advertising boom could play out on every smartphone screen in 2013. Internet firms moaned for years that users spent lots of time surfing the Web on their desktops, but marketing dollars weren’t following from print and TV. Time and the growth of broadband have mostly closed the gap. The surge in smartphone and tablet use is now providing similar fuel for mobile advertising.

There’s no iron rule, but what advertisers spend and how people consume media seem related over the longer run. Five years ago, 29 percent of users' media time involved the Internet but their screens attracted only 8 percent of ad spending, according to Forrester Research. Now, 26 percent of time is devoted to Internet browsing, and that brings a much closer 22 percent of ad dollars, as Mary Meeker of Kleiner Perkins noted recently. U.S. ad spending on the Internet has ballooned to $30 billion, the Interactive Advertising Bureau reckons, up 76 percent since 2006.

Web advertising really took off after 2007, when for the first time half of U.S. homes had broadband access, according to the Department of Commerce. Ads loaded faster, companies became more comfortable promoting themselves on the Web, and the development of better analytics meant improved customer targeting.

A new mismatch has emerged. Some 10 percent of media time was spent on mobile devices in 2011, yet they only attracted 1 percent of ad spending. Closing that gap would result in nearly $15 billion in mobile ad revenue in the United States alone. That’s a conservative estimate, as mobile gadgets continue to proliferate and draw more of users' attention.

This gap, too, should close. Half of U.S. cellphone customers now have smartphones, and the number is growing rapidly. That means faster downloads and larger screens to view promotions – echoes of the shifts in desktop Web use five years ago. Analytics have improved for mobile ads, too.

Facebook (FB.O) only started gunning for smartphone and tablet ads earlier in 2012. By the end of the third quarter that business was running at $1 billion a year, with sales still increasing. Google (GOOG.O) expects to reap $8 billion this year worldwide from mobile ads, three times as much as last year. Smaller concerns like Pandora (P.N) and Yelp (YELP.N) are reporting similar trends. Expect much more of the same, coming to a smallish screen near you.

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(Editing by Richard Beales and Martin Langfield)

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