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Monday, December 17, 2012
Facebook, Google Drive US Mobile Advertising Growth

Google's mobile ad revenue in the United States will be roughly $4 billion next year, while Facebook's nascent mobile advertising business will more than double, according to a study by research firm eMarketer.

US mobile ad spending is growing more quickly than previously expected, due in large part to the success of so-called "native" ad formats like Facebook?s mobile newsfeed ads and Twitter's Promoted Products.

eMarketer expects overall spending on mobile advertising in the US, including display, search and messaging-based ads served to mobile phones and tablets, will rise 180% this year to top $4 billion. eMarketer's previous forecast, made in September 2012, was for substantially smaller growth of 80%, to just $2.61 billion. Now eMarketer expects US mobile ad spending to reach $7.19 billion next year and nearly $21 billion by 2016, a significant upward revision.

Facebook's Q3 mobile performance is one major reason for the change, the research firm says. The social networking giant offered no mobile ad opportunities at the beginning of 2012 but grew its mobile business at an astonishing - and unexpected - rate. Before Facebook's Q3 earnings call, most researchers and analysts expected US mobile ad revenues of roughly $45 to $100 million, according to figures examined by eMarketer. While the company's total ad revenues were, for the most part, unsurprising, the share of revenues attributed to mobile advertising was far from it.

eMarketer, which bases its figures on a meta-analysis of data from research firms, investment banks and other sources on ad revenues, ad impressions, ad pricing and other factors, now estimates Facebook's US mobile ad revenues will hit $339 million in 2012.

Google also posted better-than-expected mobile ad growth in Q3. Fueled primarily by direct-response advertisers, Google now controls a 56.6% share of the US mobile advertising market, eMarketer estimates.

Most of Google's mobile ad revenues come from search, and eMarketer estimates Google maintains a 93.3% share of the overall $1.99 billion US mobile search ad market. Spending on mobile search ads in the US is expected to jump 55% to $3.6 billion next year - of which Google is expected to earn a 92.4% share.

Search, however, is not enjoying growth at quite the same level as native display formats, though it is growing quickly. Shifting consumer behavior has dramatically increased the volume of mobile searches and paid clicks on mobile devices, but advertisers remain hesitant to pay rates per mobile click comparable to those on the desktop, as mobile searchers are still less likely to convert into purchasers than their desktop counterparts.

Facebook is now expected to earn more display revenue than any other mobile publisher this year thanks to its ability to - more or less - redistribute revenue from mobile to desktop through its native display products. eMarketer estimates the company will take home an 18.4% share of the US mobile display advertising market in 2012.

Still, Google's mobile display business is also growing quickly and the company will earn $315 million in US mobile display ad revenues, driven primarily by the underlying strength of its AdMob network and its pre-existing relationships with advertisers looking to extend their display efforts to mobile devices. As a result, Google's share of US mobile display advertising will reach 17% this year?higher than all but Facebook. The bulk of future growth for Google's mobile display business, eMarketer predicts, will come from mobile monetization of YouTube.

Twitter's 2012 US mobile ad revenues have also been revised upward to $134.9 million from $116.8 million expected as of September, representing 3.5% of the total US mobile ad market and 7.3% of the mobile display ad market. Strong performance from competitors such as Google and Facebook suggests Twitter will also have a faster-than-expected transition of native ad inventory from desktop to mobile devices. Additionally, the nature of Twitter's Promoted Products and their integration with the platforms core user experience allows for this transition to be seamless across platforms, meaning rising mobile usage will boost mobile ad revenues without negative effects on user experience.

Apple, which currently holds an estimated 6.7% of the US mobile display ad market, has the potential to capture more market share in the long run, eMarketer believes, because of a strong capacity to invest and expand that business if it is successful. The company can continue to leverage the success of its iOS platform on iPhones and iPads in favor of iAds, as it has begun to do by phasing users out of native YouTube and Google Maps apps.

Millennial Media, by contrast, which has performed similarly to Apple in the past, has less potential to scale mobile ads in this way. But Millennial does have an outsized presence in the marketplace despite its 5.1% share of the after-TAC market. The company is well-positioned to use its vast audience to implement new technologies, such as geofencing - something companies other than ad networks will likely adopt much later. Overall, Millennial is in a position to capitalize on overall mobile ad market expansion, though against rivals with control over operating systems, devices and app marketplaces.

Despite the jump upward, mobile still represents a small slice of the total ad pie. Just 2.4% of total ad spending in the US will go toward mobile ads in 2012, eMarketer estimates. Mobile is expected to reach an 11% share of total US ad spending by 2016 - when it will overtake radio but still be below print.

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