US mobile ad expenditure more than doubles to $2.1 billion in 2011, Google dominates, according to IDC

According to estimates by IDC, US $2.1 billion was spent on mobile advertising in the US in 2011. That’s more than double the expenditure in 2010. The split between mobile search and mobile display advertising spend is roughly 70:30. This is part of the reason that IDC attributes a massive 70 percent market share to Google (IDC describes Google as a “near monopoly” in search), but IDC believes Google is the market leader in display advertising in the US also. No other rival mobile ad network has more than 5 percent market share. Number two to six are Millennial Media, Apple, Yahoo!, Microsoft and Jumptap. All other networks have less than 1 percent share of the US market.

Hang on, didn’t IDC say…?

You will read different IDC estimates for share of the US mobile advertising market in Bloomberg, Wall Street Journal and the various other journals that have parroted them. These numbers come from the same report, but these articles only focus on IDC’s figures for mobile display advertising and ignore the much larger and faster growing mobile search market. In mobile display, Google’s revenue (according to IDC) is only 1.5 times bigger than Millennial Media and Apple, which fits much better with dull Google-v-Apple-war media agenda, than total mobile ad revenue (according to the same IDC report), which make Google 15 times bigger than the nearest competition.

Mobile search ads and mobile display ads are different. With search ads, advertisers buy keywords, to promote their site, service, product or app, as mobile users search on Google, Bing, Yahoo, mobile operator portals and so on. Display advertising covers all other sorts of mobile Web- or app-based ads, from simple text-based ads to cutting-edge rich media ads. However, both search and display ads are mobile advertising – most analysts including IDC seem to agree on this. Messaging-based mobile marketing, while a significant market, is generally not included within mobile advertising stats.

Ah-ha, but isn’t this about mobile ad networks?

Instead of asking “Who makes the most money in is mobile advertising in the US?” the media insists on asking “Who’s the biggest mobile ad network in the US?” This may explain why mobile search is ignored, i.e. because people consider Google’s display network (formerly DoubleClick) and in-app ad business, AdMob, to be ad networks, but don’t think Google’s search ad business counts as an ad network. This is a moot point because what is and what isn’t a mobile ad network is about as clear as mud.

mobiThinking suggests this definition: A mobile ad network is a system that allows advertisers to advertise on mobile sites or within mobile apps without having to deal directly with each mobile site or app individually. You could go on to say: In many ad networks, ads are bought in a virtual market place where advertisers bid to place ads paying a higher price the more targeted the ads.

Google’s search engines are a huge network of mobile sites and apps in different countries, on which advertisers can buy/place ads, targeted by keywords (plus other rudimentary targeting) using a single system. Why isn’t that a mobile ad network? You could argue that the network needs to be independent. However, if Google search advertising isn’t a mobile ad network because advertisers are buying advertising on Google sites from Google, then the same rule must apply in the display market, where significant proportions of ads sold/served on DoubleClick, Microsoft, Yahoo, Nokia and AOL end up on the vendors own mobile sites/portals and thus – according to the same logic – couldn’t be mobile ad networks either. What about Apple’s iAd – it only serves ads to apps that can only be downloaded from Apple’s app store and only work on Apple phones – why is iAd a mobile ad network if Google search isn’t?

Are IDC’s figures accurate?

IDC’s stats are estimates. No mobile ad network (or mobile ad provider, if you like) reports its revenues except Google and all Google actually declared is it made US $2.5 billion globally from mobile, primarily via mobile search. From this IDC estimates that 60 percent of Google’s revenue is derived from the US.

When asked if networks shared data, IDC said they had refused, but each network estimated how much revenue they thought the competitors were making – this was combined with the analyst’s internal estimates to come up with the figures. It’s fair to assume that if IDC’s estimates are a million miles out then the networks would start providing actual revenue data. Arguably this is why Google suddenly started announcing its mobile revenue last year. Upon which IDC had to restate its 2010 figures. But no other network has subsequently been prompted to reveal its revenue, which suggests that IDC’s stats are close to the mark or they flatter them with an overoptimistic view of their revenue.

The combined revenue of all IDC’s ad network estimates for search and display gives a grand total for US mobile ad spend of $2.1 billion in 2011. This is considerably higher than research earlier this year from rival analyst group Gartner, which estimated that mobile ad spend in North America in 2011 would be $0.7 billion.

Then there are the niggling doubts about the revenues of particular networks. If Google is so dominant in mobile ads, then why did the FTC allow the acquisition of AdMob to go ahead? Surely the FTC must have taken revenue statements from each of the main ad networks? And how come Apple, with its 18-month-old iAd ad network, which only serves ads in apps on Apple devices, managed to become the third-biggest mobile ad network, while at the same time it is reportedly cutting prices to win customers?

Despite the reservations, mobiThinking believes IDC’s stats are the best indication of market share of mobile ad networks today, and will only improve in their accuracy in future years as mobile ad networks start sharing revenue data.

So what does the future hold?

IDC predicts strong growth next year with mobile ad revenues almost doubling, with mobile search continuing to grow fastest. Google will remain dominant and Millennial Media (the leading independent network) is likely to remain in second place, but IDC predicts Apple iAd “will, over time, fade into the background”, because advertisers are interested in targeting all mobile users, not just those who use Apple devices.

Does it matter which ad network is biggest?

Revenues/market share of ad networks only matters if you are a suitor seeking to acquire or to invest in a mobile ad network or if you are the FTC deciding whether to clear the acquisition. From an advertiser or publisher’s point of view, size should only be a minor consideration when choosing an ad network, in the same way that size of manufacturer would only be a minor consideration when you choose a car. As mobiThinking has said before, all ad networks are different with different business models, geographical coverage, publishers/advertisers on the network, targeting capability, pricing, sales model etc – all much more important considerations for a potential advertiser or publisher than market share.

• For an in-depth guide to the leading mobile ad networks, see: The mobiThinking Guide to mobile ad networks.
• If you like stats, you will love: The big compendium of global mobile stats.

• Be the first to know about mobiThinking guides, competitions etc… follow mobiThinking on Twitter: @mobithinking.

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• The big compendium of global mobile stats

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