Study: Mobile Revenues Growing Faster Than Expected – See more at: http://www.editorandpublisher.com/Headlines/Article/Study–Mobile-Revenues-Growing-Faster-Than-Expected#sthash.BqSAGyxt.dpuf

Posted on November 19, 2013

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A new study from BIA/Kelsey finds that mobile advertising revenues may be picking up more quickly than previously thought. In the fall 2013 update to its Local Media Forecast, the research firm projects that U.S. mobile advertising revenues will jump from $7.03 billion in 2012 to over $20 billion in 2017. Meanwhile, local’s share of mobiles spending continues to grow, with local targeting set to touch one of every two dollars spent on mobile advertising by 2017.

Mark Fratrik, chief economist at BIA/Kelsey, says the firm revised the projections after some of the larger digital media companies ramped up mobile revenues earlier than expected. “When Facebook filed its initial public offering, there was a question of whether it could play into the mobile game,” says Fratrik. “But the company’s quarterly reports are always surprising us the upside, with an increasing percentage of revenue coming from mobile.”

The surge in mobile spending comes as marketers continue to shift a larger portion of their advertising budgets away from legacy media to digital media. The company estimates that marketers will spend $26.5 billion on digital media this year, or 22.5% of the $132.9 billion spent annually on local media in the U.S. That number is set to increase to nearly 30% in 2016.

Meanwhile, as mobile and other digital advertising grows, spending on traditional media continues to erode. Newspapers and print yellow pages continue to see the most dramatic declines, but Fratrik says that other legacy sectors like direct mail and local magazines, which have been more buoyed in that past, are starting to see revenues depreciation accelerate as well.

Print newspapers will lose nearly 40% of their share of local media spending, dropping from an estimated 14.7% last year to 9.1% of the $151.5 billion in local media spending projected for 2017. Meanwhile, print yellow pages providers will see its share of local spending decrease more than three fold, dropping from 4.1% in 2012 to 1.5% four years later. What’s more, is that the share of spend from the digital-ends of these legacy newspaper and yellow pages companies will either stay flat or decrease in the coming years.

But the growth in digital also comes from a stronger-than-expected growth in the overall local media market. The firm revised its projections for total local media spending as well, projecting total local media spending in the U.S. to hit $137.5 billion next year. Fratrik attributes the faster-than-expected growth in 2014 to a slightly improving economy, increased political spending and strong growth in key verticals.

“One important trend, and this is true across all of media, is that auto advertising has been particularly strong thanks to pent up consumer demand for cars in the wake of the recession,” says Fratrik. “Health areae is also a really big growth area with a lot of potential for advertising spending around the obama care rollout.”

One segment of the market that continues to grow, particularly for digital is the small business market. Fratrk says that small business spending on digital media accelerated in 2013 thanks to a small business owner that’s becoming increasingly sophisticated in their marketing strategy.

In many ways, the small business market is the key variable in these projections. Unlike brand spending, which tends to shift in a more methodical manner, the shift to digital tools among the SMB market will likely occur rapidly and with less consistency.

“I cannot imagine [the shift of SMB spend to digital media] being linear,” says Fratrik. “When Sam’s Hardware sees Paul’s Hardware start buying digital media, there’s that network effect of wanting to keep up with competitor. I wouldn’t call [the shift] rampant, but an increase.”

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Steven Jacobs is Street Fight’s deputy editor.

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