What mobile downturn? Mobile ad revenue opportunity growing despite Facebook’s increasing share

James Cooper | April 10, 2014

Mobile Advertising

eMarketer recently released an update to their respected mobile advertising market sizing data and revenue forecast. This has been widely reported with many sources noting the slow-down in overall ad growth and the increasing share going to Facebook.
At the same time, some commentators are stating that the mobile market is becoming increasingly tough for new entrants and that mobile is somehow in decline outside of the big platforms. However, what has been less widely noticed is that eMarketer’s numbers imply that the overall addressable mobile advertising market available to “other” platforms i.e. NOT Facebook and Google, is still growing at an extremely healthy clip.
This might help to explain why we are still seeing huge growth in the number of mobile advertising and app advertising networks in operation.  In fact there are a number of pieces of good news for the ‘independent’ mobile and app ad industry in these numbers:

  • Mobile Advertising is still forecast to grow very rapidly and is nowhere near reaching maturity
  • Facebook’s growth in share has already largely occurred and future share gains will be more modest
  • Google’s share of mobile ad revenues is in decline
  • The total available market outside of Facebook and Google is still growing very strongly

Mobile Ad Market Forecast to Continue to Grow Rapidly

First up, looking at the forecast growth rates it is true that the rate of growth is slowing significantly, down from triple digit rates seen in 2012 and 2013 to a forecast of 75% this year and 46% in 2015.  Whilst this represents a significant deceleration, it’s worth noting that the forecast rates of growth are still extremely healthy. Even by 2018 mobile ads will still be growing at 22% p.a. which, to put it into context is nearly 8 times the growth rate of desktop banner ads which was just 1.7% in 2013 according to another eMarketer report. Any market still growing at those sort of high double digit rates is going to be extremely attractive – especially when compared with slowing desktop online revenues and stagnant or declining ad spend in traditional sectors such as print, TV and outdoor media.
Global Mobile Internet Ad Spending Change by Year (%) 2012-2018

Source: eMarketer

Facebook Growth in Mobile Ad Share Slowing

One of the clear trends however over the last couple of years has been the growing share of the pie taken by Facebook.  With the launch of a range of new mobile ad formats, which are highly effective in terms of performance, Facebook has been able to suck up a large amount of the overall growth in the market over the last year. Facebook is now reporting that the majority of its ad revenues come from mobile and as a result, it’s share increased from just over 5% in 2012 to 18% in 2013 – 1/5 of the market. It’s this trend, more than any other which has proved challenging for other mobile ad networks and publishers.  Suddenly Facebook has emerged as a major player on mobile, one that is taking a growing share of the available growth. However, looking at the eMarketer forecasts the rate of increase is likely to slow in 2015 and whilst Facebook will take a growing share we will not see a repeat of the huge land-grab previously experienced. Again, this is good news for other mobile ad networks and publishers fighting to grow against the Facebook mobile onslaught.
Facebook Mobile Internet Ad Revenue Share by Year (%) 2012-2014

Source: eMarketer

Google Mobile Ad Revenue Share Falling

Google has for a long time accounted for a large proportion of mobile ad revenues due to its ability to cross-sell mobile inventory (search and display) with online buys.  However, looking at the latest numbers from eMarketer, Google has been unable to maintain this initial lead with its share of mobile ad revenues actually falling between 2012 and 2014 from over over a half of all mobile ad spend to just over 45%. Perhaps due to the evident decline in innovation coming from admob since its acquisition by Google and the growth of alternative platforms, namely Facebook, Google has been unable to maintain its position in the market although it continues to enjoy a very dominant share.
Google Mobile Internet Ad Revenue Share by Year (%) 2012-2014

Source: eMarketer

Addressable Mobile Ad Market Growing Strongly

Taken as a whole the overall ‘addressable’ market e.g. that which sits outside of Facebook and google is still growing very strongly, despite the growth in Facebook share and the continued dominant position of Google.  Backing out the eMarketer numbers shows that ‘other’ mobile ad revenue is set to grow from $4.6bn this year to $7.8bn in 2014.  This represents a growth rate of 70% which isn’t much lower than the forecast of 75% growth overall including the ‘big two’.  This is great news for all the various independent mobile ad networks and app advertising services out there.
Other Mobile Internet Ad Revenues by Year (billions) 2012-2014

Source: eMarketer
So there you have it. Despite the growing share taken by Facebook the mobile ad market is still a highly attractive market and there’s plenty of new revenues for other ad networks and publishers to play for.  This is great news (if you believe the forecasts and data) for everyone in the ecosystem, as a healthy, diverse market is in everyone’s interests.  Of course a forecast is a forecast and we can’t predict how the market will behave, but for now the data does still point to a growing opportunity, especially when compared to the maturing desktop digital advertising market.

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