Google Eating the Mobile Market, as the Desktop May Be Peaking

By STEVE SMITH
06/24/2013

The consolidation taking place in desktop ad revenue around major players like Facebook and Google is also happening to an even greater degree in emerging mobile platforms. According to projections from eMarketer, the search giant will earn 52.1% of the net mobile ad revenues in the U.S. this year. Its next closest rival, Facebook, will only reach 14.9% of market share. This is an impressive market advantage even compared to Google’s long-standing dominance of the desktop, which brings it about a third of all online ad spending. eMarketer does not see this trend diminishing in the least, projecting that Google’s share will grow to 55.7% by 2015. After Facebook, other major mobile brands are left dividing low single digit shares: YP, Pandora, Twitter, Apple and the largest independent mobile ad network Millennial Media.

A key figure in this projection is the amount of market share left for all other players: roughly 15% to 16%. If you pull out search revenue, however, the balance of power shifts somewhat to Facebook, which will have about a third of mobile Internet display revenue this year and about a quarter of it by 2015.

Yet it is in the mobile display segment that we see the greatest and fastest consolidation around two major players, Google and Facebook. These two will be responsible for almost 60% of the market by 2015. The amount of mobile display ad revenue dispersed among other publishers will have declined from 41.1% in 2011 to 19.4% in 2015.

From the perspective of most traditional media brands, eMarketer deployed something of a double whammy recently when it also projected that digital ad spending aimed at the desktop was peaking in the next year as mobile platforms start taking some of that share. The researcher contends that the two fundamental formats of the desktopbanner and searchwill see flat or declining growth next year, the first time that this will happen in the digital space. By 2017, they project that mobile digital ad spending will account for 53.9% of all digital spend.

On the surface, that would seem to make the mobile monetization imperative even more critical. But consider that the research is conflating both smartphone and tablet platforms. The tablet screen is replacing the desktop for many people during prime- time as the main Web browsing vehicle, so parsing traditional desktop from tablet is getting harder to do. Interestingly, the company also projects that when it comes to banner advertising, the desktop will still retain more than 60% of ad spending.

Whether this constitutes a real shift in budgets is a little less clear even to some media buyers. Many seem to believe that mobile is being funded more from print and other budgets than it is from desktop budgets.

eMarketer analyst Clark Fredricksen tells min that despite consolidation, "the market is expanding so quickly and continues to expand over five or six years that there is a substantial amount of money for other companies to compete." Potential variables here may be the emergence of a stronger local mobile ad market or a faster than expected rise in wearable computing devices.

John Montgomery, chief operating officer of GroupM Interaction North America, told min: "As mobile smartphone usage grows, so does mobile search. Of course as Google is the default search engine for the two dominant mobile operating systems, they will grab the lion’s share of the revenue. I don’t think that this will change any time soon." Nevertheless, he adds, mobile is becoming such a dominant force among consumers, "advertisers will want those eyeballs." Google’s enormous share of the market "doesn’t mean that there isn’t huge opportunity for other players in mobile."

Per eMarketer’s own projections, mobile video is likely to be a hot point for investment among brands, especially those looking beyond the direct marketing channels of search.

The overall consolidation of mobile ad revenue around a handful of digital-only players means that magazine brands are not only competing against massive scale in this channel but also against some strong analytics tools on a platform that desperately needs them. It is arguable whether any of these top players really are selling advertisers mobile experiences so much as familiar search, banner and now native sponsored stories.

What these big players don’t have is a rich relationship in alignment with a very specific audience. Nor do they have a deep understanding of how niche audiences use mobile devices. Video, rich media, custom experiences that render leads, unique analy-tics–that is how media brands will master mobile.

Steve Smith (popeyesmith@comcast.net) is digital media editor for min/minonline.com. He posts regularly on minonline and directs the min Webinars. Smith also co-chairs min‘s Digital Summits, and he is based near Wilmington, Del.