Wireless advertising is currently in the embryonic stage of its market evolution, but advertising on the "third screen" represents a compelling and potentially lucrative advertising opportunity, given the widespread prevalence and reach of mobile phones and the potential for targeting, rising demographic, contextual, and geospatial factors.
There are currently about 35 million mobile Internet subscribers, out of 250 million total mobile subscribers in the United States. Despite general industry excitement about the long-term potential for wireless advertising, advertisers are only just beginning to experiment with the medium. The focus is currently to address issues such as user tolerance for mobile advertising, ad formats, and pricing models. While mobile carriers are interested in increasing ARPU through advertising, the priority of protecting the user experience and preventing customer alienation is resulting in a relatively cautious approach to mobile advertising. Carriers such as Verizon and Sprint are actively experimenting with mobile advertising, but their initiatives are a work in progress as they attempt to determine optimal ad formats and pricing models. Despite the experimentation and cautious approach, pricing trends for mobile campaigns reflect strong advertiser interest.
According to Third Screen Media, a mobile advertising platform provider, the average price for a four to eight-week long campaign is now approximately $75,000-$150,000, an increase from $25,000 to $50,000 in 2005. In general, mobile ads cost $35-$50 per 1,000 page views. Although advertisers themselves are also trying to assess the importance of mobile advertising, forward-thinking advertisers are enthusiastic about the ability to target advertising on mobile phones, which contributes to higher click-through rates than conventional Internet display ads.
Click-through rates in mobile ads are 3%-5% compared with 1% on conventional display ads, based on Third Screen Media estimates. Ovum, a mobile-focused research firm, estimates U.S. mobile advertising revenue in 2006 to be approximately $150 million, an increase from $45 million in 2005. While mobile advertising is a tiny sliver of overall advertising spending, expect mobile advertising to maintain robust growth for many years to come. At this stage of market development, carriers and advertisers are experimenting with SMS, video, banner, sponsorship, idle screen, and in-game ad formats. Over the next five to seven years, as broadband mobile networks proliferate, mobile advertisers could become a significant sector of the online ad market.
