Advertising is the next big opportunity in mobile—by some estimates released this week, it will be a burgeoning $250 billion industry within two years, but other more conservative estimates predict it to fall between $11 billion and $20 billion in the next three years. So, which is it?
This week's outrageous projection—$250 billion by 2010—came from the GSM Association, which believes that an initiative that Vodafone (NYSE: VOD), O2, T-Mobile, and 3 are working on, could make it as easy for advertisers to run campaigns on mobiles as it is on TV or in print. The results were reported in Mobile Entertainment.
Criticisms came fast. Chetan Sharma, who co-authored the book "Mobile Advertising: Supercharge your brand in the exploding wireless market" said in his blog: "I have seen ridiculous projections before but this has to top everything we have seen before and then some more." In an October cover story in the Economist that hailed mobile phones as a marketers' promised land, still said mobile advertising is only a tiny business. In 2006, $871 million was spent on mobile ads worldwide, according to Informa Telecoms & Media, and the most bullish forecasted between $11.4 to $20 billion by 2011.
The GSMA said the industry will be large because of all the great things about mobile that we've all heard before—it's a personal device that people carry with them always; and it can provide behavioral statistics on consumers; and therefore it can provide more targeted ads. The article points out that the carriers are doing this as a defensive move against Google (NSDQ: GOOG) and others. Their aim is to build a system that's as quick and painless as online, while still reaching millions of consumers.
So, the question is, will the carriers be able to pull it off? In Sharma's first chapter, he points out what the wireless industry is up against: "The challenge is that the market is too nascent to make simple linear projections and assumptions. We must be mindful of the difference between emerging and steady state markets when building our business strategies."
UPDATE: When numbers are this outrageous, they usually aren't true, and that turns out to be the case in this instance. First off, the figures were discussed last month at Mobile World Congress by consultancy STL Partners, not the GSMA. STL's CEO Simon Torrance cleared up the inaccuracies. In 2010, mobile advertising was not projected to hit $250 billion. Rather, he said in 2017, a wide range of fixed and mobile telecom services will be worth $250 billion in Western Europe and North America. He said the global advertising market will total $533 billion; and of that, a small portion—$62 billion—will be going to online and mobile ads. That projection is much closer and in line with other mobile-advertising projections. For more information, Torrance elaborated on his blog here.
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