Publishers wield substantial clout, overtake ad networks in US mobile display ad segment

The newly released IDC report, titled 2012 U.S. Mobile Advertising Market Sizing and Vendor Market Shares, reveals some interesting movements in the mobile advertising space in America.

While the rate of growth seems to be slowing, the market itself continues to grow. The mobile advertising market was worth US$4.5 billion in 2012, a growth of 88% compared to 2011’s market size of US$2.4 billion which represented a growth rate of 125% from the previous year. The forecast for 2013 is carefully optimistic: a modest growth rate of 55–65%, with spending coming in around $7 billion for the United States.

The most interesting finding, however, is the fact that publishers now lead the mobile display ad segment, where once before the majority of spending went to ad networks such as Google, Millennial Media and Apple. Facebook, Twitter and The Weather Channel registered strong sales in 2012, from zero sales in 2011. According to IDC, these publishers took 52% of US mobile display ad spending in 2012, compared to 39% the previous year.

Given the differences between the regions, and the diversity of markets in the Asia Pacific, it seems unlikely that this situation will replicate here anytime soon. It is unlikely that a few key publishers will be able to dominate the market, and the space itself is so large and well-differentiated (by national, linguistic and cultural boundaries) that we’ve already seen that localisation is a much stronger force in this region.

What is worth noting is the shift in focus from ad network to publishers. Publishers in the online/mobile space have a much closer relationship with their audience, and much better insights into their behaviour, than is the case with any other media type, particularly with social media networks like Facebook and Twitter. Additionally, because these networks build their own software, then have a much higher degree of control of their platforms. Throw in the fact that these services are offered to users for free, and selling advertising becomes far more important.

Facebook has recently announced that it is taking that integration one step further with the introduction of Facebook Home, a cross between an operating system and an application, that inserts Facebook even more closely into the operations of a phone (in this case, a phone running Android) and giving it even more access to user information.

User information is what these publishers are selling to advertisers, and is the advantage that they are pushing over ad networks. Through careful harvesting and cultivation, publishers can offer advertisers a degree of targeting and customisation that ad networks have trouble matching, together with ease of use and economies of scale (especially in the case of Facebook). It’s hard to see some other network with a similar size doing the same in Asia Pacific, but some of the social media networks in China may be able to rival Facebook in terms of reach and scale.