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EMarketer has released a report on mobile ad growth in Canada. The numbers are growing at rates similar to those we see in the U.S. (see TKG U.S. Mobile Advertising Forecast) but on a smaller scale.

We also see a similar breakdown of ad formats — right now SMS has a commanding share.

In the U.S. we’re forecasting a considerable share shift to search advertising as we see further penetration of smartphones, iPhones and any mobile device with full Web browsers. This will drive the growth of the mobile Web and overall search volume. Much of this growth in mobile search — both in volume and revenue — will be local.

Mobile local search ad revenues today are limited by low search volume, which is spread even thinner by geographic fragmentation. Search volume for certain specific categories and locations (i.e., Dry Cleaner, Omaha) is limited: There are only so many searches happening for these terms. So the challenge in mobile local search monetization is one of inventory.

EMarketer reports similar dynamics in the Canadian market, where low volume constrains not only inventory, but also advertiser interest:

“Like any emerging medium, mobile advertising faces hurdles that prevent wider adoption. According to an IAB survey of mobile marketers, the three most formidable challenges were low levels of advertiser understanding, small audience size and difficulty demonstrating ROI to potential advertisers.”

We’ll see this inventory scale up with the growth of the mobile Web — which again will produce many location-based searches. This will be supported by the tens of thousands of third-party applications distributed through the growing subset of app stores — many of which (I’ve projected 15 percent) will be local search apps.

The growing volume of these apps will lead to the same fragmentation of local search services online. This is why content distribution deals for local listings — similar to what we see online — will be the name of the game for anyone selling local advertising (such as Yellow Pages publishers) to scale.

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