Mobile Local Search Ad Growth Is a Worldwide Phenomenon

My colleague Michael Boland released a new Advisory today on The Kelsey Group forecast for Western Europe mobile search and display. The bottom line is that TKG analysts forecast mobile search ad revenues will grow at a compound annual growth rate of more than 125 percent with display ad revenues anticipated to increase by a CAGR exceeding 138 percent. Growing even faster will be mobile local search advertising revenues, which are predicted to grow to 1.4 billion euros.

The reason for the hockey stick growth is the relatively low levels today: Mobile display revenues are 14 million euros and local search ads are 18 million euros. The major drivers to this hockey stock growth are: a) rapid proliferation of smartphones from 6.5 percent penetration today to 26 percent in 2013; and b) ”a combination of local search volume increases, ad performance and premium ad rates associated with locally targeted ads.”

I spoke with Michael to ask a simple question that I knew had a complex answer. Do you really think Western Europe will enjoy this kind of growth? After all, our estimates for Internet advertising, in general, and e-commerce in particular, turned out to be overly optimistic. Michael stuck to his forecast (which he had developed with TKG SVP and Senior Analyst Matt Booth) because he said all the pieces are in place. If anything, the tremendous growth of applications for smartphones has greatly exceeded what few have anticipated. Consumers (particularly the young) are quickly adapting the new apps and are likely to accept advertising as a way to save money. The devices keep getting more sophisticated on the one hand and yet easier to use on the other.

So the only other player that is a potential question mark is the advertiser. An article in today’s NY Times (“Mom and Pop Operators Turn to Social Media“) reinforces how even the smallest of companies (in this case a crème brûlée cart in San Francisco) has grown rapidly using Twitter as a promotional vehicle. No, there’s no advertising money associated here … yet. The old saw “where there’s a will, there’s a way” comes to mind. If a growing number of (young) people are using smartphones, advertisers will find them. The money is not likely to be new advertiser dollars, but rather expenditures coming from other media that are looking for the most efficient way to drive conversions within geotargeted areas.

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