2015 Mobile Predictions: The Director’s Cut
Like we do every year, BIA/Kelsey analysts huddle to formulate predictions for the coming year in respective areas of domain expertise. Last month, we released a report that highlights picks across these coverage areas.
For more color on the predictions that pertain to mobile, below is the “director’s cut.” These are areas I’ve been watching, and where I think they’re moving. It’s pretty clear from the momentum that it’s going to be an action-packed year for mobile.
1. Apple Pay Won’t Take Over the Universe (Yet)
Apple pay will not “mainstream” mobile proximity payments in 2015. It will however cause a dent in in-app payments for offline fulfillment (a la Uber). The numbers don’t work out given that the iPhone 6 will not reach ubiquity until late 2015. And merchants will not be incentivized to upgrade POS hardware without that critical mass. It’s an issue of compatibility and network effect. Furthering the above points, neither consumer nor merchant will be incentivized to adopt unless there is a more compelling value proposition for Apple Pay. That includes saving time, money, or skipping lines, as opposed to the current value proposition which is the marginally different process of tapping rather than swiping. That’s not enough to alter such an entrenched and comfort-driven consumer behavior. In the meantime, Apple Pay’s killer app will be with in-app payments for offline services, such as “order ahead” functionality or on demand local services (OLDS) like Uber.
2. The Uberification of Local
Mobile payments, search and discovery will culminate in the area of on-demand local services (ODLS). The segment is exploding in use and investment, a la Uber. This is real world products and services summoned by mobile and fulfilled offline. This outweighs M-commerce (i.e. ordering things on your phone for shipment a la Amazone) because more than 93 percent of U.S. retail spending (and near 100 percent of service transactions) happen offline. The factors that will drive ODLS and make it a more predominant area of attention and investment in 2015 include:
— ODLSs create liquidity, transparency, and supply/demand balance in traditionally opaque two-sided marketplaces (like finding a cab)
— ODLSs will be the killer app for near term adoption of mobile payments like Apple Pay (see above).
— ODLSs will create a long missing analytics “bridge” to the offline world, given that the mobile device is with you throughout. That trackability will bring more data to offline commerce, opening the door to better analytics, user targeting and next gen functions like dynamic demand-pricing for local services.
3. Swipe Left
Given escalating share of location based search and discovery happening via mobile, content formats will evolve in ways more native to that use case. Currently most content delivery formats are inherited from the desktop, such as list views or “ten blue links” SERPS. We’ll see a revolution in design standards for mobile local search and discovery products. These will be more visually oriented and card based. Scrolling and tapping will give way to swiping, a la Tinder. This is not only more conducive to mobile, but it will naturally enable more user inputs in order to algorithmically determine user sentiment and refine content delivery accordingly (a la Pandora). Content delivery will be much more algorithmic and push based, accelerating the discovery trend that has been underway for years, replacing active search queries. Google now will be a model for this, and companies like Weotta are doing cool things. Meanwhile, the visually oriented nature of these interfaces will also result from better hardware such as camera optics and larger screens to view striking imagery. Some of that multimedia will be pushed from advertisers and publishers, while some will structure and organize user generated content, a la social sharing.
4. Becoming Selfie-Aware
The social sharing trend — capturing and sharing moments via instagram, vine, stapchat etc. — has been driven by better smartphone optics and larger screens (i.e. iPhone6). That has begun to reach the local level as consumers likewise share their experiences in transactional contexts such as dining out. This phenomenon will accelerate in 2015, specific to certain visual and sharable local verticals such as arts & entertainment. We’ll see most local media players embrace this trend by launching products that support the use case (i.e. Yelp’s video capture feature). This will be the foundation for clear monetization that aligns with existing models. For example, visual content shared by users aides in content marketing, SEO, and SMB landing page development. Paid tiers of merchant offerings will include things such as highlighting user generated multimedia through slideshows. Mobile will be a big user touch point to not only capture and share that media, but to also consume it via larger screens.
5. U.S. Mobile Ad Market Reaches $19B
The U.S. mobile ad market (excluding tablets) will reach nearly $20 billion in 2015. And the location targeted portion of that ad spend will be about one third. This counts all mobile ad formats including developing areas like social native ads (i.e. FB mobile news feed ads). Our figures also take into account the growth of search ads (currently the largest share of mobile ad revenue) and Google’s Enhanced Campaigns which will continue to accelerate mobile advertiser adoption. More populated search bid marketplaces that result will also raise bid pressure and increase cost per click rates. Higher CPCs will in turn boost mobile ad revenue further for Google and mobile publishers and developers. The longstanding imbalance in mobile ad rates will also begin to reverse as sources of premium ad rates continue to be found. That includes native social ads on places like Instagram, better attribution metrics, and higher performing location targeted ads from companies like xAd, Verve, and YP.