Mobile Advertising to Organize, Accelerate by Next Year

A new report from Magna finds mobile advertising is susceptible to the cuts and slowed growth seen online and in other channels over the past few quarters. However mobile advertising will enjoy a re-acceleration in 2010 as apps and other mobile platforms become better organized from an ad sales standpoint.

According to Magna, the media forecasting unit of Mediabrands, the momentum will come from emerging mobile applications such as iPhone apps and similar offerings for Android and Blackberry devices. For each of these systems the ecosystem needs time to develop before the advertising can grow.

“The app store business model is a fascinating one, an open source environment where two guys in a garage can build an application, and do so with meaningful scale. The advertising market will come eventually, [though] maybe not for a 12-month time period,” said Brian Wieser, global director of forecasting at Magna.

Magna expects mobile ad spending this year will increase 36 percent, from $169 million to $229 million. That represents a downward revision from the forecast released last year.

Mobile ad networks are poised for growth, according to the report. It calls mobile networks the largest sub-sector within mobile advertising and the area that will see the greatest growth in absolute terms over the next several years.

“Because mobile traffic is so fragmented, the only efficient way to aggregate large audiences with the mobile Web is through ad networks,” Wieser said.

While the mobile Web sector is still relatively new, there has been some consolidation among ad networks and there could be room for additional acquisitions or even niche specialization similar to what is happening on the Web.

The much talked about iPhone actually poses problems for advertisers. Users are more likely to brows applications than Web sites. “So much of the traffic on mobile advertising is coming from the iPhone right now, but it appears to be diverting traffic from mobile Web pages,” said Wieser. “And so to the degree that a mobile Web page may have been more monetized than an application, any shift to traffic to applications may be less advertising.”