BIA/Kelsey ILM West: 12

Social, Mobile Ad Spends To Soar By 2016

A wave of innovation in social media advertising will spark an exponential increase in ad spending on the medium, driving annual revenue to $19.2 billion by 2016, according to BIA/Kelsey executives speaking at the ILM West conference. Mobile advertising will triple during the same period, they said, as advertisers catch up to the strength of location-based advertising.

LOS ANGELES -- For media companies still impatiently waiting on mobile and social media to deliver viable revenue streams, experts here said that wait is coming to an end.

Ad spends on both fronts will jump dramatically by 2016, BIA/Kelsey said at its ILM West conference on Wednesday, driven by increasing user adoption rates and innovations in ad forms including a ramp up in location-based advertising.

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In social, ad spending will jump from $4.6 billion in 2012 to $19.2 billion in 2016, said Jed Williams, program director at BIA/Kelsey. In mobile, that spend will climb from $2.76 billion in 2012 to $9.92 billion in 2016, according to Michael Boland, also a program director.

On the social side, Williams said that 63% of SMBs are now using some form of social media, and they perceive Facebook as the most important social platform for their businesses. Those SMBs report that customer acquisition is their No. 1 reason for using social media.

Their resistance to spending ad dollars in that space, however, has been marked by questions of efficacy. "There hasn't been a clear ROI path, do why do it?" Williams said.

But Williams predicts that a new wave of innovation in social advertising going into next year will begin to move the dial.

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Much of that will be in native advertising, which integrates advertiser information into the actual content feed that the user goes through — a practice currently being used to promising effect on Facebook. Williams said such native advertising will comprise 42% of social ad revenue by 2016.

In the mobile space, Boland acknowledged that there's still a serious gap between mobile usage and the advertiser demand that follows that usage. But, he said, "mobile right now is in a stronger position than desktops were in 1995."

There are many signposts to defend that assertion, he said, including the fact that 50% of Google searches are local and advertisers are slowly catching up to that. Also, location-based ads are the fastest growing segment of mobile advertising, he said, and more premium rates will begin to attach to those more targeted ads. 

Such location-based ads have higher click through rates, Boland said, and also impel crucial secondary actions in consumers. He said mobile local leaders like Foursquare and Yelp should soon be showing a model of more effective monetization on that front.

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