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Mobile Advertising to Reach $8.2 Billion by 2016 As Search Market Share Shrinks

New figures released by Forrester Research project the healthy growth recently seen in U.S. interactive advertising will continue through 2016, with total spending reaching $76.6 billion, or 35 percent of global ad spend.

The figures are particularly encouraging for those in the mobile sector, who have had to deflect criticism about the current state of mobile advertising and its viability using current technology. The report projects mobile interactive advertising will enjoy a compound annual growth rate of 38 percent, reaching $8.2 billion in 2016. This best-in-class growth will be led by a growing mobile commerce market, consolidation of mobile ad networks and the implementation of rich media ad formats as smartphone technology advances.

Consolidation in mobile ad networks has accelerated in the past two years, as Google acquired AdMob for $750 million, Apple acquired Quattro Wireless for $275 million and ValueClick acquired Greystripe for $75 million, placing the full force of some of the most valuable companies in the world behind the mobile ad sector.

Mobile Advertisement Example - Land Rover

While display and search are projected to retain their dominance of most interactive ad budgets as rich media, text listings and online video components become budget staples, search engine advertising is expected to see a significant reduction in both its growth rate and its share of the overall interactive market. Search advertising is projected to experience a compound annual growth rate of 12 percent, nearly doubling from $18.8 billion in 2011 to $33.3 billion in 2016, but will see its share of the overall market decrease from 55 percent to 44 percent over the same period as other formats establish themselves as meaningful components of large scale media buys.

Forrester reports social media marketing will enjoy a healthy 26 percent compound annual growth rate, but will only reach $5 billion in total spend due to the inexpensive nature of many social ad platforms.

With the explosive valuations of literally thousands of VC-funded startups heavily dependent on advertising revenue for survival, let alone growth, these latest figures are encouraging. However, marketers appreciate (and are increasingly demanding) both security and results, which will likely benefit the largest and most established companies in mobile and social, including Google, Apple, Facebook and Twitter. The industry should expect further consolidation as the large, cash and equity-rich players utilize critical acquisitions to expand their arsenal and take advantage of the rapidly accelerating growth in interactive advertising.

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