February 23, 2011, 10:24 AM

Advertising is getting bigger on small screens

But mobile ads remain a sliver of total online advertising spending.

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Mobile ad spending will exceed $11 billion annually by 2015, up from a projected $3.1 billion this year, a new report from Juniper Research finds. In the wake of the global recession, many advertising budgets were slashed. Mobile, however, bucked the trend by growing, the report says, but still represents only a fraction of the total advertising market.

In 2009 mobile accounted for less than .5% of global advertising spending of around $500 billion, the report says. Major brands including Unilever, Proctor & Gamble and Coca Cola are all advertising in mobile, but mobile still makes up a very small portion of their total ad spend, the report says.

The challenge facing the mobile marketing industry is to prove that mobile is efficient at getting consumers to engage with products and services. One advantage mobile advertising has, Juniper says, is that it comes in many flavors—from mobile TV campaigns to display advertising to SMS text message campaigns. The best advertisers will integrate all three as part of an overarching mobile advertising strategy, Juniper says.

For example, in November 2009, U.K.-based NatWest Bank partnered with mobile telecom provider O2 for an SMS campaign to promote its new mobile app. NatWest sent text messages to opt-in subscribers with iPhones who also had a NatWest  account. One in five consumers responded and they downloaded the app 100,000 times, Juniper says.

With the rise of the mobile web and apps, brands and retailers are steering away from text message advertising. In 2007 mobile Internet ad spending surpassed mobile text message advertising for the first time to account for 53% of mobile advertising spending. In 2009 mobile Internet ad spending accounted for 77% of mobile advertising spending, Juniper reports, mainly thanks to dramatic increases in mobile banner and search ad spending.

But Juniper cautions not to dismiss the text message ad. It predicts SMS advertising will rebound in the coming years, partly because it will become increasingly targeted with the rise of opt-in location-based text messaging. Mobile phones, including less sophisticated feature phones, are increasingly equipped with GPS functionality that enables marketers to send relevant ads, such as a promotion or deal, to an opt-in shopper when she is within a few blocks of a store. For example, a shopper who opts in to receive text messages from J.C. Penney might fill out information letting the retailer know she is a new mom. And so the department store might send her a mobile text message offer for 20% off baby clothes when it recognizes she is within a mile of the store.

Juniper also forecasts in-content advertising, such as an ad within a mobile video, to increase during the next few years.

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