January 8, 2013, 2:58 PM

Mobile paid search and display ad spending soars 213% in 2012

Mobile is an increasingly important part of the shopping process, an eMarketer analyst says.

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Spending on mobile paid search and mobile display advertising in North America hit $3.95 billion in 2012, up 213% from $1.26 billion in 2011, research firm eMarketer Inc.says. It will jump 81% to $7.16 billion in 2013, 57% to $11.25 billion in 2014, 43% to $16.12 billion in 2015, and 33% to $21.39 billion in 2016, eMarketer forecasts.

One of the biggest factors driving the massive growth in 2012 was the successful debut of a new format of display advertising that is sometimes referred to as “native” advertising, says Clark Fredricksen, an analyst at eMarketer.

“These are ad products that are seamlessly integrated with the core user experience of major platforms; they include ads placed in Facebook newsfeeds and in Twitter timelines,” Fredricksen says. “For many years a big problem with display on mobile was the small screen limited the number of impressions advertisers were able to put on a mobile device. That inhibited growth. What we’ve seen over the past year is a few of the major platforms found a way around that, through ad products that are seamlessly integrated with core user experiences. An ad in Facebook’s newsfeed or in Twitter’s timeline can be seen regardless of what device the consumer is using.”

Another factor driving growth is retailers and other advertisers catching up with consumers’ propensity to search on smartphones, Fredricksen says.

“Consumers generally are searching for things much more frequently on mobile devices,” he says. “That translates to a pretty significant jump in the number of paid search click-throughs, and even though there is a lower cost-per-click on mobile devices because people still are a bit less likely to buy something, the increased volume in searches is a major propeller for a company like Google. We’re seeing a big jump in search revenue as a result.”

Google controls 93% of the mobile paid search market, eMarketer says.

Because consumers continue to adopt smartphones and tablets at a rapid pace and because they spend a growing amount of time on their smartphones and tablets, retailers and other advertisers need to invest in mobile paid search and display ads, Fredricksen says.

“Consumers are spending much more time on their mobile devices and retailers are being forced to adapt to that,” he says. “While the number of people purchasing goods on their phones is growing but smaller than desktop, the path to purchase is very non-linear today. It’s very important that marketers make sure they are front and center for people who are researching or purchasing goods on their phones because while mobile is still a small portion of online purchases it has become a very important factor in the shopping process.”

Spending on mobile paid search and mobile display represents 11.8% of total search and display ad spending in 2012, eMarketer says. That figure will rise to 18.6% in 2013, 25.8% in 2014, 33.7% in 2015 and 41.7% in 2016, eMarketer forecasts.

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