The spend on local mobile advertising will approach $1 billion by the end of 2012 as campaign objectives evolve to meet the location-targeting abilities of smartphones, per a study by BIA/Kelsey.

The report projects that total U.S. mobile ad spending will grow from $790 million in 2010 to $4 billion in 2015. Locally targeted mobile ads will be a big driver of the growth, accounting for 70 percent of overall U.S. mobile ad spending by 2015.

“Pay more attention to local – its relevance is boosting performance,” said Michael Boland, senior analyst and program director at the Kelsey Group, San Francisco.

“Mobile advertising should – and it will – better evolve into the mobile form factor and the growing prevalence of smartphones,” he said.

“Some mobile brands and mobile ad networks are already sinking their teeth into this, while others still have a ways to go.”

Evolving objectives
As brands and agencies, which are the largest source of mobile ad spending in the U.S., evolve campaign objectives to better meet the capabilities of smartphones, BIA/Kelsey predicts there will be more location targeted mobile advertising.

Between 2010 and 2015, Bia/Kelsey predicts the spend on locally targeted ads will grow from $404 million to $2.8 billion. Today, locally targeted mobile ads account for 51 percent of the overall mobile ad spend.

Local mobile ad share of total local media ad revenues will grow from a 0.3 percent in 2010 to 1.8 percent in 2015.

Other local media includes radio, television, newspapers, Yellow Pages and online/interactive.

Also driving the growth in local mobile advertising will be the increasing number of small and medium-sized businesses that will begin adopting mobile advertising.

“Mobile advertising will move down market to SMB and mid-market segments, where it currently makes up a very small portion of the overall ad spend,” Mr. Boland said.

“This will be similar to the shift we saw online over the last decade as advertising was ‘democratized’ through tools like AdWords,” he said.

“In mobile it will be driven by a combination of self serve tools – adwords, Foursquare – as well as local sales organizations – newspapers, yellow pages – that increasingly bundle mobile marketing with existing advertising.”

Greater adoption of mobile by brands, agencies and smaller businesses will drive the volume of mobile ads sold. At the same time, the dollar amount spent in local mobile advertising will also be driven by higher prices.

“The premiums placed on locally targeted mobile advertising will boost the spending amounts and the share shifts toward mobile local ad spend, in dollars, that we’re predicting,” Mr. Boland said.

Challenges remain
There are hurdles to overcome if the growth in local mobile advertising is to continue, including educating marketers about its benefits and evaluating if the improved ROI delivered by locally targeted mobile ads outweigh the loss in reach.

“It will take an evolution of advertising to build mobile campaigns from the ground up for the new form factor,” Mr. Boland said. “That requires new ways of thinking.

“There are also some drawbacks any time you start to segment audiences, because that sacrifices reach which has always been a major objective for a lot of brand advertising,” he said.

“So it has to be evaluated to see if higher performance and clearer ROI outweigh the almighty reach.”

There are signs, however, that mobile is already gaining the attention of lots of marketers.

Some are just talking about it while others are acting.

“Even those that step in and shift digital budget to experiment mobile will gain an early mover advantage and experience and perspective in what is a nascent and quickly evolving area of content and ad delivery” Mr. Boland said.

Mobile marketing is a trend that businesses can’t ignore, unless they want to see their competitors stealing all their customers!

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