open mobile advertising

The USmA:
The United States
of Mobile
Advertising

WHITE PAPER

Prepared by Nick Lane

Chief Analyst, mobileSQUARED
“
Mobile is a conversation that all DDB clients want to have now. And we
are happy to share our experience that when Mobile is used effectively it
makes all media work harder. We believe that mobile can be an integral
component of a larger campaign as long as it works to connect people
with people, not just people with brands.

Jeff Swystun
Chief Communications Officer, DDB Worldwide
”
DDB Worldwide Communications Group Inc., known internationally as DDB, is a part of Omnicom Group
Inc. Omnicom is the advertising holding company with the highest revenue in the world, at US$12.69 billion,
according to Advertising Age’s agency rankings of April 2008.

“
I’ve got a vision that these mobile phones could have a greater effect than
even television advertising. I couldn’t quite see my way through it because
it still seems rather misty to me, but I get the feeling that these could be
incredibly powerful as an advertising medium.

I must say, mobile was all ‘gobbledegook’ to me but I’m beginning to get
a little bit of what mobile means and can do for me as a brand. But what
I would say to [the mobile industry] is that we need to understand more
clearly how this all works, why it works, how you use it, the best method
of use and we need somebody to talk to us in layman’s terms.

Mike Godwin
Managing Director, Mövenpick Ice Creams
”
Mövenpick Ice Creams is part of Nestlé, and represents the next wave of brands looking to invest in a mobile
strategy.

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising
Summary
The US is all about numbers, big, big numbers. It has a mobile
population exceeding 300 million, and a mobile internet user base
on the verge of surpassing 100 million.

With this level of scale, mobile advertising budgets are high –

especially in relation to Europe – with the average mobile advertising
campaign in the US between $75,000-100,000.

At this level, it ensures there is sufficient budget available to release

the creatives on the campaign and deliver a truly compelling, rich
advertising experience.

Presently, the US is the second largest mobile advertising market in

the world, behind Japan. In 2010, the US mobile advertising market
will be worth $797.6 million, rising to $5.04 billion in 2015.

Aligned with this increase in mobile advertising spend, will be an

increase in US mobile users engaging with advertisements on their
mobile.

Consumer research for mobileSQUARED by Lightspeed Research

reveals that 53% of US mobile users claimed not to have seen an
advert on their mobile. User engagement with mobile advertising
will inevitably increase.

Primarily because 49 million mobile users already claim to have

actively engaged with an advert on their mobile, and if just one-third
of that 53% start to engage with mobile advertising, that would
contribute an additional 50 million mobile users.

USA Mobile Advertising Market Size $5.04BN

$1.24BN

2011 2015

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising 3
The 75,000 dollar question
The US mobile advertising market is a very exciting market to be
operating in right now. It has scale like no other developed mobile
market and that is making for a hotbed of activity.
300 Million
US active mobile
The US has a population approaching 310.6 million, and there are subscriptions
a fraction over 300 million active mobile subscriptions in the US, of
which, almost one-third use their mobile phone to browse.
$797.6 Million
mobileSQUARED research has highlighted that around 50% of the
US Mobile Advertising
US mobile internet users are doing so on a frequent basis – on a
market worth
daily or almost daily basis.

The mobile internet is becoming a very popular and powerful

platform throughout the US, and this is creating an opportunity for
content producers and publishers to capitalize through the delivery
of creative and rich-media-based advertisements to consumers.

Because of the country’s vast population, the average mobile

campaign spend is significantly larger than anything witnessed
in Europe, for example. In the US, the average mobile
advertising campaign spend is between $75,000-100,000. On
average, creatives receive 10-15% of the budget which could total
$15,000 and provide the scope to develop an ad delivering a rich
consumer experience. In the UK for instance, the average creative
budget would be approximately $5,000 maximum.

The richer advertising content is helping to fuel the mobile

advertising marketplace even further. In 2010, the US mobile
advertising market is expected to be worth $797.6 million, second
only to Japan which is the world’s only billion dollar mobile
advertising economy.

US Mobile Ad Spend, 2010

20%
29%
3% Opt-in Messaging

2% Mobile Games/Music/Video/TV
Apps
Search

Banner Ads
46%

Source:
mobileSQUARED, October 2010

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising 4
For the US, this equates to a little under 8,000 mobile advertising
campaigns, and an average of 21.8 new campaigns per day. But $5.04 Billion
the market has to brace itself for unprecedented growth. The US
market will join Japan next year, when revenues are forecast to top US Mobile Advertising
$1.24 billion, and increasing to $5.04 billion by 2015. revenues by 2015

Total mobile banner spend (US$) of Europe’s Big Five

Banner Ads
Search
Apps
Mobile Games/Music/Video/TV
Opt-in Messaging

Source:
mobileSQUARED, October 2010

Yet mobile remains a fraction of total advertising spend in the US.

According to ZenithOptimedia, part of the Publicis Groupe, the US
is set for a 2.4% increase in advertising spend to $151.5 billion in
2010 – with global ad spend for 2010 expected to be worth $449.5
billion. For the US advertising industry, mobile represents 1% of
total spend.

Aside from the phenomenal increase in mobile advertising activity

during the forecast period, as a medium, mobile is yet to penetrate
over 50% of the US mobile population in terms of advertising.

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising 5
The consumers are coming: millions of them
A nationally-representative survey of US mobile phone users
conducted by Lightspeed Research for mobileSQUARED, revealed
that one-sixth of US mobile users (49 million), have engaged with an
49 Million
advertisement of some description on their mobile phone. Already engaged with
an advertisement
A breakdown of those users reveals that 12.3 million mobile
users “have clicked on the advertisement and went on to purchase
an item,” 28.86 million users have “clicked on the advertisement 12.3 Million
and looked at the item advertised but did not buy it,” while a further
Users clicked on the ad
7.82 million mobile users have “clicked on the advertisement and
and purchased an item
looked at the item advertised on their mobile phone and ended up
buying it online using their PC/MAC.”

Not only does this highlight that an increasing number of mobile 28.86 Million
users are willing to commit to a purchase there and then over their Users clicked on the ad
mobile phone than those opting to delay until in front of their PC, but did not bought it
the total number of mobile users engaging with mobile adverts in
the US is incredibly high. But it has to be said, that that figure will
only increase.

The consumer survey revealed the now expected naysayers, with

21.6% of users “doubt they will ever click on an advertisement
on their mobile”, or 64.9 million mobile users. However, 53.1% of
espondents claimed to have “never seen an advertisement on their
phone.” This suggests a little over 50% of the US population is yet
to form an opinion with regards to mobile advertising. Put another
way, 159.63 million mobile users in the US are yet to experience
mobile advertising. Realistically, it is only a matter of time until they
do.

Therefore, the number of mobile users in the US that will engage

with mobile advertising can only increase. Even if one-third of the
159.63 million indulge in engagement, that will deliver an additional
53 million mobile users, taking the total number beyond the 100
million mobile user mark.

US Mobile Populations’ Propensity to Mobile Advertising

Source:
mobileSQUARED, October 2010

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising 6
The American Dream
Following years of promise, the US mobile advertising marketplace
has sprung into life, and will become the second billion dollar market
after Japan – during 2011. Yet the true potential of mobile, and
the market realisation of advertising on the medium, remains
some distance away. By the end of 2010, mobile advertising will
represent 1% of total ad spend in the US. And although mobile is
growing faster than online, that is only to be expected given digital
was an entirely nascent medium 10 years ago, and has laid down
the foundations for mobile to florish. And florish the United States
of mobile Advertising will.

The State of Mobile Advertising

According to the data collected by Smaato choosing the
right ad network is a complicated decision, as publishers
should consider fill rates, operating systems as well as
response times of ad networks, to name a few criteria.
Smaato’s metrics are published monthly to show the state of the
mobile advertising ecosystem according to data from over 50 ad
networks globally & inventory of 9,000 registered publishers.

The metrics demonstrate the

performance of mobile ad
networks globally and the
fill rate is measured as the
percentage of ads delivered per
ad request and varies by differ-
ent factors like country, device
and content type.

Smaato Mobile Advertising

Metrics are published monthly
at: http://metrics.smaato.com

Chart: Fill Rate of Mobile Ad Networks (USA), September 2010

Nick Lane, Chief Analyst, mobileSQUARED

Nick has been described as “the leading commentator on UK
mobile media (Adam Smith, Futures Director at GroupM). But Nick’s
experience extends well beyond the UK. He specializes in mobile
market intelligence and heads up the research and analysis at
mobileSQUARED (www.mobilesquared.co.uk).

Prior to launching mobileSQUARED, Nick was Head of Research

Services and Principal Analyst at Informa, where he oversaw the
group’s leading industry newsletters, reports and forecasts that
have helped shape the mobile industry.

In this role, Nick established himself as one of the leading

authorities on the mobile content, services and advertising space,
regularly speaking and chairing at conferences and events around
the world. While in this role at Informa, Nick wrote a number of re-
ports, from consumer behavioral analaysis to mobile advertising.

© 2010 Smaato Inc. White Paper on The USmA: The United States of Mobile Advertising 7
 open mobile advertising
About Smaato
Smaato is a pioneering mobile advertising company that operates the mobile ad optimization platform called
SOMA (Smaato Open Mobile Advertising) and partners with mobile publishers, developers, ad networks and
operators.

Smaato’s SOMA mobile advertising platform aggregates more than 50 mobile ad networks worldwide and
optimizes mobile advertising revenues according to automated rules overseen by an experienced ad
operations team. More than 9,000 publishers have signed up with Smaato as a partner to monetize their
content in 220+ countries and Smaato is managing 16 billion ad requests per month.

SOMA’s unique feature is the aggregation of multiple leading ad networks globally to maximize mobile
advertising ARPU. SOMA can be easily integrated with ad networks, ad inventory owners (publishers, developers
and operators) and 3rd party ad technology providers.

Smaato is an active member of the Mobile Marketing Association and the German Digital Media Association
BVDW. Smaato received a Top 100 Private Company Award by AlwaysOn Media (2009 & 2007) and was recently
named a „company to watch 2010“ by Financial Analyst company GP Bullhound, among other awards.

Smaato Inc. is based in Redwood Shores, California. The privately held company was founded in 2005 by an
experienced International management team. The European headquarters are in Hamburg, Germany and the
Asia-Pacific presence of Smaato has been established in Singapore.

Redwood Shores, CA Hamburg, Germany Singapore, SG

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