Mobile Advertising's Gold Rush

If you’re rushing toward mobile advertising, you’d better check the numbers first.

The gold rush is definitely on. It’s the new-new thing. But it sounds a lot like 10 years ago, when everyone was rushing toward the Web. Many people starved on the journey or died when the mine collapsed in 2000.

The headlines scream big numbers for mobile. Here’s one of our own: Mobile advertising to jump 33% in 2010, from $1.6 billion to $2.6 billion (Borrell Associates, Oct. 2009).

Few people seem to understand how that translates down to, say, Knoxville, Tenn., or Montgomery, Ala.

Before you charge up the iPod and hitch the wagons, consider this: The amount spent by advertisers on mobile devices in most markets will likely be in the tens of thousands of dollars next year for applications like couponing, mobile video, and text messaging. That’s barely enough to support software licensing fees, let alone salaries and sales commissions. Overall, we’re estimating that local mobile advertising will hit about $500 million in 2010. Still sounds like a lot – until you start looking down into individual markets.

Let’s take Knoxville. We’re estimating that the total mobile advertising expenditure in Knoxville next year to be about $9 million for the full Designated Marketing Area (DMA). For the Central Business District (CBD), the figure is less than half that.

But wait – that’s TOTAL. The LOCAL portion of that – spent by businesses in Knoxville – is somewhere around 20% of that. And for an application like mobile couponing, you’re looking at one-half of one percent of the total spending, of which 33% is local. I’ll do the math for you: Mobile couponing in Knoxville will fetch less than $10,000 next year. The numbers look relatively the same for other markets and applications. In Atlanta, local mobile text-messaging sales come to about $6.5 million (not bad, but remember, it’s Atlanta), and local mobile couponing should come in at about $100,000 in total spending next year. In Cincinnati, mobile couponing looks to be about a $40,000 local opportunity, and in Montgomery it might be about $10,000.

All of this is to say, temper your expectations. Timing is important. Now’s the time for experimentation and “placeholders” in the mobile space, but overinvesting time and money might cause a premature scale-back when the CFO realizes there isn’t enough money to support the effort.

Mobile is, indeed, a growth category with a lot of marketing opportunity. I definitely wouldn’t ignore it, but I also wouldn’t buy the hype.