Meeker: Mobile Advertising A $20 Billion Opportunity In US

Mobile advertising will come in somewhere around $2.5 to $3.0 billion in the US this year. However Kleiner Perkins’ Mary Meeker, who is a former Morgan Stanley analyst, says the opportunity is roughly $20 billion. Among the 110 slides in her presentation to the D10 conference yesterday is one that illustrates her thinking on this point.

Source: KPCB (data drawn from numerous industry sources)

This is one of those familiar time spent vs. share of ad spend slides that everyone has seen. Meeker shows online advertising almost catching up with consumer time spent — which Business Insider identified as a bad omen for online ad spending growth.

However there’s a major gap between time spent with mobile and monetization.

There are different stats and metrics floating around regarding how much time is spent with mobile. For example, ad network InMobi has argued that mobile web users are spending more time with mobile now than conventional TV (based on international Q4 2011 survey data). And Flurry Analytics has famously said that people in the US  spend more time in mobile apps than they do on the PC internet.

The logic behind these “time spent vs. ad spend” statements is the assumption that money will move with consumer eyeballs. That’s generally a correct assumption at the highest level. Advertisers want to be where audiences are. But friction, fragmentation and other challenges can complicate that migration.

Another very interesting slide presented is one showing that India’s mobile internet traffic has now surpassed the PC internet in that massively populated country.

This will likely happen in the US and Europe at some point within the next 4 or 5 years. That seems hard to imagine today; however the moment will come. The question of whether commensurate monetization will come along with it is quite another thing.

Meeker shows that display CPMs in mobile are far less than online. What this reflects, at a general level, is that advertisers literally aren’t valuing the mobile internet as highly as the PC internet. There’s also less competition for ad impressions.

Google has seen a flattening of CPC rates in part because of the migration to mobile. And Facebook’s mobile challenges have already been written about at length. Paradoxically however mobile has given new life to the subscription model that all but died on the PC internet.

We’re unlikely to see mobile advertising reach that $20 billion potential in the next 5 to 7 years, if ever. However mobile ecommerce, mobile payments transactions, mobile app purchases and subscription revenue driven by mobile devices (including the iPad) are together likely to leave that number in the rear-view mirror.