More Ad Spend Flows To Mobile, But Will Brands Dive In?

When we spoke to Nexage CMO Victor Milligan back in October, he told us that inadequate demand for high-value ad inventory and the absence of brand spend were the two major impediments to growth in the mobile ad market. 

There is some evidence that these impediments are beginning to fade, according to the latest Nexage Analytics Report, which covers activity through October 2012. 

Nexage works closely with publishers as a mobile ad exchange, serving up 20 billion mobile ad impressions per month, and operates mediation and real-time bidding platforms. (For further information on mediation and RTB, please read our report on the mobile ad ecosystem.)

Milligan told us that that the report “set out to understand the level of liquidity and the patterns underpinning that liquidity.” Nexage defines liquidity as ad spend on the exchange, and although it does not disclose total ad spend, the growth numbers do reveal broad trends in mobile advertising. 

Overall, Nexage found 24 per cent per month growth in ad spend, which Milligan sees as a clear sign of a maturing market. 

“We see liquidity as a necessary condition of the market,” he says. “Those conditions are showing up and they’re especially showing up on the premium level.” 

Nexage Liquidity

The mobile ad market is beginning to split between premium and low-value inventory. The percentage of high-value impressions on the exchange is growing, and so is the amount of ad spend flowing to the high-end of the market.

While the relatively low-value generic banner ad isn’t likely to disappear, Milligan says banner ads lacking a device identifier are probably the only mobile ad form declining in price.

Significantly, Milligan thinks that the increase in ad spend is spurring more developers and publishers to take a new look at mobile advertising. As we discussed in our mobile ad report, many developers have a fixed mentality that sees advertising as a secondary monetization stream (preferring paid apps or in-app purchases).

Milligan sees more developers enabling data, like location, that help draw top dollar for their inventory. The supply of location-enabled impressions on Nexage’s exchange increased 33 per cent per month between May and October. Location-enabled impressions draw a premium that doubles typical mobile CPMs, or advertising cost per thousand views. The more granular location data, such as latitude and longitude, earns publishers five times the average CPM. 

Milligan sees local and hyperlocal campaigns as one entry point into mobile for brand spend. A major retailer, for example, could use hyperlocal data to run an in-store campaign. 

Tablets will be another factor driving brands’ mobile ad spend because “[brands] get a lot of reuse for ads they built on desktops,” says Milligan. He thinks tablets could become a beachhead of sorts for brands as they begin to figure out mobile advertising. 

A rush into mobile by brands would be a real turning point for mobile advertising. Nexage expects that to happen, projecting that by next year mobile will represent between 3 and 7 per cent of brand ad spend, up from 1 per cent currently. 

Finally, RTB continues to rush into the mobile ad market. Its share of Nexage’s exchange doubled in six months to 26 per cent. Milligan estimates that RTB is currently between 8 and 10 per cent of the total mobile bidded ad market. Projections place RTB at about 30 per cent of the market by 2015

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.