Based on this article, it appears that Google's CEO Eric Schmidt does actually appear to believe that mobile advertising will be larger than that on the PC Web. I'd heard various people quote him before, but I'd dismissed that as out-of-context rhetoric.
The question in my mind is how can this really become true?
The current online advertising market is c$50bn - ie about $40 per Internet user per year (there's about 1.3 billion users), or $3 per user per month. That will continue to grow even as mobile ads are introduced, so realistically by the time of any cross-over, it's likely to be at least $5, $6 or greater, per user per month.
Now obviously at the moment mobile has a greater number of total users (2.7-3.0bn, depending on how you deal with multiple devices, non-phone devices etc). But a lot of those will be inaccessible to anything but *very* primitive adverts for a long time to come.
Probably a billion or more are on $10 ARPU or less, with 2G handsets and no likelihood of getting data access any time soon - basically SMS ads only, or perhaps voice-insertion messages. Another big group have OK handsets, perhaps $10-20 ARPU, but also mostly prepay with limited use of data, except occasional browser use. (The future "next" billion to get mobile devices will probably be on <$5 ARPU, so for all intents & purposes I think advertising will be a near irrelevance). Even looking out to say 2012 or 2013, the number of people with iPhone-grade browsers on their handsets, ideally with 3G and flatrate data, is going to struggle to get much beyond 500m I would have thought. And even then it's likely that not all of them will be *active users* of mobile web access. And as the mobile search people are so fond of mentioning, "people don't browse on the mobile web" - ie session times are much lower, albeit more frequent. And there's less screen real-estate, so fewer ads can be seen per minute or per session. Another issue is that PC online ads include both B2C and B2B. I don't know the split (does anyone?) but I have to believe that B2B mobile advertising will be much harder than B2C, ironically, because of the "personal" nature of the medium. So mobile B2C will need to outstrip fixed B2B+B2C for Schmidt's prediction to become true.
And I think that a lot of things that are currently advertised on PC-web will be difficult to translate directly to mobile-web, because they are complex purchases rather than the sort of instant-response or brand-recognition ads that work best on phones. Who's going to want to fill in 100 data fields for a car-insurance quote on phone? Or find jet engine maintenance services?
Sure, there will be things that are *easier* to advertise on phones, and there may be different ways to advertise that overcome the limitations. But I think it will be quite a while yet before we go down the learning curve. Another good thought-experiment is if anyone would ever administer their own Google AdWords account on a phone rather than on a PC.
Let's be very generous and say that there will be 1bn "full mobile web" active & regular users by 2013, with maybe 1hr or 20+ sessions per week. (I reckon 3-400m is more plausible, but let's go for the big round number). Then there will be a long tail of maybe another billion getting text ads, occasional browser ads and so forth, but realistically that's not going to add on a huge extra chunk of revenue compared with all-singing-all-dancing, high-response clickthrough mobile web ads, especially as many of the next bunch will be anonymous prepay users.
And by that time, PC Web advertising should be heading towards $100bn, I would have thought.
So for mobile to catch up, it'll have to be hitting $100 per "full" user per year, or $8 per user per month.
Does Schmidt honestly believe this?
I'm certainly not professing to be an advertising expert, but this just appears to be far too much of a tall order to me. Sure, response rates should be better, but I'd be wary of extrapolating from 100k early handpicked Blyk users to a billion mainstream punters. Especially as, even if m-commerce grows incredibly quickly, it's not going to catch up with PC-mediated e-commerce. (Which as we all know, is a quadrillion dollars per year).
In other words, most of that $8 is going to have to be recouped by people buying products through channels not based on the phone (ie on PC or "in real life"), making tracking of advertising effectiveness horribly difficult to measure. Nobody is going to be buying a car on their handset... and can you imagine the fun politics of tracking churn, when you're changing phone & operator based on an advert seen on another operator's device?
Personally, I think that Schmidt is either deliberately overstating the market to drum up excitement.... or he's about to make a horrible strategic mistake.
The worrying thing for me is that most of the Google folk I've met or heard at conferences appear to have a very narrow view of the mobile industry, heavily coloured by the US market viewpoint (no prepay, people deliberately buy 'smartphones' and are willing to download apps, people want a single device, that 'normal' people actually want the Internet on phones etc). I'm singularly unconvinced by Android based on what I've heard so far.
In fact, if he's staking the company's future revenue growth on this, I wonder if we've just seen the big G hit the high-water mark, and it's all downhill from here.