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Location-Based Ad Dollars To Hit Nearly $30 Billion By 2020

Search will continue to eclipse all ad formats, holding the largest share of location-targeted ad spend over the next five years, says BIA/Kelsey.

Location-targeted mobile ad sales are expected to rise from $9.8 billion in 2015 to $29.5 billion by the end of 2019, for a 24.6% compound annual growth rate, according to BIA/Kelsey’s mobile ad spending report.

The market researcher’s mobile report comes a week after BIA/Kelsey’s main local digital ad spending forecast, which calls for overall local ad dollars to reach $172.2 billion by 2020. That’s an annual gain of 4.2 percent — an improvement over BIA/Kelsey’s November 2015 call for 3.7 percent yearly increases.

The gains for location-based advertising reflect several developments that have been building for the past several years:

  • Smartphones have entered the mainstream and marketers have been rapidly catching up to consumers’ mobile usage
  • Social networks have become the center of consumers’ attention and time-spent on mobile, including where they access most of their content
  • Google and other ad tech players have helped promote clearer online-to-offline measurement — and that has made local marketers more comfortable with ad effectiveness versus other forms, such as static display ads across PC and mobile.
  • The on-demand economy, from ride-hailing to immediate delivery, has been powered by advances in location technology and local businesses have rushed in to take advantage of the greater “discovery” capabilities associated with geo-data.

Location Targeted Ad Spend 5 Year Forecast‘Niche Search’ Categories Emerge

BIA/Kelsey defines location-targeted mobile advertising as “advertising that is based on a user’s location or includes proximity-relevant content to trigger local offline conversions.”

That includes large national advertisers, SMBs, and non-SMB local marketers. Location-specific ad copy, or calls- to-action (e.g., call local store) will classify a given ad as “location-targeted.”

“Several market factors are currently bearing down on the mobile ad marketplace — from Google’s moves to adapt to an app-based world, to the media consumption habits of millennials,” said Michael Boland, chief analyst and VP, content, BIA/Kelsey. “These and other influences will require advertisers, publishers, agencies and ad tech players to rapidly innovate.”

Looking more closely at the individual ad categories — i.e., search, traditional display, native social, traditional video, and messaging — BIA/Kelsey finds that search will continue to dominate all those formats, holding the largest share of location-targeted ad spend through the forecast period.

However, that share will decrease from 57 percent in 2016 to 42 percent in 2020, the forecast noted.

Instead, niche forms of search are where the growth is. For example, native social is one of the fastest rising formats in mobile advertising. BIA/Kelsey expects that category to increase its share of location-targeted mobile ad spend from 19.8 percent in 2016 to 28.1 percent in 2020 as dollars shift from general search and display.

The most common examples of the native social format are Facebook’s news feed ads and Snapchat Stories. Instagram and LinkedIn have similar offerings, which continue to grow in prevalence and ad coverage. LinkedIn has not been much of a player in location-based advertising compared to other social nets, but if Microsoft’s $26.2 billion acquisition of the “professional” social network goes through, it could be joined with the Redmond software company’s Bing Ads search tools.

The forecast points to a number of factors feeding native social’s expected growth including:

  • The rise of ad blocking technology which will benefit formats that are immune to ad blockers, like native social and sponsored content.
  • High performance of native social compared with other mobile ad formats and benchmarks.
  • Alignment with mobile device realities, like small screens, which favor vertically scrolling in-feed units over banners.
  • Growing consumer influence and buying empowerment of millennials, who are more receptive to native social advertising than traditional formats like banners.
  • Continued evolution of in-feed ad units, like action buttons and multimedia.