The Mobile Marketing Association released results from a study that was conducted by Marketing Evolution to examine how marketers are currently spending advertising budgets, and what percentage of those budgets are being spent on mobile advertising.
Surprisingly, marketers are spending less than 1% of their marketing budget on mobile advertising, which is considerably lower than the optimized level of 7% on average for U.S. marketers – a figure that was determined using “sophisticated ROI analysis.” This figure is expected to increase to over 10% over the next four years, and is dependent on the growth of smartphones (which is expected to reach 59% and 30% market share in the U.S. and worldwide by 2016, respectively.)
What’s interesting to note, however, is that the optimal percentage of 7% is an average; for highly involved brands, the optimal percentage of marketing budget to mobile advertising is as high as 9%, while low involvement brands have an optimal percentage of 5%. Other factors that affect optimal percentage include: 1) Industry vertical; 2) Marketing objective; 3) Target audience; and 4) Marketing budget.
But before we go any further into the results of the study, what exactly is the value of mobile advertising? As more people use their phones for online browsing and apps, there are more opportunities for marketers to display advertising on mobile devices. And given the relative infancy of mobile advertising, it’s up to marketers to create innovative, effective mobile ad campaigns that will generate ROI. According to Marketing Evolution, ROI can be measured by 1) The impact of each exposure relative to the cost; 2) Media synergy; 3) Reach & Frequency; and 4) Type of mobile format used (ex: web browsing, video, apps, etc.). Mobile advertising is opening a new channel for marketers to reach their audience.
What Marketing Evolution concluded from the study were the following: 1) 7% of a marketer’s media budget should be allocated to mobile advertising to optimize advertising goals; 2) By under-investing in mobile, marketers and thus businesses are losing out on profits; and 3) Over the next 4 years, marketers should invest at least 10% of their budget to mobile advertising.
And with 18% of paid search clicks coming from mobile devices, up from only 5% a year ago, the evidence is clear that mobile is changing the way marketers advertise. Waiting around to see what happens isn’t smart, marketers need to rethink their advertising strategies to include mobile now.