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Smaato White Paper Asia Powerhouse June 2011
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Smaato White Paper Asia Powerhouse June 2011


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  • 1. US$2.8 Billion: Asia Powerhouse leads globalMobile Advertising WHITE PAPER Prepared by Nick Lane Chief Analyst, mobileSQUARED
  • 2. “Smaato is a thought leader in the mobile advertising industry.This important research highlights the enormous potential for the mobileplatform as a mainstream media channel in Asia, and EDBI believesthat Smaato can strongly leverage Singapore’s connectivity to the rest ofAsia to capitalise on this promising growth opportunity in the region andbeyond.Chu Swee-YeokChief Executive Officer, EDBI Pte Ltd ”“Mobile is fast becoming a central part of brand communicationsthroughout Asia, where cellphones have achieved penetration rates thatrival TV. Much of the current activity is simple, direct advertising, but theexplosive growth rates of mobile-friendly social channels like Twitter arealready influencing the way brands harness these devices’ ubiquity.We expect mobile-oriented activities to become a cornerstone of themarketing mix across the region within the next 12-18 months.Simon KempEngagement Planner, BBH Asia Pacific ”© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 2
  • 3. SummaryMobile advertising will generate 4% of total advertising revenuesacross Asia Pacific by the end of 2011, according to the latestresearch released by mobileSQUARED and published by Smaato. up to 122%Mobile advertising across the region is coming of age. Brands investment increase in mobile advertising campaignsWhile the focus during 2010 was on the undoubted opportunitypresented by hundreds of millions of mobile internet users acrossAsia, 2011 will be a period of starting the monetising process of 17%that opportunity. Research reveals brands starting to invest morein mobile advertising campaigns resulting in a county-by-country China’s contribute of total mobileincrease in spend of between 32% and 122%. It’s a period when the advertising spend across Asiasleeping giant that is China wakes up and starts eating into Japan’sdominance on the Asian mobile advertising market.By the end of 2011, China will contribute almost 17% of totalmobile advertising spend across Asia – and mobileSQUAREDprojects incredibly strong growth for China over the coming fiveyears, by which point it will join Japan and the US as a billion dollarmarket.But as the investment in mobile increases, it cannot be attributedto networks or smart devices. It is safe to say that Asia remainsoblivious of the “Apple effect”. Yet again, 2011 will continue to be ayear of lacklustre 3G rollouts, and slow smartphone adoption. Amidsuch ambivalence the rise of mobile social networking across Asia,allied to the fact it does not need high-end devices or high-speednetworks, will provide an ideal platform to connect consumers andbrands, and pave the way for a richer experience when technologyand device capability permit.For the time being, less than 5% of all available inventory acrossAsia will be monetised via mobile advertising in 2011, while onetheory suggests that mobile ad networks are playing catch up withthe market, an alternative view is that it presents mobile ad networkproviders, like Smaato, with a phenomenal opportunity.“The Powerhouse now packs a punch.Nick LaneChief Analyst, mobileSQUARED ”© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 3
  • 4. Size MattersBrands are now starting to move their spend onto mobile becauseacross Asia the medium delivers scale. 671.5 MillionBy the end of 2011 there will be 671.5 million mobile internet users Mobile internet usersacross Asia. That means over the last 18 months, the number of across Asia in 2011mobile internet users across Asia has increased 22%.As a standalone figure it comes across as reasonably impressive. 400 MillionWhen placed in context, the growth represents 122.2 million people,and that is impressive. Put another way, the potential audience to China’s mobile internet usersview display advertising on their mobile has increased by the by end of 2011equivalent of Japan, making advertising on mobile all the morecompelling.The mobile internet landscape is dominated by China. Notparticularly surprising given that the number of mobile internetusers by the end of 2011, according to mobileSQUARED, will be398.9 million, comparable to the total population of the US andGermany combined.China accounted for around two-thirds of mobile internet usergrowth added around 80 million mobile internet users in 2010, andmobileSQUARED forecasts a slight increase in growth of 86 millionin 2011.Total Mobile Internet Users 2011, Asia (in Millions) 400 300 200 100 0 Australia China Hong India Indonesia South Japan Malaysia New Philippines Singapore Thailand Taiwan Vietnam Others Kong Korea Zealand Source: mobileSQUAREDAfter China, the biggest growth will come from India, which willenjoy an increase in mobile internet users of 144%, from 12.78million in 2010 to 31.22 million by the end of 2011.Otherwise, growth remains steady across South East Asia inparticular, while growth in Asia’s two developed mobile markets,Japan and South Korea, appears to be stabilizing.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 4
  • 5. The number of mobile internet users in Japan is hovering a littleunder 100 million, while South Korea is in the mid-30 million. 476 BillionNot only does China have the largest number of mobile internet China’s monthlyusers, it has some of the most active. page impressions in 2011The average page impression per user per day in China is 39.23,compared to Australia (32.74), South Korea (33) and emergingmobile internet markets like Thailand (17.95) and India (14).But only when considering the number of people browsing, doesthe true potential of the mobile internet for brands in China cometo the fore.On a daily basis across China in 2011 some 15.65 billion pageimpressions are generated, or 476 billion a month, and 5.7 trillionper year.In China alone, this is creating an unparalleled opportunity formobile advertising. Out of the total monthly page impressions,mobileSQUARED estimates that 4% are monetised through displayadvertising. This highlights the true extent of the opportunity inChina for mobile ad networks in particular, and also, that the levelof potential inventory being generated on a daily basis is on a scaleunique to China.Average Daily Page Imperssions Per User 40 30 20 10 0 Australia China India South Korea Thailand Source: mobileSQUAREDIt is a similar story across Asia, beyond Japan and South Korea,where growth relative to the size of the country is on anunprecedented scale, and it is the growth in mobile internetconsumption that is at the heart of the mobile advertising revenuespend across the region.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 5
  • 6. Mobile Ad Spend: The Sleeping Giant AwakesThe Asian mobile advertising market will be worth US$2.8 billionby the end of 2011, representing an increase of 32% on 2010 spend. $2.8 BillionAs in 2010, spend in Japan dominates Asia’s mobile advertising Asian mobile advertisingrevenue skyline – projected by mobileSQUARED to remain the market value by end of 2011world’s biggest mobile advertising market worth $1.71 billion thisyear but its dominance within the region is diminishing. $1.71 BillionLast year, mobile advertising revenues from Japan accounted for70% of total spend across Asia, but that figure will drop to 61.1% in Japan’s mobile advertising2011 because of the rise of the sleeping giant, China. market value by end of 2011Mobile advertising revenues in China will grow 121% in 2011, from$214.4 million to $474.7 million, accounting for 16.93% of spend in $475 MillionAsia. China’s mobile advertising revenue by end of 2011During 2011, China will replace South Korea as the second largestmobile advertising market in Asia, and will become the third largestin the world, behind the US in second place.Within five years, mobileSQUARED forecasts China becoming thethird nation, after Japan and the US, to become a billion dollarmobile advertising market.Mobile Advertising Spend Asia, Selected Markets (in Millions) 2000 1500 1000 500 0 Japan China South Korea Thailand India Australia Indonesia Malaysia 2010 2011 Source: mobileSQUAREDAfter China, India will experience the second largest increase inmobile advertising spend, up 83% from $24.6 million in 2010to $45.1 million. Previously the market had been dominated bypublishers dealing direct with advertisers, but over the last 12-18months, some of the more recognizable mobile advertising networkproviders are starting to penetrate this strange-hold on the displaymarketplace and fill sizeable inventory.Like China, India has unprecedented scale, but as a market it isdeveloping considerably slower. Nevertheless, as mobile internetpenetration increases, the opportunity for brands to connect withconsumers, will more than double throughout 2011.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 6
  • 7. Similarly, mobile advertising spend across South East Asia andAustralia is projected to increase by between 30-47% in 2011. 47%The increase in spend is the result of heightened interest from 2011 SE Asia and Australia mobilebrands across the region, utilizing the mass market appeal of advertising spend increasethe mobile internet. Interestingly, the research indicates thatthis has enabled the mobile ad networks delivering display-basecampaigns, to maintain a consistent CPC and CPM rate to that of 4%2010. mobileSQUARED believes this is the result of the phenomenaltraffic levels generating an abundance of inventory, creating a Mobile advertising worth of totalland-grab by the mobile ad networks. ad spend in Asia by end of 2011Put simply, there really is enough to go round, negating the need formobile ad networks to compete on a head-to-head and develop a $173 Billionprice war in the near-term. Asia Pacific advertisingMobile advertising will be worth 4% of total ad spend in Asia by the market value by 2015end of 2011. Even more notable is the fact this is at a time of stronggrowth in overall ad spend across the region. According to a 2010report by eMarketer and Starcom MediaVest Group, Asia Pacific willovertake North America as the largest advertising market in 2015,worth $173.2 billion.The report claims that the global economic slowdown prompted addollars to be reallocated to digital media in the emerging marketsof Brazil, China and India. One year on after the report’s release,the shift in ad spend is now filtering down onto the mobile platform.mobileSQUARED forecasts mobile advertising spend in Asia willaccelerate from 2012, down to the proliferation of smartphones andthe widespread deployment of high speed networks. Consequently,this will lead to more brands increasing their investment in mobilecampaigns, to deliver a more creative, rich-media experience.Where Australia and South Korea are set apart from the rest ofAsia, is that smartphone penetration as of the end of 2011 will be39% and 38%, respectively. Indeed, South Korea is now undergoingsomething of a meteoric growth spurt in smartphone adoption.As of 2009, South Korea’s smartphone market was largelynonexistent, but significant growth throughout 2011, is expectedto result in the sale of approximately 17.5 million smartphones.Beyond Australia and South Korea, smartphone penetrationremains low.In China, smartphone penetration has just reached doublepercentage points, while across much of South East Asia, thenumber is low single digit at best. Featurephones and legacydevices remain the dominant form factor.Across Europe and the US, the mobile advertising markets areexploding into life because of the rapid adoption of the smartphone.Not only is this increasing phenomenal in-app inventory, butbrowsing continues to be greater than featurephone users by afactor five, or by a factor 10 in the case of iPhone users.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 7
  • 8. Limited smartphone penetration coupled with the continuedsluggish rollout of 3G networks across South East Asia and India inparticular, significantly dampens the scope of creativity restricted 2012to lo-media campaigns. This is by no means a negative App market will evolve from nichedevelopment, as lo-media equates to the potential for a higher to established business modelfrequency of repeat campaigns. Not surprising then, is the fact thatdisplay and messaging based mobile advertising will contribute thegreatest percentage of spend in the majority of Asian markets in theforeseeable future.Furthermore, the lack of smartphones will not impact on theexponential increase of social media on mobile across the region.Despite slow starts, both Facebook and Twitter are making giantinroads across all markets, except China where local socialnetworking sites, such as QQ and Qzone, and the country’s ownversion of Twitter called Weibo. Harnessing the power of mobilesocial media in the coming 12-24 months will prove an invaluablelearning curve for brands seeking to capitalise on the advertisingopportunities presented by the limitations of the small screen.And with social network sites becoming the second most visitedsites across Asia (see below) among users (not including actualusage and page impressions generated), understanding howbrands can integrate their content in an unobtrusive manner ontosocial media pages served to mobile devices will be critical as socialnetworking starts to dominate traffic.Mobile Internet Browsing Behaviour, Asia, 2011 (in Millions) 1,300 1137 975 812 650 487 3252011 2012 2013 2014 2015 Total News/Sport Mapping/Directions Source: mobileSQUARED Search for Devices Search for Products Access Social Network SitesThe lack of smartphones across Asia will also accelerate mobileadvertising spend in 2012 because of the pent-up demand for apps,from brands witnessing the impact app development and in-appadvertising is generating in developed mobile markets. A muchimproved smartphone penetration across much of Asia in 2012will evolve app marketing from a largely niche play in 2011 to anestablished business model.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 8
  • 9. ConclusionThe sheer scale of the Asian mobile internet community is nowstarting to attract the attention of the brands, which are starting toincrease their investment in mobile advertising. 2011 is going to be very good, but 2012 will be betterWithin five years, Asia will not only be the biggest advertising regionglobally, it will have two of the biggest individual mobile advertisingmarkets in the world.The inflection point will be 2012 when the need for brands to startdelivering rich-media campaigns will drive spend in mobileadvertising.The platform for this growth is being made possible despite thelow smartphone penetration and lack of significant high-speednetworks. Overcoming the immediate need for these components isthe rise of mobile social networking, which is now starting to enjoya ubiquity like SMS, though by no means on the same scale.Mobile social networking is assisting the development of themobile advertising industry in Asia because, not only is it generatingsignificant inventory, it also allows brands to sidestep the need forsmartphones and 3G, and adopt a lo-media campaign strategy todevelop a relationship with the consumer.In essence, mobileSQUARED believes 2011 is a stepping stoneto 2012 when interest in mobile will reach an inflection point andbrands will start investing sizeable sums into mobile advertising:2011 is going to be very good, but 2012 will be better.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 9
  • 10. “Advertisers are clearly excited about in-app marketing, and indeed haveembraced app development itself as an area where they can build valueand engage consumers directly.And while some advertisers are content with the relatively limitedaudience they can reach through phones capable of receiving these typesof messages, many advertisers are disappointed by what options areavailable for them to reach Asia’s vast majority of consumers who do notyet have these level of phones, nor can afford the data services associatedwith them.I think this is just today’s problem. The future is incredibly bright formobile advertising in the region as it will be one of the leading areas in theworld where consumers use a mobile device as their first and only tool toaccess the Internet.Jason KupermanVice President, Omnicom Digital, Omnicom Group Asia Pacific ”© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 10
  • 11. Nick Lane, Chief Analyst, mobileSQUAREDNick has been described as “the leading commentator on UKmobile media (Adam Smith, Futures Director at GroupM). But Nick’sexperience extends well beyond the UK. He specializes in mobilemarket intelligence and heads up the research and analysis atmobileSQUARED ( to launching mobileSQUARED, Nick was Head of ResearchServices and Principal Analyst at Informa, where he oversaw thegroup’s leading industry newsletters, reports and forecasts thathave helped shape the mobile industry.In this role, Nick established himself as one of the leadingauthorities on the mobile content, services and advertising space,regularly speaking and chairing at conferences and events aroundthe world. While in this role at Informa, Nick wrote a number ofreports, from consumer behavioral analaysis to mobile advertising.About mobileSQUAREDmobileSQUARED provides specialist research which enablesbrands, agencies and the mobile industry to increase engagement the mobile consumer. We conduct primary research on themobile industry and mobile consumers, with a focus on delivering forward-looking data on mobile device usage, mobile web,app and commerce trends and usage, and mobile advertisingresponsiveness to help clients identify and respond tofast-changing mobile trends. And for a wider view of the industry,we provide detailed mobile industry user and revenue forecasts.Our clients look to mobileSQUARED’s expertise to provide candidinsight into the mobile market. We do this using our extensiveglobal network of senior contacts to research, collect and collatethe latest data, developments, trends and insight on an ongoingbasis.mobileSQUARED is a trading name of D2 Mobile Ltd.All rights reserved. Whilst reasonable efforts have been made toensure that the information and content of this report was correctas at the date of first publication, neither D2 Mobile Ltd nor anyperson engaged or employed by D2 Mobile Ltd accepts anyliability for any errors, omissions or other inaccuracies. Readersshould independently verify any facts and figures as no liability canbe accepted in this regard.Readers assume full responsibility and risk accordingly for theiruse of such information and content.© 2011 Smaato Inc. White Paper on US$2.8 Billion: Asia Powerhouse leads global Mobile Advertising 11
  • 12. About SmaatoSmaato provides Ads for Apps – operating the leading mobile advertising optimization platform called SOMA.More than 30,000 app developers and premium publishers have signed up with Smaato to monetize their con-tent in 220+ countries and to manage 70+ billion ad requests per month. The Smaato network reaches 150+million mobile unique users every month.SOMA’s unique feature is the aggregation of 60+ leading ad networks globally to maximize mobile advertisingrevenues. Through an open API and the widest range of SDKs, SOMA can be easily integrated with ad networks,ad inventory owners (publishers, developers and operators) and 3rd party ad technology providers.Smaato is an active member of the Mobile Marketing Association, Singapore Infocomm Industry (SITF) andSingapore IT Federation. Smaato recently received the OnMobile Top 100 by AlwaysOn 2011 and the AlwaysOnTop 100 Award (2011, 2009 & 2007). Smaato was named a “company to watch in 2010” by Financial Analystcompany GP Bullhound, among other awards.Smaato Inc. is based in Redwood Shores, California. The privately held company was founded in 2005 by anexperienced International management team. The European headquarters are in Hamburg, Germany and theAsia-Pacific presence of Smaato has been established in Singapore.3 Lagoon Drive, Suite 170 Gerhofstrasse 2 66B, Tras StreetRedwood Shores, CA 94065 20354 Hamburg, Germany Singapore 079005T: +1 (650) 286 11 98 T: +49 40 3480 9490 T: +65 3157 1444F: +1 (650) 240 07 08 F: +49 40 4921 9055 F: +65 3157 White Papers info@smaato.comThe names of actual companies and products mentioned here may be trademarks of their respective owners.