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US Mobile Ad Dollars Shift to Search Apps

Google loses share of $9 billion US mobile search market; Yelp emerges from the pack

Mobile advertising in the US will total $17.73 billion in 2014, with mobile search spending accounting for more than half of that total, or $9.02 billion, according to new figures from eMarketer. By 2018, we estimate, mobile search spending will reach $28.41 billion, or 85.9% of the US digital search advertising market.

eMarketer’s definition of mobile search advertising includes paid ads served by search engines, search applications and carrier portals to all mobile devices, including smartphones and tablets.

As smartphone and tablet usage continue to increase, users are becoming more sophisticated, blurring their mental division between browsers and apps. Mobile marketers are responding to the fact that mobile search behavior is becoming less comparable with its desktop/laptop counterpart, and as a result, the market for mobile search advertising continues to fragment.

“Even though browser-based search is a common behavior among mobile owners, search engines are not necessarily the first place smartphone and tablet users turn,” said Cathy Boyle, senior analyst for mobile at eMarketer. “The explosion of mobile app development and usage means mobile users have more—and more specialized—alternatives for finding information.”

Google’s declining share of mobile search dollars is notable in context with the market’s fragmentation. Google owned 82.8% of the $2.24 billion mobile search market in 2012, and while the company’s mobile search revenues continue to increase, other players have ramped up their efforts to become the entry portal for mobile information. Google still dominates browser-based searches on mobile devices, but niche search apps are also becoming much more prevalent. This caused Google’s share to drop to 68.5% in 2013, according to eMarketer estimates, while the long tail of “other” companies increased share from 5.4% to 22.9%. This year, we expect Google’s share to fall again, to 65.7%, while the “other” category reaches 27.3%.

This category includes search stalwarts like Yahoo and Bing, which eMarketer estimates have material mobile search revenues, but they have not been broken out yet in company earnings statements to provide a basis for reference. “Other” also includes niche service providers such as travel metasearch apps like KAYAK, job search apps like Indeed, ecommerce sales apps like Amazon and contextual search apps like Shazam, all of which charge advertisers for search listings and are beginning to see gains in their mobile advertising revenues.

Yelp is one of the companies beginning to emerge from the pack, however, and this forecast includes eMarketer’s first-ever projections of the company’s ad revenues. We estimate that Yelp’s mobile search revenues will grow 136.0% to reach $119.4 million this year, accounting for just over 40% the company’s overall search intake. Still representing a small share of the mobile search advertising market, at 1.3% this year, we expect Yelp’s mobile search ad revenues to nearly triple by 2016, accounting for close to two-thirds of the company’s total search revenues, as well as for about 2% of the overall mobile search ad market.

“App-based searching is a new phenomenon that pales in comparison with the longstanding practice of querying a search engine, and the degree to which mobile users rely on both methods for finding information is unclear,” Boyle added. “Still, in light of the growing popularity and time spent with apps, search marketers that recognize this behavior and focus on increasing visibility within apps aligned to their industry and business objectives will be best positioned to connect with the largest number of mobile users.”

eMarketer bases all of its forecasts on a multipronged approach that focuses on both worldwide and local trends in the economy, technology and population, along with company-, product-, country- and demographic-specific trends, and trends in specific consumer behaviors. We analyze quantitative and qualitative data from a variety of research firms, government agencies, media outlets and company reports, weighting each piece of information based on methodology and soundness.

In addition, every element of each eMarketer forecast fits within the larger matrix of all of its forecasts, with the same assumptions and general framework used to project figures in a wide variety of areas. Regular re-evaluation of each forecast means those assumptions and framework are constantly updated to reflect new market developments and other trends.

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