How IDC Slices A $287mil US Mobile Ad Pie

The chart above features the market shares of the top US mobile advertising companies (based on their % of revenue in a $287mil market) as included in the report “Mobile Ad Market Share Estimates Show Yahoo and Microsoft Must Follow” released by industry analyst IDC in the wake of the $750mil Google-AdMob deal. This report was met by some controversy, as Mobile Marketer revealed in a story at the end of November. Companies like Jumptap immediately claimed that their revenue was "drastically understated." But, of course, neither Jumptap nor any of the other companies covered stepped up to reveal what they were actually making... because that's not how private companies in the mobile space roll (fantasy is usually sexier than reality). Frankly, I usually assume all whisper and analyst numbers in this space are inflated and I think this report is no exception.... I don't think AdMob made $40mil in 2009. Nonetheless, the report, suggests correctly I believe, that with the AdMob deal done (and now with AOL/Quattro) both Microsoft and Yahoo (who apparently once courted Millennial) are in the hunt for acquisitions in early 2010 so they can challenge Google's potential 24% market share. I'm looking forward to lots of crazy valuations... which could be a good thing in the short-term if the acquiree's VCs realize handsome paydays and, consequently, are motivated to inject more risk capital into the mobile content market.

Velti Forecasts $106mil in 2009 Revenue

UK mobile advertising outfit Velti Plc (VEL), the company that bought AdInfuse last year, got a jump on FY 2009 earnings season by forecasting revenues of over $106mil... which represents 24% year on year growth. The company claims to have run over 2k campaigns for over 450 brands during the last year and indicated that demand for its products remains strong. While the company is trying to spin the earnings as "in-line", many analysts had them pegged in the $115mil range, so the company's stock took a 3% hit in London trading today. It'll be interesting to see the rest of the numbers when they report full details in the next few weeks. Despite the near miss, Velti is probably the biggest of the mobile advertisers, with revenues more than double those of hyped US plays like Millennial and AdMob (in the process of being acquired by Google for $750mil) and at least 5x the revenues of Quattro (which is being acquired by Apple for $275mil). Oh, and by the way, these guys actually turned a (real) net profit last year. One wonders why, in light of Velti's performance and the recent frothy valuations of other mobile advertisers, that its market cap is only around $153mil.

Update: Apple Buying Quattro For $275mil

How Much Money Do Mobile Ad Networks Make?

I always relish a good data nugget sandwich like the MocoNews post from a couple of weeks ago about how difficult it is to measure the size and reach of the 6 biggest US mobile advertising networks. The article highlighted some recent monthly unique site visitor data, per network, from Nielsen. Ostensibly the data indicates that Millennial's network is the biggest (by a wide margin) in the US, with the potential to reach up to 82% of the 55mil US mobile web users (hmm...that's if they ever use their mobile browsers, right?). Moco and an associated post on Mobile Marketer spend a lot of time debating the value of these numbers as a method of comparison. Interesting, if you're into that sort of thing...but frankly what I really care about, and I know you do too, is figuring out how much money these guys make. Analysts, pundits and panelistas love to throw out big mobile ad numbers like $2.7bil WW and $300mil in the US...but I'm generally super-cynical about accepting that kinda nonsense at face value. So, despite the aforementioned measurement difficulties & the advice of school marms everywhere, I decided to take a stab at the revenues the big 6 US mobile ad networks are seeing from selling ads on those networks.

So here are my assumptions... and, frankly, I think I'm being generous. I'm gonna say that the average US mobile browser is exposed to about 20 ads per month across these networks, which would be a total of 1.1bil impressions (55mil x 20) total. The reality, of course, is that this is a Pareto principle on steroids...wherein most of the activity is generated by a very small base. I've divided that number by the share each network has of unique visits (yielding about 6.4 impressions per network per month). Fantasy (rate card) mobile CPMs are $15 (good luck), but the blended reality (effective CPM) considering CPC deals, unsold inventory & a large remnant market is probably more like $1.75 (I know...ouch). Publishers keep about 60% of ad revenue (maybe more) and carriers (when involved) can take 50% before publisher...so I'm guessing that on average the networks keep something like 25% of their topline revenues. If these assumptions are correct...or even close to it (and my model isn't broken)...then, as you can see, these companies still have pretty nascent businesses.

btw -- this is a guesstimate (based on lots of assumptions...though, I believe, generous ones), so if anyone has any data points that could yield a more accurate outcome please feel free to comment (or contact me directly) and I'll make the appropriate modifications.