There appears to be a lot of room for upside in mobile advertising -- possibly around $20 billion. That’s a positive sign for Pandora, iTunes Radio and other ad-supported music services that depend mostly on advertisements.
As comScore explains in a blog post, the upside in mobile advertising stems from the difference between mobile advertising spending and mobile usage. In 2011, mobile devices accounted for 10% of time spent with media (all media, including TV, print and radio) but only 1% of advertising spending, according to a presentation by Mary Meeker, an analyst at Kleiner Perkins Caufield Byers.
In contrast, there is a small difference between spending and usage in web advertising. Web browsers accounted for 26% of time in media and 22% of advertising spending. TV is almost in equilibrium -- 43% of time and 42% of advertising spending. Meeker calculated there to be $20 billion in upside for mobile advertising if the time-to-spending ratio was similar to that of the web.
Perhaps some of that upside will come from reallocated print dollars. Print was also out of alignment but in the opposite direction as mobile: print accounted for 7% of time but 25% of advertising spending.
This upside is important to the music business, because hundreds of millions of dollars in royalties are generated in the U.S. each year by advertising-supported services such as Pandora, YouTube and Vevo. The upcoming iTunes Radio should be another major player that redistributes the growth in the mobile advertising business to artists, songwriters and rights owners.
Entire business models depend on the upside in mobile advertising. An interim report will come Thursday (Aug. 22) afternoon when Pandora reports second-quarter earnings.