TM

mobile advertising

Smartphone Movement Heads East

WHITE PAPER
Prepared by Nick Lane Chief Analyst, mobileSQUARED

New York London Hamburg Singapore

+1 (646) 807-4596 contact@adsmobi.com

Mobile is here to stay. The exponential rise in mobile internet usage has endorsed the advertising value of the platform and brands are embracing it. Indeed if brands are not using this channel, they are missing out on reaching their customers in a more personal and direct way.
Carl Poplett Business Development Manager, News Digital Media, Australia

Understand the mobile users as human, is the key to accelerate mobile advertising and marketing growth in Indonesia.
Amin Azman Managing Director, GroupM Interaction Indonesia

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Summary
The mobile market throughout Asia is now migrating onto smartphones. And when Asia does something in the mobile space there are generally more zeroes attached to the numbers than anywhere else in the world. For the purposes of this report, mobileSQUARED has looked at 10 markets (Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Thailand and Vietnam). The most significant development across the Asia10 countries, is the adoption of smartphones throughout 2011. By the end of 2012, smartphones will account for 33% of all active mobile devices throughout the Asia10 countries. That means 449.4 million smartphones across Asia10 in 2012, and over 640.5 million by the end of 2013 double the size of the total US mobile market. The Asia10 markets will collectively surpass the 1 billion smartphone landmark in 2015. The rise in smartphones is encouraging a faster-than-expected adoption of mobile internet and app usage, and this is further cementing the mobile advertising opportunity. Whats more, the functionality and capability of smartphones is permitting brands to develop rich media campaigns on mobile which will not only drive mobile advertising spend from US$3.12 billion across the Asia10 region to US$3.94 billion in 2013, but also improve the click-through rate on mobile display campaigns. Significantly, from 2014, there will be more mobile browsers on smartphones than featurephones across the Asia10 region. mobileSQUARED projects the mobile display market to be worth US$2.02 billion in 2012 across the Asia10 region, rising to US$2.98 billion in 2015. In 2012, mobile display will account for 65% of total mobile advertising spend in the Asia10 region, and 58% of total spend in 2013.

449 Million
Smartphones (2012)

$3.12 Billion
Mobile Advertising Spend (2012)

$2.02 Billion
Mobile Display Market (2012)

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Asia10
Asia breeds boundless opportunities across the mobile ecosystem, and with smartphone penetration set to exceed 40% in 2012, and the number of mobile internet users to surpass 1 billion in only a matter of years, mobileSQUARED predicts that the Asian mobile market will evolve rapidly and become a fertile landscape to connect with all consumers whether rich and poor, old and young, and (perhaps most importantly) rural or urban. The Asian mobile community is phenomenally big, but mobile is now starting to cut through the vast cultural diversity and societal fragmentation that comes when trying to communicate with consumers across a continent with over 50 countries. This vast diversity and fragmentation commonly associated with Asian culture and society, is also reflected in the mobile marketplace, where globally recognised handset manufacturers jostle for market share alongside local lesser-known Asian players. In Asia, BlackBerrys compete with GreyBerrys and BlueBerrys, and Apple is faced with pears. For the purposes of this report, mobileSQUARED has focused on 10 markets (Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Thailand and Vietnam). Across the Asia10 In 2012 there will be 2.56 billion mobile subscriptions, increasing to 2.8 billion in 2013, and surpassing 3 billion in 2014. In India and China alone in 2012, these two markets represent 1.89 billion mobile subscriptions which equates to 74% of the Asia10 markets covered. If Indonesia is thrown into the mix also, the number of mobile subscriptions passes 2.1 billion (82% of all mobile subscriptions).

2.56 Billion
Mobile subscriptions, Asia10 (2012)

1.89 Billion
Mobile Subscriptions (China & India)

Mobile Subscriptions, Asia10 (in Millions)

3500 3000 2500 2000 1500 1000 500 0

2010 Australia Malaysia

2011 China Singapore

2012 India

2013

2014 Indonesia Thailand

2015 Japan Vietnam

South Korea

Chart 1: Asia10 Mobile Subscriptions (Source: mobileSQUARED)

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Mobile Subscriptions, Asia10 2012 (in Millions)

1200 1050 900 750 600 450 300 150 Australia Indonesia Malaysia Singapore South Korea Thailand Vietnam India Japan China 0

Chart 2: Asia10 Mobile Subscriptions 2012 (Source: mobileSQUARED)

But reaching a mass audience across Asia is not just restricted to the cultural diversity and device fragmentation, it also applies to technological advancement, where Japan and South Korea can boast ubiquitous high-speed 4G networks, whereas in emerging mobile markets such as Vietnam and India, infrastructure remains an issue while Wifi and 3G networks are still being rolled out. India can also be used as an archetypal market highlighting the stark divide between the urban and rural population, which is also prevalent in China and Indonesia. To a certain extent, this divide can be reflected in the mobile device penetration in these markets, where the balance is tipped towards lower-end featurephone as opposed to the smartphones. Nowhere is this more extreme than in China which will have a projected 229.8 million smartphones at the end of 2012 more than double the combined smartphone total of Europes Big 5. In China alone, there will be 45.5 million iPhone users and a staggering 159.1 million Android users at the end of 2012, driven by sub US$150 pricing of devices by Samsung, LG and local OEMs. BlackBerry and Windows will make up the remainder of the smartphone users in China. But placing this in context, smartphone penetration will still only be at 20% at the end of 2012, leaving more than 925 million non-smartphones active across China. And the smartphone, non-smartphone divide is even more contrasting in India. Of the 28.3 million smartphones in India, they only account for 2.98% of the total marketplace. This is in stark contrast to a market like Singapore where mobileSQUARED projects smartphone penetration to reach 100% in 2014, up from 71% at the end of 2012. Presently, iPhone represents 57% of the total market and is expected to become more dominant over the forecast period.
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230 Million
Smartphones in China (2012)

28.3 Million
Smartphones in India (2012)

71%
Smartphone Penetration, Singapore

Singapores Device Breakdown, 2012

57%
iPhone Market Share

18%
Android Market Share

6%
Other Smartphones Market Share

18%
Featurephones Market Share

2%
Legacy Market Share

iPhone

Android

Other Smartphones

Feature Phones

Legacy

Chart 3: Singapores Device Breakdown (Source: mobileSQUARED)

Or, to add an alternative perspective into the smartphone mix, Japan, the worlds most advanced mobile market, will only achieve a smartphone penetration of 21% at the end of 2012. Japan is dominated by what are categorised as featurephones around the globe, but a more accurate term would be extremely smart featurephones comparable to smartphones. However, the traditional smartphones as recognised by the rest of the mobile world are making headway into Japan and will represent 25% of all devices in 2013. Intriguingly, Vietnam, considered to be one of the emerging mobile markets, will have over 42 million smartphone users by the end of 2012, rising to over 80 million by the end of 2015. Similarly, Malaysia and Thailands smartphone market is set to double between 2012 and 2015. By 2015, Malaysia will have 32.6 million smartphone users and Thailand 36.6 million. During the same timeframe, Indonesias smartphone penetration will almost treble from 30.67 million to 81.5 million.

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Smartphone Mobile Internet Penetration, Asia10

35% 30% 25% 20% 15% 10% 15% 0%

2010

2011

2012

2013

2014

2015

Chart 4: Smartphone Mobile Internet Penetration, Asia10 (Source: mobileSQUARED)

Across the Asia10, following a slow smartphone adoption rate in 2010, smartphone penetration grew 166% in 2011, and will reach 33% by the end of 2012, and rise to 42% in 2013. In numerical terms, there will be 449.4 million smartphones across Asia10 in 2012, and over 640.5 million by the end of 2013 double the size of the total US mobile market. The Asia10 markets will collectively surpass the 1 billion smartphone landmark in 2015.

166%
Smartphone Penetration Growth (2011)

1 Billion
Smarphones in 2015

Smartphone Users, Asia10 (in Millions)

1200 1050 900 750 600 450 300 150 2010 Australia Malaysia 2011 China Singapore 2012 India South Korea 2013 2014 Indonesia Thailand 2015 Japan Vietnam 0

Chart 5: Smartphone Users, Asia10 (Source: mobileSQUARED)

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More smartphone users equates to an increased active mobile population away from the traditional communication services of voice and text onto browsing and app usage. A consistent trend to emerge between smartphone penetration and mobile internet usage across the Asia10 is that smartphone users are rapid adopters of browsing and app usage. By the end of 2012 there will be 772.9 million mobile internet users across the Asia10. Not surprisingly, more than 56% (434.4 million) of the mobile internet users will be in China, with 13.45% of the Asia10 total in Japan, and a little under 7% in India. Smartphones will account for 42% of all mobile internet browsers in Asia10 in 2012.

772.9 Million
Smartphones Users, Asia10 (2012)

434.4 Million
Mobile Internet Users, China (2012)

Mobile Internet Users, Asia10 (in Millions)

1500 1350 1200 1050 900 750 600 450 300 150 0

2010 Australia Malaysia

2011 China Singapore

2012 India South Korea

2013

2014 Indonesia Thailand

2015 Japan Vietnam

Chart 6: Mobile Internet Users, Asia10 (Source: mobileSQUARED)

Consequently, the rise of smartphones has resulted in faster than expected mobile internet growth in emerging mobile markets. For example, Indonesia, Malaysia and Vietnam have now joined Australia, Singapore and South Korea where there are more mobile browsers on smartphones than featurephones. This crossover is expected to occur in Thailand in 2013, and in China in 2014. Because of its scale, China will be hugely influential on when the combined mobile internet users on smartphones will overtake featurephone users across the Asia10 markets; also expected in 2014.
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The Expansion of the Ecosystem

The mobileSQUARED research reflects that within the Asia10 countries, the mass mobile market has now become accessible to brands looking to deliver an engaging and interactive experience with consumers. The fact that 42% of mobile internet users are already on a smartphone, with this figure projected to rise to 60% in 2015, creates a platform for brands to develop and deliver compelling rich media campaigns to a broad and potentially targeted audience. mobileSQUARED research reveals that across the Asia10, rich media mobile advertising accounts for an average of 16% of all mobile display campaigns, peaking in Australia and Japan where 40 - 45% of all campaigns are rich-media driven. While there is a premium attached to rich media campaigns, averaging a price hike of between a factor of 2 and 8 (depending on the complexity and creative of the ad) that of standard banner ad CPX costs across the Asia10, the increased investment is already demonstrating a return on investment with a click-through rate (CTR) of 0.3% - 0.7% compared to the standard mobile banner rate CTR averaging 0.1% - 0.2%. There is a direct correlation between the richness of the campaign and increased click throughs, with video-based rich media ads commanding click-throughs in excess of 3%.

16%
Rich Media Share of Mobile Display

3%
Video-Based Rich Media Ads CTRs

adsmobis Mobile Ads Requests, APAC - Q1 2012 (in Millions)

5400 4800 4200 3600 3000 2400 1800 1200 600 Indonesia Australia Malaysia South Korea Singapore India Japan China 0

adsmobis Average Mobile Ads Requests, APAC - Q1 2012

Chart 7: adsmobis Mobile Ads Requests, APAC (Source: adsmobi Inc.)

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adsmobis Mobile Ads Click Through Rate, APAC - Q1 2012

0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0%

Australia

Malaysia

Singapore

South Korea

adsmobis Average CTR, APAC - Q1 2012

Chart 8: adsmobis Mobile Ads CTR, APAC (Source: adsmobi Inc.)

With an ever-increasing penetration of smartphone users, mobileSQUARED expects an explosion of rich media campaigns across the Asia10 will redress the downward spiral of CTRs that has engulfed mobile banner ROIs in recent years. Furthermore, rich media campaigns will inject new levels of creativity into mobile advertising and have a positive impact on campaign spend in the next 12-18 months because of the strong interest being express by brands and agencies. According to the MMA, it expects investment in rich media mobile banner spend to increase by 200% in the near term across Asia, with mobile ad spend expected to leap by 120%. mobileSQUARED projects the mobile display market to be worth US$3.12 billion in 2012 across the Asia10 region, rising to US$3.94 billion in 2013. In 2012, mobile display will account for 65% of total mobile advertising spend in the Asia10 region, and 58% of total spend in 2013.

Mobile Ad Spend, Asia10 (in Billions US$)

7 6 5 4 3 2 1 2010 Banner 2011 2012 2013 Search 2014 Messaging 2015 0

Rich Media (Banner+Video)

Chart 9: Mobile Ad Spend, Asia10 (Source: mobileSQUARED)

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Indonesia

India

Japan

China

Mobile display is the dominant form of mobile advertising in the Asia10 countries, and will remain so throughout the forecast period. Despite strong growth its dominance will wane as search and permission-based ads (messaging) gather momentum. By the end of the forecast period, search across the Asia10 region will generate revenues of US$2.6 billion and messaging US$629.4 million. Based on the research, spend on rich media is expected to double in 2012. If we take the average number of rich media campaigns (16%) across the Asia10 countries, and assume the premium associated with rich media spend is double that of a standard banner campaign, we are left with the following scenario over the forecast period. Potentially, rich media spend across the Asia10 countries could increase from US$241.8 million in 2012 to US$1.4 billion in 2015, and would represent almost 50% of mobile display spend.

$1.4 Billion
Rich Media Spend in 2015

50%
Rich Media Share of Mobile Ad Spend, 2015

Standard vs Rich Media Ad Spend, Asia10 (in Millions US$)

3000 2500 2000 1500 1000 500

2010 Banner

2011

2012

2013

2014

2015

Rich Media (Banner+Video)

Chart 10: Standard vs Rich Media Ad Spend, Asia10 (Source: mobileSQUARED)

Another consequence of the rise of smartphones is the demand for apps. And this has perpetuated perhaps one of the major trends to emerge in mobile advertising across Asia to date, with the development of mobile content and service providers using mobile advertising to promote their apps. When mobile advertising was in its infancy, its nascent growth was fuelled by mobile content companies promoting their games, ringtones and wallpapers, with the stronger growth achieved when the major brands got in on the act. Now in a smartphone environment, mobile services can range from entertainment to financial to business. The mobile has become a utility that enhances everyday lives, and representative by the millions of apps available in multiple app stores addressing every conceivable need possible via a mobile device.
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The MMA says that small businesses and app developers creating are now investing an average of between US$500 and US$3,000 per campaign to promote their app. The outcome can result in increased downloads of a premium app, or increased traffic (inventory) to an app monetised using in-app advertising. Regardless, it is a self-fulfilling model resulting in the ongoing repeat campaign spend that will drive mobile advertisings growth across Asia10.

$500 - $3000
Developers App Promotion Spend

iPhone Users, Asia10 (in Millions)

135 120 105 90 75 60 45 30 15 2010 Australia Malaysia 2011 China Singapore 2012 India South Korea 2013 2014 Indonesia Thailand 2015 Japan Vietnam 0

Chart 11: iPhone Users, Asia10 (Source: mobileSQUARED)

Android Users, Asia10 (in Millions)

700 630 560 490 420 350 280 210 140 70 2010 Australia Malaysia 2011 China Singapore 2012 India South Korea 2013 2014 Indonesia Thailand 2015 Japan Vietnam 0

Chart 12: Android Users, Asia10 (Source: mobileSQUARED)

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Conclusion
Smartphones are accelerating the Asian mobile advertising marketplace and dramatically transforming the way brands are developing strategies to communicate with consumers. The ability to deliver richer, more engaging creative adverts over the mobile medium is increasing spend and ultimately encouraging a greater number of users to connect with brands. This is creating a virtuous circle across Asia within the mobile advertising ecosystem that will fuel growth for the long term. mobileSQUARED projects the mobile advertising market across the Asia10 region in 2012 will generate revenues of US$3.12 billion, rising to US$6.21 billion in 2015. Mobile display market will be worth US$2.02 billion in 2012 across the Asia10 region, rising to US$2.98 billion in 2015. In 2012, mobile display will account for 65% of total mobile spend. Whats more, the AARPU (Average Advertising Revenue Per (mobile internet) User) will increase over the forecast period 2012-2015. In 2012 AARPU will be US$4.04 per annum, rising to US$4.33.

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Mobile advertising spend in the Asian10 markets is skyrocketing - it will almost hit the US$4 billion landmark next year. We want to be prepared to drive this growth by supporting interactive products such as Rich Media and Mobile Video Ad Formats across these countries.
Ramy Yared Managing Director, adsmobi Inc.

We are moving beyond traditional mobile advertising, such as messaging and mobile display, which has raised awareness and been very good for brand health. We are now moving toward understanding how to use mobile to utilise that awareness and drive loyalty and attention. In the medium- to long-term the opportunity is to build that relationship between the brand and the consumer and offer tailored and specific content.
Andrew Newton Director of Mobile, MediaCom
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About mobileSQUARED
mobileSQUARED provides specialist research which enables brands, agencies and the mobile industry to increase engagement with the mobile consumer. We conduct primary research on the mobile industry and mobile consumers, with a focus on delivering exclusive forward-looking data on mobile device usage, mobile web, app and commerce trends and usage, and mobile advertising responsiveness to help clients identify and respond to fast-changing mobile trends. And for a wider view of the industry, we provide detailed mobile industry user and revenue forecasts. Our clients look to mobileSQUAREDs expertise to provide candid insight into the mobile market. We do this using our extensive global network of senior contacts to research, collect and collate the latest data, developments, trends and insight on an ongoing basis. For more information, visit, www.mobilesquared.co.uk

About Nick Lane

Nick has been described as the leading commentator on UK mobile media (Adam Smith, Futures Director at GroupM). But Nicks experience extends well beyond the UK. He specializes in mobile market intelligence and heads up the research and analysis at mobileSQUARED. Prior to launching mobileSQUARED, Nick was Head of Research Services and Principal Analyst at Informa, where he oversaw the groups leading industry newsletters, reports and forecasts that have helped shape the mobile industry. In this role, Nick established himself as one of the leading authorities on the mobile content, services and advertising space, regularly speaking and chairing at conferences and events around the world. While in this role at Informa, Nick wrote a number of reports, from consumer behavioral analaysis to mobile advertising.

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TM

mobile advertising

About adsmobi
adsmobi is a mobile media buying platform that focuses on placing successful mobile campaigns for mobile advertisers. adsmobi delivers premium advertising trac for advertisers through partnerships with leading mobile mediation and optimization platforms. adsmobi matches agencies and brands, with the best mobile publisher inventory to achieve their mobile ROI goals. adsmobi focuses on the advertiser buy side of the mobile advertising ecosystem. The adsmobi ad server will help eectivelly manage media spending with the exibility to target a desired audience at the right time, in the right place, on the right device. After a great launch in February 2010, adsmobi has come quickly o the ground and generates increasing revenues with a Headquarter in New York and oces in Hamburg, London and Singapore. Through their partnership with the leading mobile mediation and optimization platform Smaato, adsmobi has access to a worldwide inventory of more than 50,000 publishers with up to 40 billion ad requests monthly.

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adsmobi Inc.
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+1 (646) 807-4596 contact@adsmobi.com