At the recent  Interactive Local Marketing East conference sponsored by BIA Kelsey in Boston, analysts presented a rosy outlook for the mobile marketing channel. By 2015, combined marketing spending by national and local merchants is expected to reach $2.9 billion. Analysts supported their data with some convincing arguments.

To begin, analysts believe that mobile marketing will be driven by consumer behavior on social networks. For example, while only 25% of U.S. consumers with mobile phones currently access social networks with mobile devices, the channel experienced a 56% growth rate over the past 12 months. In comparison, the growth rate for SMS text messaging was only 8% and the increase in instant messaging by phone was 18%. Analysts see the new check-in type business models such as foursquare driving the rate of social networking use that will then increase merchant interest in mobile local marketing.

In 2010, merchants allocated $790 million to mobile ad spending. National brands are reaching into the local advertising market and mostly ‘porting over online campaign strategies’. They spent $386 million in 2010. Local businesses spent $404 million. But currently, most small and medium sized businesses (SMBs) are not big spenders in mobile.

That’s expected to change in the next few years as these  projections indicate:

Local Marketer Predicted Spending on Local Mobile

  • 2011 $692 million
  • 2012 $985 million
  • 2013 $1.4 billion
  • 2014 $2.025 billion

National Marketer Predicted Spending on Local Mobile

  • 2011 $493 million
  • 2012 $607 million
  • 2013 $733 million
  • 2014 $922 million

The expected jump in local mobile spending by local merchants is astronomical.  Analysts say relevance will be the major driver in this channel. As merchants see more consumers using mobile devices, especially in a social context, more money will move to this channel.

How well is the channel currently performing? In some campaigns, 10% click-thru rates (CTRs) for local mobile have been recorded. This CTR is much higher than the rate coming in from consumers who respond to traditional interactive marketing. This kind of consumer response means premium ad rates for locally targeted segments will come into play. However, analysts didn’t note how much of this behavior might be driven by novelty.

Here’s a more general break-out of ad click rates for mobile channels:

  • Local total 1.123%
  • All mobile 0.761%
  • Local mobile 1.251%
  • Total 0.816%

For now, marketers are very much in an experimentation phase with local mobile but a multitude of vendors and ad agencies are prepared to help this channel grow.

[Source: Presentations at BIA/Kelsey ILM East Conference. March 2011]