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In-app mobile ad spend to reach $685M in 2011: study

Borrell Associates forecasts that spending for ads delivered via mobile applications in the United States will explode from $305 million this year to $685 million next year and more than $8 billion by 2015 with $1.2 billion of that coming from local advertisers.

Almost 5 billion applications have been downloaded to mobile devices since Apple?s App Store opened in 2008. Eighty percent of those have been free, but users have spent $1.5 billion on the rest.

?The key finding is that of the developers and the folks that we unearthed in our research, no one thinks apps are going to go away,? said Kip Cassino, executive vice president of research at Borrell Associates, Norfolk, VA.

?But no one thinks they will be the predominant ad mechanism in the mobile space either,? he said.

Growth in mobile ad spend
Borrell estimates that about one in every five computing devices in the nation can receive mobile ad messages today.

By 2015, that ratio will triple to three in every five, fueling much of the growth in mobile ad spending. By then the line between mobile devices and personal computers will be practically irrelevant.

Today the average smartphone has 22 applications on it. But the half-life of an application is about a month ? in six months only five percent of them have been retained.

Churn is high. However, most application developers do not earn back their investment.

?I think the app developers had better find out what is working for folks and what is most useful to people buying these apps,? Mr. Cassino said. ?They need to concentrate their efforts and realize there is a bigger world out there than just Apple."

Browsers versus apps
Although applications today are capturing a growing share of ad spending from the mobile Web, it is far too early to count browsers out.

The improved power and platform-spanning convenience of HTML5 may relegate applications to the fringes of the space, according to Borrell.

Nielsen?s data shows games ? both paid and free ? are the most popular applications used, followed by social networking and music

Facebook, Google Maps, Pandora, Google Search and Weather Channel are currently the most popular downloaded titles.

?The implications for brands is that it is not enough to just put an app out there among the 200,000 that are hanging around right now,? Mr. Cassino said. ?In order for it to do something for the brand it needs to have a compelling offering.

?What we are seeing is that more than a quarter of ad requests on the mobile Web right now call for an app download and we are seeing less than 1 in 10,000 resulting in a download of the app.

?That?s a small percentage.?

Final take
Giselle Tsirulnik is senior editor of Mobile Marketer and Mobile Coommerce Daily