Google Will Hit $5 Billion in Ad Revenue from Tablets in 2013: Study

By Todd R. Weiss  |  Posted 2013-02-13

Google Will Hit $5 Billion in Ad Revenue from Tablets in 2013: Study

Google's search ad-click revenue from the spreading use of tablet computers alone in the United States will increase in 2013 to $5 billion, based on new analysis by Marin Software.

One of the key findings of the new report is that by the end of 2013, tablets will account for about 20 percent of Google's paid search clicks in the United States, which is more than three times the 6 percent in paid clicks Google Search received from tablet users back in January 2012.

The white paper "Mobile Search Advertising Around the Globe: How Smartphones and Tablets Are Changing Paid Search" was produced by Marin as a snapshot into the online ad usage of its customers, which place more than $4 billion in online search ads using Marin's management platform each year.

Gagan Kanwar, director of research and partnerships for Marin and the author of the white paper, told eWEEK that the $5 billion tablet ad revenue estimate was reached by making projections based on Google's $40 billion in overall search ad revenue from 2012. Google's ad revenue typically increases by 20 percent each year, said Kanwar, which would mean that Google's search ad revenue is expected to be about $48 billion by the end of 2013.

Because 20 percent of Google's paid search clicks are estimated to come from tablets at that time,  that means that the total tablet ad-click revenue will hit about $5 billion, he said. 

"If you look at the macro trend, tablets are basically replacing PCs, as in desktops and laptops," he said. "Year-over-year there have been revenue declines for the PC business. It's not a shortage of population, but people are just not replacing their PCs as much."

Using the data from real-world ad-click experiences of the customers that use Marin's ad platform, the company extrapolated the numbers from its customer base to reach its estimates, said Kanwar.

The white paper is Marin's second annual report on the mobile ad marketplace. The company also produces quarterly benchmark reports.

The report says that "conversion rates on search clicks originating from tablet devices increased dramatically in 2012, rising 31 percent from January to December," meaning that consumers were following through with purchases after seeing and clicking the ads that were served up to their tablets.

The study also estimates that by the end of 2013, the conversion rate of tablets will exceed the conversion rate of desktop computers.

Dan Maycock, mobile IT analyst with Slalom Consulting, said that based on the spreading usage patterns of tablet computer owners, the Marin estimates make sense because most tablet use involved Web searching and consuming information, rather than doing work tasks such as email or writing documents.

"If you think about every television commercial that you've ever seen for an iPad, about 90 percent of what they're doing in it is consumption of information, which is what tablets are ideal for, compared with production of work and interaction such as email," said Maycock. "So this report confirms that sure enough, people consume more on their tablets than they would on their mobile phones or desktop computers."

That makes perfect sense when you think about how consumers actually use their tablets, laptops or PCs, he said.

"If you think of the physical position you are in using a desktop PC or a laptop, you can't get into a comfortable chair with them," he said. "A laptop can overheat on the upholstery. Tablets conform to that kind of physical position in the easiest ways."

Google Will Hit $5 Billion in Ad Revenue from Tablets in 2013: Study

Google continues to make business moves to help encourage and build on the tablet ad-click successes. On Feb. 6, the search giant announced that its Google AdWords program is being enhanced so it can send just the right ads at the right time to potential customers based on the devices they are using and the time of day they are making their searches.

AdWords, which lets Google send out ads to online users on behalf of advertisers, will soon get useful new capabilities that will serve up the ads with proper formatting whether they are going to tablet computers, smartphones or other devices.

In December, research data from eMarketer showed that Google's mobile ad revenue outperformed analyst estimates for the third quarter, bringing in between $5.8 billion and $7 billion globally, according to an earlier eWEEK report.

In the United States, overall spending on mobile advertising, including display, search and messaging-based ads served to mobile phones and tablets, rose 180 percent in 2012 to top $4 billion, according to eMarketer. That's expected to reach $7.19 billion in 2013 and nearly $21 billion by 2016.

Fueled primarily by direct-response advertisers, Google controlled a 56.6 percent share of the U.S. mobile advertising market by late 2012, eMarketer estimated.

Most of Google's mobile ad revenue comes from search, and eMarketer estimates Google maintains a 93.3 percent share of the overall $1.99 billion U.S. mobile search ad market.

In 2013, spending on mobile search ads in the United States is expected to jump 55 percent to $3.6 billion, of which Google is expected to earn a 92.4 percent share.

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