A new Gartner report projects that mobile ad spending worldwide will grow 74% this year to $913.5 million but not really accelerate until 2011, when advertisers are expected to boost mobile spending as part of an overall shift toward digital marketing channels.

By 2013, the research firm expects mobile ad spending to surpass $13 billion, with the Asia-Pacific region leading the way, followed by North America and Europe.

"After 2011, the trend will continue as smartphones and flat-rate data plans become more affordable to mainstream users," states the report, titled "Mobile Advertising Grows Quietly. "The growth in mobile advertising revenues is primarily driven by mobile Web banner ads, but it also has a strong growth component from mobile search, downloadable applications and SMS advertising."

Underlying the growth of these formats is increased consumer use of smartphones, which Gartner expects to account for 45.5% of all mobile phone sales in 2013, up from just over 9% in 2008. The embrace of smartphones -- especially the iPhone -- coupled with a rise in flat-rate data plan pricing, signals that a fundamental change is underway in how consumers interact with high-end devices.

While data usage is growing most rapidly among smartphone users, Gartner analyst Andrew Frank points out that that the increased mobile media consumption is leading Web publishers to create more user-friendly versions of their mobile sites, "which in turn is lifting mobile Web access among non-smartphone users."

A recent NPD report also noted that regular mobile phones have also increasingly adopted smartphone features such as Qwerty keyboards and touchscreens.

The report highlights location-based targeting, long hyped as one of the killer apps of mobile advertising, as still underutilized by finally coming into its own with the spread of GPS technology. "GPS-aware apps now provide a much simpler and more cost-effective means of achieving location targeting, while lowering the risks of consumer backlash," since no personally identifiable information needs to be sent by users.

Gartner expects location-based ads to find an audience among young mobile users who are increasingly using mobile devices to navigate and connect with friends on the go. The firm suggests that media companies will have to develop (or acquire) local directory services like Yelp and Citysearch to fully take advantage of location-based advertising on cell phones.

Another as-yet unfulfilled opportunity in mobile advertising lies in third-party advertising in mobile apps. Despite the explosion of apps sparked by Apple's App Store, most have yet to integrate advertising. And among those that have, the prevalence of house ads indicates that revenue growth is significantly lagging the opportunity afforded by rising usage.

Gartner also predicts that mobile handsets will increasingly complement other types of advertising as a "universal back channel," especially for out-of-home media. The firm's research supports the idea that young consumers in particular will accept free mobile content subsidized by advertising.

Even so, the report acknowledges that user acceptance generally, and regulation of more highly targeted and personalized forms of advertising, remain a potential hazard for advertisers, content providers and carriers. Other barriers to mobile ad growth cited by Gartner include the proliferation of non-standard devices and metrics and mobile spam, especially in connection with SMS text marketing.

While encouraging advertisers and agencies to look at precise targeting by time and location, the firm advises them to maintain a keen sensitivity to privacy issues and permission strategies.

by Mark Walsh