Editor’s note: Matt Cohler is a General Partner at Benchmark Capital. He’s responsible for identifying investment opportunities in Internet-related companies in addition to working closely with companies across the firm’s portfolio. You can follow him on Twitter here.
The global advertising market is big. Half a trillion dollars big in 2012.
In the tech world we tend to think of the Internet when somebody mentions advertising. But even now the Internet isn’t the biggest advertising market in the world.
The biggest advertising market in the world is television.
Even now, TV ad spend is more than twice as big as Internet ad spend and represents close to half of all ad spend in the world across all media. How can this be, even in a world of DVRs and even after the web has had 20 years to work its interactive, data-rich, efficiency-enabling, creative-destruction magic on the market?
First of all, people spend a lot of time watching TV. In America, the only thing people spend more time doing is sleeping and working. This massive time spend is important to marketers not only for sheer quantity of inventory, but also for the society-wide reach and broad social context it provides. This is something that brand advertisers in particular — roughly half the total market, and the half that’s struggled most with the web — care a lot about.
Second, watching TV is a focused, immersive experience. There’s really only one thing happening on the screen at a time and the only distraction available is changing the program to a different version of the same thing (awful picture-in-picture and interactive menu interfaces not withstanding).
TV beats the web on time spent and on focus of attention (or “frequency, reach and engagement” in marketer-speak). But you know what TV doesn’t beat?
People are going to spend more time staring at mobile screens than television screens (and certainly more time than staring at computer screens, especially when you exclude work applications). Your smartphone is with you pretty much all the time. Smartphones are also inherently social devices, which explains the deep emotional connection people feel to them. The society-wide reach and social context that mobile smartphones will provide advertisers leaves other media in the dust.
Using a mobile device is also a focused, immersive experience. Like watching TV, the screen focuses the user’s attention on one thing at a time and “changing the channel” is even less distracting than with a television.
If these are really the dimensions that matter, why are mobile ad rates so low? This is simply an issue of time and of product and market development. The market is still illiquid and sub-scale, and great ad products haven’t had time to develop. I don’t know what the new mobile ad products will look like yet, and they won’t be one-size-fits-all. But to be great they’ll need to act like “content” in the context of an app and will need to be interactive and “push-button remote control” simple.
One of the reasons Benchmark led the Series A in Instagram was the belief that this was exactly the sort of app which would eventually enable a phenomenal advertising environment. And while I won’t share the specifics, even now the trends are looking very encouraging across the companies my partners and I are involved with.
By the way, know what the second biggest advertising market is after television? Still not the Internet! Nope, it’s print media (newspapers and magazines). Just like TV, print media have a lot more in common with mobile devices (especially tablets) than they do with the web.
This year, mobile will account for little more than 1 percent of the half trillion dollars spent by advertisers across the world. As mobile ad products and the mobile ad market develop and grow, that’s going to change. A lot.