Smartphones evolve into niche industries : Mobile ad market set to take off

*Since smartphones first touched down in Korea with the arrival of the iPhone 3GS in late 2009, the market has seen exceptional growth. By the end of this year, the industry estimates 34.8 million people in the country will own a smartphone given the recent release of Samsung Electronics' Galaxy S3 and the upcoming launch of Apple's iPhone5. The wide use of mobile gadgets has not only inspired the related advertising market to expand, but is also changing the way consumers here make purchases. The Korea JoongAng Daily puts the domestic mobile ad and shopping market under the microscope.


NHN Corp. is restructuring its business to focus on the mobile market as more Koreans give their PCs the cold shoulder in favor of Tweeting, KakaoTalk-ing, Facebook-ing and generally surfing the Web on their mobile devices and smartphones.

To profit from this shifting trend, the nation's leading Internet content operator launched its mobile ad platform late last month to lure advertisers following a successful trial run.

Mobiles accounted for just 3 percent of the total online ad market as of last year, but competition is fast heating up.

"The mobile ad market will soon hit an exceptional growth patch as 70 percent of mobile phones are expected to be smartphones by the end of this year", said Choi Yoon-mi, Shinyoung Securities analyst.

The current distribution rate is about 50 percent.

The changes in the industry are emerging less than four years since smartphones hit the local market and reshaped Korea's IT landscape, with Apple and Samsung at the forefront.

As faster fourth-generation (4G) long-term evolution (LTE) networks are available for newer devices such as Samsung's Galaxy S3, which was released in Korea on Monday, the environment for faster connectivity and access to numerous Internet content has ramped up the lucrative potential, and appeal, of the mobile ad market.

NHN has for years dominated the PC market in terms of controlling advertising revenue, but it trails rival Daum, the nation's second-largest Web portal, when it comes to mobiles.

Daum, which has been servicing this platform since 2010, saw roughly 5,000 mobile ad clients last year, when its combined monthly page views topped 15 billion and revenue exceeded 37 billion won ($32.4 million).

Google, which ranks second to Daum in the local mobile ad market, laid out its plans to aggressively expand its share in February.

The Korean market is expected to more than double this year to 170 billion won and climb as high as 690 billion won by 2015, when it should account for one-quarter of the online ad market.

Advertisers are expected to use it to target younger consumers.

According to the industry, around 5 percent of people who play games on their smartphones click on pop-up ads, whereas just 0.3 percent of those use the device to access the Internet or fiddle with apps do so.

Mobile ads can appear in the form of banners on smartphone applications and mobile web browsers, QR (Quick Response) codes, and other creative formats.

The difference between mobile ads and regular Internet ads seen on computers lies in user-specificity, according to mobile advertising firm Inmobi.

Company spokesperson Yoon Dae-Geun said targeting users of mobile gadgets offers greater specificity and efficiency.

"An ad that you see on your PC's Internet browser might be a banner that links to a keyword you typed into a search engine.

However, an ad that you come across on your mobile web can be personalized based on your device, location, the time you accessed your smartphone, and so on", he said.

Yoon said the market will be further fueled by the wide distribution of 4G LTE services that will further change the way people connect to the Internet.

"With 3G, there was always a restriction as to how much data you could use. As a result, people stayed away from accessing large mobile Web content", he said.

"Before, most people had set amounts of data allotted to them each month, and they didn't want to use up their precious data on traffic from mobile advertisements.

But with cheaper data on 4G LTE networks, they won't be as precious with their bits and bytes, and won't hesitate as much to click on ads".

Moreover, mobile ads will be more varied and creative on the faster network, he said.

"Because ads need to be able to be viewed quickly, companies were always concerned about using as few multimedia agents as possible to shorten the ad's loading time", he said.

"But with more data being accessed at a faster rate, advertisers can make full use of the multimedia resources at their disposal and provide ads that incorporate more of the smartphone's functions to zero in their target audience".

The biggest challenge for the mobile ad market is attracting more clients as it is still in its infancy.

"Many potential clients are hesitant about using it as they're not sure how much influence it wields over consumers due to the relatively small size of the market", said an industry insider.

By Han Jee-soo Contributing writer [[email protected]]