From The Atlantic
… “Advertising must come to terms with a new technology.” Now, in the opening innings of the mobile revolution, about half of American adults own a smartphone. But if television was once known as the “small screen,” smartphones are the smallest, allowing mere inches of marketing space. From an advertiser’s perspective, this has proved problematic. Mobile ads are generally ineffective today, and the ad rates companies are willing to pay are minuscule. Mobile platforms, from phones to tablets, now command one-tenth of our media attention, but only one one-hundredth of total ad spending. That represents a $20 billion gap, and an unmistakable message for tech companies: either the mobile-ad revolution is coming, or our attention has finally escaped to a space where effective advertising cannot follow.
This may seem like good news—many ads, after all, are annoying and intrusive. But it could have unpleasant side effects. The mobile-ad drought, for instance, fundamentally threatens the two biggest businesses built on the back of digital advertising: Google and Facebook. (In a strange twist, it is Apple’s invention, the iPhone, that put them at risk.)
Plenty of apps and companies, including Pandora and Twitter, make much of their revenue from mobile advertising. But ads account for more than 90 percent of revenue at Google and more than 80 percent at Facebook, and as users migrate from desktops and laptops to mobile devices, only a small fraction of these companies’ ad revenues are moving with them. The same problem applies to many of the other companies that have been providing free content and services on the Web as it has developed. For the next 10 years, as mobile penetration screams past 60 percent, 70 percent, 80 percent, this will be the trillion-dollar question: How do you build a thriving business selling ads on a four-inch screen—and what happens if you can’t?