Key Digital Trends from xAd's State of the Market Report

Confidential and Proprietary | Do Not Distribute | © 2016 xAd, Inc.
February 2016
STATE OF THE MARKET

THE DIGITAL LANDSCAPE
Smartphone and Tablet Penetration
Digital Ad Spend and Format
Local Mobile Ad Spend and Format
MOBILE TRENDS
Media Multitasking
Apps as Life’s Remote Control
Rise of the Smart Store

Confidential and Proprietary | Do Not Distribute | © 2016 xAd, Inc.Confidential and Proprietary | Do Not Distribute | © 2015 xAd, Inc.
The Global Digital Landscape

By 2019, Global
Smartphone users will
pass 2.6B, with APAC,
Western Europe and
North America leading
this growth
4
The Digital Landscape
2016 brings a key
milestone in mobile
advertising as spend will
exceed 100 billion
globally
Over the next 5 years,
as national advertisers
shift budget to local
markets, location-based
ad spend will increase
26% and will make up
over 40% of total mobile
spend

1,585
1,843
2,059
2,260
2,441
2,616
2014 2015 2016 2017 2018 2019
Worldwide Smartphone Users
(millions)
Global smartphone users are expected to pass 2.6B by 2019
Over one quarter of smartphone users
live in China alone
Source: eMarketer, 2015

Confidential and Proprietary | Do Not Distribute | © 2016 xAd, Inc. Source: eMarketer, 2015
53%
59%
64%
67% 69%
46%
52%
57%
61% 64%
22%
26% 28%
31% 33%
2014 2015 2016 2017 2018
Smartphone Penetration
(% of Population)
N. America
W. Europe
APAC
46%
49% 51% 52% 53%
35%
39%
43%
45% 47%
9% 11% 13% 15% 17%
2014 2015 2016 2017 2018
Tablet Penetration
(% of Population)
By 2018, almost 70% of the population in N. America and W. Europe will own a
smartphone and a third will own a smartphone in APAC

$204 $206
$209 $212
$215
$113 $106 $102 $98 $96
$112
$121
$130
$139
$148
$42
$72
$105
$137
$169
$68 $66 $61 $57 $54
2014 2015 2016 2017 2018
US$Billions
Worldwide Ad Spend by Media Type
TV Print Desktop Mobile Other
NOTE: “Other” includes OOH and Radio
Source: ZenithOptimedia, Dec 2015; eMarketer 2015
Mobile, Desktop, and Total numbers from eMarketer; TV, and Print numbers from ZenithOptimedia
The global mobile advertising market will hit a significant milestone in 2016 by
surpassing $100 billion in spending; US and China account for over 60% of ad spend
This growth is being driven by consumers accessing the internet mobile-first and mobile-only, so advertisers are allocating accordingly
Total 2015 Ad Spend was
$570B Worldwide

49%
46% 44% 43% 42%
25% 27%
29%
31% 31%
16% 16% 15% 14% 14%
7% 8% 9% 10% 11%
3% 2% 2% 2% 2%
2014 2015 2016 2017 2018
Share of Worldwide Mobile Ad Spend by Format
Search Social Display Video Other*
Source: Cowen and Company, "Annual Ad Buyer Survey III: 2015 Outlook“ and MAGNA
GLOBAL, Jan 12, 2015
*Other includes SMS/MMS/p2p messaging, classifieds and directories
On mobile, search and social have the largest share, but growth is steady across all
formats

$8.5 $11.3 $14.7 $18.6 $22.3 $26.7$14.2
$18.1
$22.4
$26.9
$31.5
$35.4
$22.7
$29.4
$37.1
$45.5
$53.8
$62.1
$0
$10
$20
$30
$40
$50
$60
2015 2016 2017 2018 2019 2020
US$Billions
United States
Local vs. National Ad Spend in Mobile
Location Targeted* Non-Location Targeted
Source: BIA Kelsey Oct 2015 Mobile Forecast
*Location Targeted mobile ads include ads with location targeting component,
location specific ad copy or location specific calls to action
Location-targeted mobile ad revenues are projected to grow from $9 billion in 2015 to
$27 billion in 2019, a 26% growth
This increase comes from national advertisers shifting their focus to local markets
43%
Local Mobile Ad Spend
37%

Confidential and Proprietary | Do Not Distribute | © 2016 xAd, Inc. Source: BIA Kelsey Oct 2015 Mobile Forecast
*Location Targeted mobile ads include ads with location targeting
component, location specific ad copy or location specific calls to action
54.6%
18.6%
18.5%
5.0% 1.5%
Search
Display
Native/Social
Video
SMS
47.8%
21.0%
22.8%
5.8%
0.6%
2015 2020
As native/social grows, search will continue to hold the largest share – boosted by
premium ad rates resulting from search’s intent-driven nature
Local Mobile Ad Spend
United States
Local Share of Mobile Ad Spend by Format

Consumer Mobile Trends

Media Multitasking
Apps as Life’s
Remote Control
The Rise of the
Smart Store

The modern consumer is constantly being bombarded with new and existing technology. With so much to
choose from, consumers are now professional media multitaskers and it is hard to hold onto their
attention for more than a few minutes.
Essentially, technology needs to help consumers get more from the time
they have.
In order to capture the attention of this distraction consumer, marketers need to provide services and
content that is beneficial and helps improve their lives.
The good news is that smartphones receive the highest amount of attention
while consumers are using multiple devices. And digital platforms are winning
consumer attention when it comes to advertising.
Media Multitasking

Source: Yahoo Advertising “A Day in the Life of a Media Consumer”
2015; Nielsen Biometric Day in the Life
42% multitask with their phone and another device, mostly during prime time hours
Media Multitasking
58%
24%
16%
2%
TV & Laptop TV & Phone Phone & Laptop All 3
18%
9%
13%
60%
7-10AM 11AM-2PM 3-6PM 7-11PM
Cross-Device Use by Time Period

Source: Yahoo Advertising “A Day in the Life of a Media Consumer”
2015; Nielsen Biometric Day in the Life
While using multiple devices, smartphones receive the highest amount of primary attention
Media Multitasking
94%
83%
80%
Smartphone
TV
Laptop
of the time, the Smartphone is being used as
the primary device during prime time hours
94%

25%
When it comes to advertising, digital devices hold consumer attention better than TV
Media Multitasking
% of time consumer attention diverted to another
device when an ad appeared
57%
15%
Source: Yahoo Advertising “A Day in the Life of a Media Consumer” 2015

Smartphones, the most personal computers ever, have become our everything devices. The average daily time
spent on these devices is exponentially increasing over the years as consumers become more and more reliant
on their smartphones.
Application usage is the most common action among all smartphone activity.
In fact, in 2015, 400k new apps were introduced to app stores.
Brands are recognizing the importance of apps, especially ones that provide real-time, easy and instant access
to whatever a consumer may need or want at any given time.
Apps not only keep consumer eyes on the smartphone screen, but will increase the
device’s use as a decision making tool in daily commerce.

By 2017, consumers will spend over 3 hours a day on their smartphones – mobile is the
only media still growing
Growth +47%
Decline -4%
Decline -12%
The average user looks at
phone 150 times a day!
Source: Yahoo Advertising “A Day in the Life of a Media Consumer” 2015; eMarketer, October 2015
4:31 3:58
2:16
2:10
2:15 3:18
2013 2017
Avg. Time Spent Per Day in (Hours : Mins)
TV PC Smartphone

Confidential and Proprietary | Do Not Distribute | © 2016 xAd, Inc. Source: eMarketer 2015, Pew Research Center as cited in company blog, Jan 29, 2016
Application usage dominates all phone activities, with location-based services growing
exponentially as consumers want ease and relevancy in their mobile experience
79%
83%
86%
88% 89%
2014 2015 2016 2017 2018
Mobile app users (% of mobile users)
74%
90%
2013 2015
Used Location Based Services
(% of mobile users)

Note: represents activity on Flurry’s platform, broader industry metrics may vary
based on growth of usage sessions, defined as a user launching and using an app
Source: Flurry Analytics; eMarketer 2015
Users want apps that provide personalized and relevant information to make
their lives easier
332%
135%
125%
81%
54%
53%
52%
51%
21%
-1%
Personalization
News and magazines
Utilities and productivity
Lifestyle and shopping
Travel and navigation
Sports
Health and fitness
Messaging and social
Music, media and entertainment
Games
Usage Growth Rate for Select Mobile App Categories
(% change vs. prior year)

Although eCommerce is continuing to grow, over 90% of transactions still occur in-store.
Consumers are using their mobile devices prior to visiting a business location and while in-store, enabling
a faster, more seamless shopping experience.
There is an incredible opportunity for marketers to leverage mobile to
complement and improve the in-store experience.
And to marketer’s interest, consumers are now more willing to provide personal information if they reap
significant benefits, such as time and money saved.
Mapping consumer behaviors helps marketers better understand who the
customer is, what their needs are and what they might need in the future.

Source: Google Digital Impact on In-Store Shopping: Research Debunks Common Myths; King Retail Solutions 2014;
Deloitte, “Navigating The New Digital Divide: Capitalizing on Digital Influence in Retail
Consumers are using smartphones in-store to aid in their purchase decision
82% of smartphone users say they consult their phones on
purchases they’re about to make in-store
71% of in-store shoppers who use their smartphones
say their device has become more important to their
in-store experience
Shoppers who use their smartphones in-store convert
at a rate 20% higher than those who don’t

Source: Deloitte, “Navigating The New Digital Divide: Capitalizing on
Digital Influence in Retail
In 2015, 64% of in-store sales were influenced by digital and this number is projected to
rise
Use of mobile devices
before/during in-store
shopping converted to
$970 billion
in sales in 2014

Shoppers are expecting more from their in-store experience
50%
42%
31%
28%
Shop at retailer based on technology used to
assist customers
Stores should know more about online
research done so can receive better service
Take advantage of special offers/vouchers
Expect store to know what previously
purchased
Strongly/Somewhat Agree…
Source: Salesforce “2015 Connected Shoppers Report” Nov 2015

Source: : DigitasLBi’s Connected Commerce Study 2015
70% of shoppers are more likely to embrace new in-store technologies, such as GPS &
WiFi tracking, if they receive customized benefits in return, such as…
35%
32%
32%
28%
27%
23%
23%
20%
Find the best prices
Save time
Take advantage of special offers/vouchers
Have more choices
Avoid having to run around
Have access to more consumer
opinions/reviews
Help me to make the right choice
Have an experience tailored to personal
needs
Save time
& money

Key Takeaways &
Implications

As worldwide smartphone ownership continues to grow, advertising dollars are shifting quickly to mobile
In 2016, global mobile ad spend will surpass $100B with more and more brands focused on reaching consumers through
location-targeted ads.
Of all the various media devices available, consumers are paying the most attention to their smartphones
The most successful way of reaching consumers is through their smartphones, where their attention is focused most, even
when it comes to advertising.
As daily mobile usage increases, consumers are utilizing apps for their every day activities
Consumers have discovered the benefits of location-aware apps that provide relevant, real-time and easy access to the
information, products, and services they want. Brands are also recognizing the importance of these types of apps in order to
better meet their customer’s needs.
Mobile is a necessary part of commerce, especially in-store to aid in a purchase decision
Marketers can take advantage of this opportunity to reach and engage with consumers moments before making a purchase by
targeting them with the content they want.
Shoppers are willing to give up more personal information for a benefit, such as time or money saved
It is a huge advantage for marketers to use location information to have a view of where a consumer is or has been. This
provides them a very robust view of who their consumers are and what products and messages they are most receptive to.
Key Takeaways and Implications
State of the Market

Thank You.
Sarah Ohle
Senior Director of Global Research
sarah.ohle@xad.com
+1.415.314.8178

Key Digital Trends from xAd's State of the Market Report

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