The amount of time people spend on mobile is still growing quickly. Last year, average time spent on mobile devices in the U.S. increased another 10% or so, to 3.1 hours per day, while time spent on desktop computers remained steady at 2.2 hours per day, according to Mary Meeker's 2017 Internet Trends presentation. The amount businesses are spending on mobile ads is growing even faster, up a whopping 76% from 2015, according to Meeker's data. As a result, the gap between the share of time spent on mobile and the share of ad money spent on mobile is shrinking.
Still, the gap is huge. Meeker says it's a $16 billion opportunity. That's quite a bit smaller than the $30 billion gap of just four years ago, but sizable enough to make a significant impact on companies well positioned to take advantage. There are really only two such companies: Facebook (NASDAQ:FB) and Google, the Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) subsidiary.
Dominating the advertising market
Google and Facebook accounted for 85% of all advertising revenue growth in the U.S. last year. That's up from 76% in 2015. That number may fall back down to that level again this year as Facebook faces ad load saturation challenges, but both are still completely dominate the digital advertising market.
And that mostly has to do with their dominance of time spent on mobile.
As time spent on mobile grows but desktop usage stays the same, the apps users spend the most time in stand to gain a lot of ad revenue as the "dollars shift with eyeballs," as Facebook COO Sheryl Sandberg is fond of saying. Facebook is far and away the big winner, with daily users spending an average of over 50 minutes per day across its family of apps.
There are a couple of things worth noting about that number. First, it's a global average. The average in the U.S. may be even higher, as there's better internet infrastructure. Second, Facebook said that number is still rising, even as the number of daily average users continues to increase, indicating that newer users are just as engaged as older users.
Snap's (NYSE:SNAP) Snapchat users are also very engaged, averaging over 30 minutes per day in the app. But with significantly fewer users than Facebook and much lower ad inventory, it's not making a huge dent in the market. Analysts expect its revenue this year to increase two and half times, but that's only an additional $600 million. By comparison, Facebook's revenue is expected to climb about $11 billion this year.
Google, meanwhile, is a bit different. It's not a platform designed for users to spend a lot of time on; it's designed to send them elsewhere. Nonetheless, Google is benefiting greatly from an increase in mobile searches and an improving ability to monetize them. Mobile search queries surpassed desktop queries in 2015 and have only continued to grow as a percentage of searches since then.
Don't expect the gap to close entirely
While Meeker says there's a $16 billion opportunity for businesses like Google and Facebook (or even Snap), that may be overstating the case. A minute spent on mobile may not be as valuable as a minute spent on a desktop computer. That's because U.S. consumers still prefer to do their online shopping on desktops.
This past holiday season, just 21% of e-commerce sales took place over mobile. Importantly, growth in mobile's share of e-commerce is in line with the growth in the share of time spent on mobile, which indicates that consumers' willingness to shop on mobile isn't improving. So Sandberg's thesis that ad dollars will follow the eyeballs may not be entirely correct.
That said, mobile users may not need to make a purchase on mobile for a mobile ad to be effective. A slide in Meeker's presentation shows that 26% of Facebook users that clicked on an ad ended up buying a product they saw on the social network.
Notably, 7% of users who didn't click also bought a product they saw on Facebook. In other words, merely exposing consumers to products on mobile could lead to purchases on desktop or in stores later. That remains a measurement challenge for Facebook and advertisers, but it should help support closing the gap between time spent and money spent on mobile.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.