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2 Surprising Companies Poised to Take Mobile Ad Share From Facebook Inc.

By Adam Levy - Dec 12, 2014 at 7:37AM

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These two companies don't spring to mind when you think of mobile advertising.

Facebook's ( FB 2.40% ) share of mobile display ad spending might have peaked this year.

Of the $9.6 billion advertisers are expected to spend on mobile display ads this year, Facebook took approximately $3.3 billion, or 34.7%, according to eMarketer. That's an increase from the 28.9% revenue share Facebook had last year.

However, several companies are expected to increase their mobile display ad revenue significantly faster than Facebook over the next several years. That list includes some names you'd probably expect, such as Twitter. It also includes a couple of big names that investors don't usually associate with mobile advertising: Apple ( AAPL 2.28% ) and ( AMZN -0.00% ).

Yet another billion-dollar Apple business
When Apple acquired Quattro Wireless in 2010, it was extremely confident in its ability to dominate the market and take a majority share in mobile display ads.  That goal has yet to materialize, and iAd captured just 5% of that market this year.

Apple has over 800 million credit cards on file, each of which carries valuable demographic data on users (although Apple has said it won't share data from its Apple Pay mobile payment system with advertisers). It can target users based on geography, app and music purchases, and other specific characteristics. Most believe its data is more accurate and more plentiful than Google's, but Apple isn't very open about it.

But that might all change soon. Apple, in partnership with several ad tech companies, plans to introduce programmatic ad purchases. The move will allow advertisers to book ads via an online platform such as Facebook or Google instead of negotiating with sales people. Additionally, it allows for real-time targeting -- e.g., a 27-year-old male in St. Louis who recently purchased Shake It Off is playing a game at 1:30 p.m., instead of working. How much do you want to pay for an ad?

The move should help Apple increase adoption of the iAd platform and take significant share in mobile ads. Additionally, Apple expanded to several new international markets in October, launched the ability to retarget ads across devices in June, and continues to introduce new premium ad units. Those are just a few reasons why eMarketer expects Apple to increase iAd revenue from an estimated $482 million this year to $1.17 billion in 2016.

What Facebook and Apple lack, Amazon dominates
Facebook might dominate people's time on mobile devices, and Apple might dominate the physical products they use, but Amazon's advantage is in offering one of the most popular apps for mobile shopping.

Indeed, Google Executive Chairman Eric Schmidt noted in October that Amazon is the search giant's top competition. When people are searching for a product to buy, they go to Amazon, and more and more searching is being conducted on mobile devices.

Mobile search continues to gain share over desktop search, and mobile shopping is becoming extremely popular, even in the United States. Forty-one percent of Cyber Monday traffic and 22% of sales came through smartphones and tablets. Overall, mobile shopping sales increased 17% last month, year over year.

As this trend gains steam, Amazon, with its loads of shopper data, is poised to increase its mobile display ad revenue faster than the market average. eMarketer expects the company's mobile display ad revenue to more than triple over the next two years.

A rapidly growing market
While Apple and Amazon are set up to boost their diminutive mobile ad units much faster than Facebook, the market itself is growing rapidly. The mobile display ad market is expected to more than double over the next two years, and mobile advertising as a whole (including search and sms) is expected to double as well.

Going forward, Facebook could still see significant growth in mobile advertising, including its app-install ads, for which the company just added video capabilities. As far as Facebook expanding its reach with its Audience Network, though, iAd is starting to look more attractive. But while Facebook's revenue share might fall, it will still see significant growth for years to come.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$330.56 (2.40%) $7.75
Apple Inc. Stock Quote
Apple Inc.
$175.08 (2.28%) $3.90, Inc. Stock Quote, Inc.
$3,523.16 (-0.00%) $0.13
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,963.73 (0.62%) $18.34
Twitter, Inc. Stock Quote
Twitter, Inc.
$45.72 (2.83%) $1.26
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,974.41 (0.46%) $13.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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