I’ve worked in the world of mobile apps and developers for over six years, and along the way, I’ve cultivated a point of view on the economics of this space. You may be considering how to monetize your mobile investments, so today, I’ll share my analysis of the mobile advertising economy. Later, I’ll write about what those responsible for making mobile investments should do in the context of this analysis. When I’m done, you, too, may ask yourself, “Where’s the money?” It’s a question that advertising alone is not likely to answer to our satisfaction, but the good news is that there are many more ways for businesses to thrive with mobile. Direct revenue need not be the sole or even the main objective.

Before I dive into the numbers, let me offer some simple definitions.

Cellular phones generally fall into two categories: feature phones, sometimes called mobile phones, and smartphones. The primary difference between the two lies in the need for a data plan to run smartphones, which have more PC-like capabilities. I’m going to focus on the smartphone mobile economy here, though one could write a lot about the feature phone opportunity, too.

Digital and mobile advertising includes both display ads, e.g. banners, and paid search, e.g. Google or Bing.

Apps are short for applications, which are software programs that run on computing devices, including smartphones, and include games.

With that out of the way, let’s dig in. Any discussion of mobile economics has to start with the installed base of users. In 2011, the industry shipped about 470 million units, and that number almost certainly will grow in 2012, a year marked by two blockbusters: the Samsung Galaxy S III and the iPhone 5. Smartphone sales have grown so large that they have eclipsed PC sales on an annual basis. That’s in large part because they are computing Swiss Army knives. They possess many of the characteristics of laptops, but with location awareness, high quality cameras, extended battery life, and portability advantages. It’s therefore no surprise that handset makers such as Samsung and Apple recently have achieved record profits.

Handset manufacturers aren’t the only ones feeling giddy about these numbers. All those smartphones have excited advertisers, too. That’s primarily a product of two factors. First, most smartphones have capable web browsers that can support advertising. Second, they run apps that draft off smartphones’ features to deliver games, music, shopping, news, weather, information, and social experiences, just to name a few. Both these phenomenon attract hundreds of millions of users and therefore naturally lend themselves to advertising.

Yet, compared to traditional advertising incumbents, including TV and digital advertising on the non-mobile internet, mobile looks like it has some growing up to do. To show you why I think that way, I’m going to draw on some publicly available statistics. You may have different ones, but I suspect they’ll paint the same picture in the end.

Time spent on smartphones: According to Flurry, U.S.-based smartphone users spent about 150 minutes per day on apps and browsing in 2011. For the sake of being conservative, let’s assume that this average applies worldwide, and let’s round the 2011 smartphone shipments to 500 million. This allows us to compute the total number of hours spent annually using smartphones: about 456 billion hours.

Time spent watching TV: According to Deloitte, that number was nearly 4.5 trillion hours in 2011, or about 10 times the time spent on smartphones.

Time spent online: According to this site, which reported data in Feb., 2012, users spend 35 billion hours per month on average, or 420 billion annually. I’m going to assume this number does not capture time spent online via a mobile device.

So smartphone usage is trumped by TV but exceeds time spent online. What do advertising revenues tell us about the health of these platforms? Again, for the sake of being conservative, let’s be generous in the definition and include revenue from the sale of apps, in-app purchases and subscriptions across smartphones and tablets in 2011, as measured by Canalys. That total is about $7.5 billion. If we add mobile advertising, as reported in the U.S. here, we get another $1.2 billion. Let’s assume the U.S. accounts for a third of all mobile ad revenues and say the global total is $3.6 billion. That produces a grand total of $11.1 billion.

Meanwhile, TV booked $191 billion in 2011, according to the same Deloitte study. Meanwhile, in the U.S. alone, the IAB reported digital advertising revenues of nearly $32 billion. Again, assuming the U.S. drives one third of the global total, that means $96 billion in worldwide digital revenues.

In the spirit of full disclosure, I haven’t parsed all these numbers to check the methodology or look for overlapping data. I’m more interested in what they seem to indicate, and the global economic story they told in 2011 is this:

• TV time spent and advertising revenues:  4.5 trillion hours, $191 billion
• Digital time spent and advertising revenues: 420 billion hours, $96 billion
• Mobile time spent and revenues from app purchases, advertising, and subscriptions: 456 billion hours, $11.1 billion

I’ll stop here for now and come back to you with my recommendations on how to approach mobile in the context of these advertising economics. Though the revenues are small in comparison, there are still lots of good reasons to embrace mobile. The key, as always, is to make the decision strategic and to have a clear objective driving the decision.