Will 2010 be mobile advertising’s big year? Is mobile inbound advertising the future of Internet Advertising?

Google’s acquisition of AdMob last November pulled the mobile advertising industry into the spotlight. Until then it had mostly been seen as the poor relation of Internet advertising in terms of revenue, if not of hype. Yet mobile offers advertisers many attractive possibilities. No other device is as personal, interactive and constantly within reach as a cell phone. There are currently 5 billbion cell phone users and right now about 50 million are smart phones. That ratio will do nothing but change, and cell phones let advertisers target whole new parameters, such as location and context. So will 2010 be the breakout year for the mobile inbound advertising business? Facebook has just entered into the location based services, and a clear picture is starting to develop. Location based mobile advertising will be the ultimate destination for inbound advertising.

The Mobile Advertising Ecosystem

Mobile ads can be delivered in the form of messages like SMS and MMS, banner and full-page ads on Mobile Internet sites, mobile search ads, in-application advertising and mobile video. Mobile ad impressions are generally bought at cost per thousand (CPM) or cost per click (CPC). The main measures of success are the number of users reached, click through rate (CTR) and the number of actions — for example, number of downloads — prompted by the ad. SMS and MMS are still considered the most effective advertising channel, with correspondingly higher pricing. Most users will read at least part of an SMS received.

Mobile ad networks distribute mobile ads to publishers like mobile websites, application developers and mobile operators. The cheapest way to advertise is via a blind ad network where advertisers can’t pick specific publishers but can often target by country and content channel. Admob and InMobi fit into this category. Premium ad networks like AOL or Nokia focus on a limited number of prestige publishers like mobile operators and specific big-traffic sites, and the advertiser pays extra to target those sites specifically. Some larger publishers and mobile operators run their own ad platform, like the one supplied by Amsterdam-based startup MADS. There are also many small players who supply niche services. Mobclix, for example, is an ad exchange startup targeting smart phones via multiple ad networks. Finally, there are the publishers themselves such as eBuddy, maker of one of the most popular mobile IM applications.
Big Fish, Huge Ocean

Google’s acquisition of AdMob is the beginning of the era of mobile advertising.  It creates a big fish in a small pond, but the acquisition was also the first stick of dynamite to explode on the dam holding back  mobile advertising.

It is a common belief that someday soon people will consume media whenever and wherever they want – i.e. mobile.  It is also widely accepted that advertising is going to be one of the primary means for paying the bills.

Today, the “pond” of mobile advertising is small compared to total ad spend – less than a billion dollars in 2009.  It remains separate from the advertising budgets of many of the largest brand advertisers.  (Most of the current ad dollars come from performance advertisers who are looking to drive direct financial value through the click.)  There is an “ocean” of brand ad dollars that currently flow to TV ($70 billion), print ($55 billion), and online ($12 billion).  As audiences shift to mobile from online, television and print, the brand ad dollars will follow.  The question has not really been “if” but “when” this will happen.  When Google pulled the trigger on purchasing AdMob, the dam separating these pools of ad dollars began to crumble.

The Battle has Begun 

With Google aggressively staking out territory by picking up AdMob, other industry players with their sights set on the huge market have acted. 

In December, Apple purchased Quattro (after failing in its bid to acquire AdMob), and has recently announced their entrance into mobile advertising with iAds.  Apple changed the terms of its Developer User License Agreement giving it broad discretion over its ecosystem.  They picked a fight with Adobe by outlawing its Packager for iPhone in the eleventh hour and Apple CEO Steve Jobs trashed Adobe Flash in a blog post.

Google used the opportunity to jab Apple. They announced support of Flash on new Android devices, highlighted the need for openness and warned against a future where “one man (Steve Jobs) controls mobile.” Check out “The Gloves Are Officially Off: Google Vs. Apple.”

It should be an interesting 12 months with Google and Apple continuing to jockey for position and other players (Microsoft? Yahoo? Carriers?) making moves to capture their share of the rapidly expanding mobile advertising pie.

Beyond the Mudslinging: Performance vs Brand Advertising

Behind the public posturing, Apple and Google are focusing on two different segments of the mobile advertising market. Google-AdMob is focused on performance advertising and will likely maintain a dominant position. The FTC statement explains performance advertising,

“Both Google and AdMob focus their businesses on performance mobile ad networks, in which advertisers often buy ad space through auction rather than through sales relationships, and pay for the advertising on a “per click” or other direct response basis.”

Read more: http://dld.bz/sE2E

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