• by Mark Walsh  @markfwal, July 11, 2011

AT&T Interactive, the AT&T unit that oversees YellowPages and the company's local ad business, today announced the formal launch of in-app local ads on its mobile ad network.

The rollout will allow developers to target ads based on a user's location and potentially earn more revenue from higher ad rates. Locally targeted mobile ads generally cost more because marketers believe they are more likely to lead to sales. During a three-month test period, AT&T said in-app ads on its mobile network generated 750 million impressions and suggested that CPMs are higher than for broader-based mobile ads. 

AT&T hopes to be a dominant player in serving local ads within mobile apps. To date, it has mostly featured national ads. Recent data from mobile ad network Millennial Media showed that 58% of its campaigns had broad reach and 42% were targeted. Within the targeted portion, about half were geared to local audiences.

That's where AT&T intends to gain ground.

Its flagship Web property, YP.com ranked as the top local online media company last year, with nearly $1 billion in revenue last year, according to the latest benchmarking report from Borrell Associates. AT&T also boasts a local sales force of some 5,000 nationwide, and 1 million local advertisers. 

In-app ads will be served across the company's YP Mobile network and include both text and image-based ads. The mobile network is an extension of the YP Local Ad Network, which spans 300 online and mobile publishers and last year served 38.3 billion ad impressions across mobile, the Web and IPTV.

AT&T said developers could start serving in-app local ads by using its API (application protocol interface) or one of its SDKs (software developer kits) for all major smartphone platforms and wireless carriers.

At launch, about 15 publishers are serving in-app ads. AT&T said CPMs for in-app ads vary by publisher and app. In the AT&T announcement, Greg Woock, CEO of app developer Pinger, was quoted as saying in-app ads served in the trial period had eCPMs (effective CPMs) three times higher than non-local ads from comparable mobile ad networks. 

For ads sold on a cost-per-click basis, AT&T pays developers an eCPC rate of 25 cents to 30 cents.

In another local ad initiative, AT&T Interactive began rolling out its own deals service in May to compete with Groupon and LivingSocial via YP.com. Daily deals will be delivered on mobile devices, as well as online, through the effort. 

Mobile is expected to drive local online advertising in the coming years. Borrell estimates that within five years, two-thirds of the $24 billion in local online advertising -- up from $18 billion in 2012 -- will be delivered on devices such as tablets, smartphones, and GPS-enabled laptops. 

A separate report from BIA/Kelsey last month estimates that local mobile will increase from $404 million in 2010 to $2.8 billion in 2015. By then, locally targeted ads will account for 70% of total U.S. mobile advertising, according to the local media research firm.