• by Mark Walsh  @markfwal, January 5, 2010

Apple Tuesday confirmed widespread reports that it has acquired mobile ad network Quattro Wireless. The move mirrors Google's recent $750 million bid for AdMob, and would pit Apple directly against the Web giant in the burgeoning mobile ad business.

News of the proposed deal comes as Google today is supposedly set to unveil its own Android-powered mobile device -- the Nexus One -- as a direct challenge to the iPhone's hegemony in the smartphone market. Both developments signal that the companies are prepared to go toe-to-toe to dominate all facets of the mobile space.

Quattro has raised almost $30 million in venture capital to date from investors including Highland Capital Partners and Globespan Capital Partners and boasts clients including Ford, Disney and the NFL. The company says its ad network includes thousands of mobile sites overall and reaches a monthly audience of 50 million.

But purchasing Quattro won't necessarily put Apple on an even footing with Google in mobile display advertising following the AdMob deal. An estimate by technology research firm IDC in November said a combined Google/AdMob would have the largest share of the $287 million U.S. mobile ad market -- at 21%, compared to 6% for Quattro.

Apple was reportedly also in negotiations to buy AdMob in November, but was edged out by Google at the eleventh hour. The AdMob deal sparked widespread speculation that competing mobile ad networks like Quattro and Millennial Media would become likely targets for other big Web players expanding into mobile. The pressure for Yahoo and Microsoft to snap up one of the remaining independent mobile ad networks may now only increase.

Much of the analysis of the Quattro deal Tuesday centered on Apple's desire to gain greater control of advertising in applications for the iPhone and iPod touch distributed through its App Store. The potential for in-app advertising was underscored by Apple announcing today that the App Store had surpassed three billion downloads. It offers more than 100,000 applications.

"Apple builds and sells the iPhone, hosts the App Store and now, by incorporating Quattro into the fold, it can better monetize the ad-supported apps it offers through the App Store," wrote eMarketer analyst Noah Elkin in a blog post on the deal.

Others speculated that with Apple expected to launch a tablet computer later this month, the acquisition would further plan to deliver advertising on a larger, more ad-friendly screen. It could also develop its own ad units for the mobile Web or applications.

In the latter case, if Apple builds advertising into their software developer kits, it may have great appeal for the company's 125,000 outside app developers. "Developers will always seek the highest source of monetization, but Apple having its own ad network will offer immediate credibility and appeal," said Lilly Gold, founder of technology and marketing company IntuApps in New York.

She added that Apple would benefit from the user information it captures, such as which apps someone has previously installed, to help deliver the most relevant ads. Standardizing advertising in iPhone apps might also appeal to agencies facing a fragmented mobile ad landscape. "For agencies, the biggest issue is they don't want to create a bunch of different formats for different mobile ad networks," said Bob Walczak, CEO of mobile ad technology firm Ringleader digital.

Google bought AdMob with the aim of expanding advertising in mobile apps as well, both for the iPhone and phones using its own Android operating system. With Apple devices generating more than half of Admob's 10 billion ad impressions worldwide, the ad network has a strong presence on iPhone/iPod apps as well as the mobile Web.

"AdMob is clearly the best of its ilk for applications monetization," Google CEO Eric Schmidt told Bloomberg at the time of the acquisition.

But Google's purchase of AdMob isn't necessarily a done deal. The company disclosed last month that the Federal Trade Commission had stepped up its antitrust review of the transaction, making a "second request" for documents from Google. The company reiterated that it doesn't see any regulatory issues with the deal because mobile advertising is still nascent and there are more than a dozen mobile ad networks.

Google reiterated that position today in a post on its public policy blog, citing the Apple-Quattro deal as further evidence of healthy competition in mobile advertising.

"Today's news that Apple is acquiring one of AdMob's competitors, Quattro Wireless, is further proof that the mobile advertising space continues to be competitive," wrote Paul Feng, group product manager at Google. "And with more investments and acquisitions in the space, including from established players like Apple and Google, that's a sign that vigorous growth and competition will continue." How increased consolidation equates to greater competition, however, isn't clear.