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How A Billion Dollar Mobile Investment Could Support Search And Display Online Advertising

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Within the past month, two tech leaders have made investments in mobile to the tune of more than $1 billion. These investments will likely support search and display advertising.

Allow me to recap: Google buys AdMob for $750 million, releases Nexus One mobile phone manufactured by HTC, and launches a Web portal to sell the phone and other mobile devices it will release in the future. Apple buys Quattro Wireless for $275 million. And let's not forget Microsoft's journey into mobile with Bing, along with a behavioral targeting application that aims to cut across mobile, PC and Xbox Live.

I nod my head as Patrick Moorhead, vice president and director of mobile platforms at agency Draftcb, tells me there's no guarantee how brand marketers will respond, but the moves by Apple and Google will make it really difficult for them to ignore mobile search and display. "If I hear any more clients say 'I don't think mobile is a real opportunity and I don't think my consumers use mobile,' I am going to ask them to pull their head out of the sand," he says.

Brand marketers will have to start treating it more seriously as the big players in technology continue to invest money and make these bets. Apple hasn't been wrong in hardware and Google hasn't been wrong in search.

"It will radically change the approach for search," Moorhead says. "Mobile search is on the rise and will continue. Services have a long way to go, but there's a huge storm cloud brewing. Why would Apple choose to get into advertising now, and pick mobile as its first step?"

Moorhead speculates that Apple could be looking at the success of third-party ad networks like Quattro and AdMob with interest to build the technology into the iPhone platform. Will they kick other in-app ad networks to the curb, so they can exclusively represent inventory on their own platform, he asks? He and I wouldn't put it past Apple. "Apple isn't going to make a move into advertising without a bullet proof plan on how to monetize the investment and own it soup to nuts," he says. "It's always been their MO."

Google has released several interesting search-related tools, such as mobile coupons, location-based features and Google Goggles. Through Bing Mobile, Microsoft has been focusing on search, location and mCommerce tools.

In the press briefing Tuesday, Google made it clear that Nexus One will become one in many devices the company will launch. With a push toward digitizing books, it seems only fitting it should have a Google-branded ereader on the agenda of products, complete with search engine and advertising through AdWords and AdSense to support the product. The Amazon Kindle supports some online browsing online and the ability to download books.

"No one really knows how to define what the 'the year of mobile' really means," says Jamie Wells, director of global trade marketing for the Mobile Media group at Microsoft. "If you look at from a perspective of investments and press, yes, you're probably dead on. You'll see a wave of consolidation and people will begin to recognition that this is truly where the next phase of interactive marketing is headed."

Microsoft has begun to invest "a lot" in mobile, he says. He's talking to me from his home, and stops to give directions to the movers who are relocating him from New York to Washington, so he's closer to Microsoft's headquarters.

Recent moves by Apple and Google validate that search and display marketing on mobile will become a major marketing strategy. Wells agrees. He says Microsoft took a carrier and platform agnostic view to search and display marketing on mobile phones. Search on Bing for mobile helps people complete tasks, which leaves the platform open to connect a variety of applications

The tech companies haven't released their respective strategies and business models to generate revenue, but Amielle Lake, chief executive officer at Tagga Media, reminds me that Google bought YouTube years before realizing how to monetize the content. She believes Apple and Google are taking their positions in the mobile search and display ad market.

Apple moves into position by acquiring Quattro Wireless, and Google by acquiring AdMob and releasing the Nexus One mobile phone. It's not a sign that search and display advertising will take off this year. It will grow, but not turn into a massive market. Not this year, anyway. You can likely expect Microsoft and Yahoo to make similar acquisitions in preparation to compete.

And while Nielsen pegs the number of mobile Web users at 60.7 million, up 33% from 2008, consumer adoption of smart phones has been one of the sticking points, she says. For those with a foot in mobile search and display advertising, 2010 will become the year adoption takes hold.

Companies will consolidate and become acquired, and advertisers will spend more money in mobile than they have before, providing fodder for mobile marketers to prove their business model. But overall, investments in mobile search marketing and advertising campaigns will remain small. Lake suggests companies on average will spend about 10% of their online marketing budgets on mobile search and display, which remain a small chunk of a company's overall budget. "It will take some time before we see a waterfall of people spending $100 million on mobile out of their marketing budget," she says.

Lake points to some stats that highlight advertising market adoption rates once companies begin to get into position to dominate an advertising medium. For example, she says it took the TV industry about 25 years to reach $1 billion in ad spend. It took the online industry about 13 years to reach similar adoption rates. Quoting stats from Forrester, she estimates it will likely take five years for mobile. Mobile marketing will grow from $2 billion in 2008 to more than $12 billion by 2012, according to Forrester Research.

1 comment about "How A Billion Dollar Mobile Investment Could Support Search And Display Online Advertising".
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  1. Debby Lissaur from Wyeth, January 7, 2010 at 11:12 a.m.

    Kudos Laurie Sullivan. I really felt like my time was well spent reading this piece. Thank you.

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