Commentary

Mobile Search Ads Will Follow Queries

bing search/mobile

Mobile search has long been considered a can't-miss proposition because search is a natural fit with on-the-go users looking for information. With its Android mobile operating system, the launch of its own smartphone and other mobile services, Google is clearly betting big on mobile search. But a new report indicates search advertising hasn't yet caught up with search volume.

The study by RBC Capital Markets suggests that mobile searches represent 8% to 10% of overall search queries in 2010 but less than 2% of paid search spend. RBC, however, expects that gap to close in the next few years as the proportion of sponsored listings in mobile search increases, keyword pricing rises, and Web-friendly smartphones proliferate.

Mobile devices are already estimated to outnumber the number of PCs by five to one worldwide.

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Those factors, along with the ability to target ads based on location, should also lead to higher return on investment for advertisers, according to RBC. Currently, the frequency of ads in mobile search results pages trails that on the PC by a wide margin -- one ad compared to nine per page on the desktop.

When it comes to specific mobile devices, the BlackBerry had the fewest ads per search, with less than 10% of queries showing sponsored results. By contrast, 64% of queries on the iPhone and Google's own Nexus One smartphone had sponsored listings (but still well below the 91% on the PC).

Search ads appearing on the BlackBerry, however, took up a larger chunk of screen real estate than ads on the other two devices, 44% compared to 38%. A single mobile search ad typically accounts for around 20% of a mobile search results page, compared to only 4% of a PC-based page.

That difference is helping to drive three to five times higher click-through rates on mobile search ads, according to the report, citing Yahoo data.

Ultimately, RBC expects Google to duplicate its success in desktop-based search on mobile devices, despite its recent stumble trying to sell the Nexus One directly online. "We think Google is best positioned to capture the potential $2 billion to $3 billion in mobile search ad spend over the next few years, but even that success is not likely to 'move the needle' materially relative to its $25 billion core business," noted RBC analyst Ross Sandler.

By pushing aggressively into mobile -- however much it ends up adding to the company's search ad revenue -- Google is also protecting its core business, while opening up new opportunities for display and other types of advertising on handheld devices.

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