• by Gavin O'Malley  @mp_gavin, May 16, 2007

In a move that bodes well for the future of mobile marketing, AOL has agreed to acquire Third Screen Media for an undisclosed sum. The mobile ad firm will now operate as a wholly owned subsidiary of AOL's third-party ad network Advertising.com.

"This acquisition firmly positions Advertising.com as the one-stop shop for online advertisers and publishers," said Lynda Clarizio, president of Advertising.com.

Analysts say the acquisition, along with the increased integration of mobile into larger ad buys, is just what the industry needs.

"This deal brings mobile further into the mainstream advertising environment by allowing for integrated ad buys," said Charles Golvin, principal analyst at Forrester Research. "Until now, advertisers have had to treat mobile as a completely different entity."

Thanks to DoubleClick's mobile ad-serving capabilities, Google's planned acquisition of the ad-serving giant for $3.1 billion will have a similarly positive impact on the mobile market, Golvin said. Also, Microsoft positioned itself to affect similar change in the European ad market earlier this month when it agreed to buy ScreenTonic, a France-based mobile ad company.

Reports that AOL was after Third Screen for as much as $80 million have circulated since February. (Initial news of the talks came several months after discussions between Third Screen and Microsoft failed, according to published reports.)

"We can now offer advertisers and publishers a comprehensive suite of interactive advertising solutions for every type of device, platform and program," said Thomas Burgess, founder and CEO of Third Screen Media.

The acquisition comes during a period of rapid growth for mobile advertising. U.S. mobile advertising is expected to grow from $421 million in 2006 to $4.7 billion by 2011, according to eMarketer. Worldwide, the market is expected to expand to $11.3 billion by the same year.

Still, the mobile market has some major hurdles to overcome if it is to realize its full potential, according to Golvin. For one, the number of consumers using the mobile Internet still pales in comparison to those accessing the Web via computer.

By Forrester's estimate, mobile Internet users still make up only about 11% of all U.S. mobile phone subscribers, which amounts to about 23 million consumers. "That might seem like a meaningful number until you consider that 35%, or 73 million subscribers, use text messaging," said Golvin.

There's also the issue of effective ad placement because mobile carriers--the only ones with access to user behavior patterns--have been slow to make such information available to advertisers.

"They're changing now because they realize the only way they're going to drive adoption is with alternative revenue models like advertising," Golvin said, adding: "Then, there's going to be the issue of consumer backlash."

Acquisition rumors aside, Third Screen has remained a hot industry name thanks to ad deals with several large companies. Last December, Universal McCann tapped the firm to manage mobile media efforts for clients including Microsoft, Johnson & Johnson and Intel.

Additionally, Third Screen earlier this year struck a deal with MSNBC to sell ads and manage inventory on its mobile site, joining a roster of publishers including Fox News, USA Today, the Weather Channel, CBS SportsLine, and ESPN.

Third Screen Media connects advertisers, publishers and mobile phone carriers on a common platform, allowing ads to be managed and delivered through wireless application protocol, or WAP, downloadable applications, text-messaging, or SMS, multimedia messaging service, or MMS and mobile video.

Advertising.com, meanwhile, has been a major driver of growth for AOL. Analysts recently credited the ad network with helping to drive AOL's first-quarter ad sales up 40% this year compared to the first quarter of last year. And in April, Advertising.com won the privilege to provide display and video ad management services for the yet-unnamed video venture between NBC Universal and News Corp.