• by Steve Smith , Staff Writer @popeyesm, August 31, 2007

Niche companies and the Big Three search engines seek opportunity in the nascent mobile market. Advertisers, meanwhile, watch and wait.

If only the mobile search territory were like the proverbial Wild West, then at least some big gun might come in and impose some predictability and order. But just try running a simple search on a cell-phone today. On some decks, a query brings back only relevant ringtones and wallpapers from the carrier's own m-commerce catalog. On others, you might get a familiar set of links to mobile Web sites or, worse, full-size landing pages that can't possibly fit on a phone.

A range of startups working on and off the deck prompt consumers to use SMS text messaging for search (Google SMS, 4Info), or suggest calling into "voice search" (1800Free411), or download a portable portal with widgets (Yahoo! Go), or use vertical directories (go2Golf, go2Pets, and the like).

But how does a hungry traveler flip their phone and find "pizza 90210" on this thing? Who knows? Maybe Mobile SearchTown could use a sheriff? The rugged terrain of mobile search makes HBO's "Deadwood" look like a model community of order and purpose.

"There is still a lot of uncertainty in the market," admits Lee Hancock, CEO of Go2, which has been serving local mobile searches since 2001. "Many people and applications are over-promising and under-delivering."

The gold rush is bringing in countless revenue models and just as many text, voice and WAP search formats. As a result, both consumers and marketers are hesitant to embrace mobile search.

Neither end of the value chain knows yet what they are going to get, but a lot of us have great expectations. A recent Harris Interactive/Ingenio survey found that a mere 7 percent of cell-phone owners use Web-wide search engines like Google or Yahoo. But we're also more bullish on the future; 22 percent of cell-phone owners think they will use mobile search in the next few years.

Mobile search ad revenues will barely crack $63 million worldwide in 2007, eMarketer projects, but the research firm also predicts $713 million in U.S. revenue alone by 2011.

Longtime search marketing firms like MoreVisibility are sitting on the sidelines watching mobile trends for now, because "it has yet to reach the level it needs for use to actively pursue it," says manager of client strategy Khrysti Nazzaro. Still, like so many others in the mobile industry, she expects "this is going to be great when it happens."

The Promise of Mobile Search

More than Web search, the mobile platform puts an interactive query in the field, close to consumers' immediate needs at a time when retailers can fulfill those needs. Yahoo and Google have been very aggressive in exploring this territory because the early signs are that mobile search could deliver response rates that are multiples higher than the Web. For instance, while Ingenio's available mobile inventory is very small relative to its larger click-to-call Web business, chief marketing officer Marc Barach says the call-through rates on mobile links are "substantially higher" than when such links appear on the desktop. "We think pay-per-call is going to be very important to monetizing this experience and search will be the key to monetizing mobile," he says.

And there's the rub. In an odd way, the very promise of mobile search poses a problem in moving the platform forward: Too much is at stake. Consumers want to use their phones to find the information they need, but the mobile deck that providers offer them is notoriously cluttered and so poorly merchandised that barely 15 percent of us even browse the mobile Web.

It's now becoming clearer that whoever owns search on mobile will also own the next interface to interactive content. The operators know this now, and so they are even more careful than ever about making the necessary and inevitable partnership moves. "Carriers have been a complete, unmitigated disaster as retailers of content services," says John Gauntt, senior analyst at eMarketer.

Most carriers in the United States continue to sit between a rock and a hard place when it comes to search. In order to avoid having their decks and their brand muscled out by the Yahoo/Google/Microsoft triumvirate of Web search, top tier networks like Verizon still partner with white-label solutions, such as Medio, to direct most searches onto their own content offerings. Even Sprint, which is the only major carrier to bring in a big Web brand (Microsoft Live) tends to direct searchers to its own ringtone and game catalog rather than searches for local services.

But it remains to be seen whether smaller companies can scale to global search services and ad sales as effectively as the endemic Web brands. White-label search companies say that users still search first and foremost for more mobile content like ringtones and games, as opposed to pizza. And restricting search to content gives carriers a more direct way to monetize and track their own customers. On the other hand, consumers told Bridge Ratings this year that more than anything else the service they wanted to improve most on their phones was search.

While Sprint, Verizon and AT&T move toward a more open relationship with the Web at their own pace, they all remain concerned about giving up the store. "Why hand prime inventory over to someone who can give services away for free," says Omar Tawakol, chief advertising officer at Medio, which provides white-label search across carriers to 170 million customers worldwide.

Letting the YaGooSoft triumvirate onto the decks may give consumers the familiar brands they love, and give advertisers an easier path to mobile as well, but carriers may have more cause for concern now about third-party intentions than they ever have.

Google raised the ante considerably in July when it offered to bid in upcoming auctions of the 700 MHZ spectrum provided the FCC puts open access requirements on the winner. In essence, Google declared that it wanted a chunk of the wireless spectrum to behave much like the Internet itself, open to anyone with a compatible device and to multiple providers. This, along with continued rumors that Google was developing its own cell-phone, only fuel telco suspicion that Web brands want to marginalize the telcos on their own platform.

Turf Wars

For now, the carriers are defending their turf by limiting on-deck search capabilities and partnering with multiple companies. There is a real fear that a single vendor could get singular momentum and roll up mobile inventory to create one keyword marketplace that attracts most advertisers. A Google-like dominance of mobile search is the nightmare scenario for carriers, because it might undermine the rest of mobile's highly lucrative model. "The operators are aware that if there is a winner-take-all dynamic, the winner can start giving away services," says Tawakol. If one of these guys comes out with their own phone, once you win monetization, you can give away data services for free. You can commoditize [the carriers'] stuff."

Until mobile search takes a clear direction and gains some volume, however, marketers are keeping their hands in their pockets. "We are seeing significant increases in mobile advertising, but from the brand-building side rather than the paid search side," says Hancock. Go2 is building vertical directories (Go2Pets, Go2ucla) that give sponsors exposure throughout the content-discovery experience rather than as a text link on an open search. Unlike the Internet, mobile searches for things like "pets" just don't offer many possible landing pages, and most major brands don't even have a WAP destination to which a results page can point. "Search is a pretty thin layer," says Hancock. "If you don't have content in mobile then search doesn't do you much good."

Media buyers generally seem to be waiting for the decks to open up to the wider Web. That's where the volumes can scale across the carriers and the major brands can merchandise without having to vie for placement on diminutive handsets. Increasingly, the carriers see the writing on the wall. Both customers and advertisers want greater freedom and they are beginning to find their way to the mobile Internet on their own anyway. Even third-party mobile video providers like MyWaves.com are finding up to a million subscribers without any on-deck presence. CBS struck deals with four mobile ad networks to feed banners and video spots into its off-deck properties and alerts. With new and old media offering customers deeper experiences off the deck, carriers will need to provide customers a better route into that content. "If [carriers] want to really encourage folks to surf the mobile Web, it comes down to the data plan and search," says Andy Miller, CEO of Quattro Wireless, which works with Univision and CoverGirl on mobile deployments.

If the needle has moved even slightly in the last year, it is that all parties now seem to agree that global search of some kind will be fundamental to growing the mobile content and marketing ecosystem. But that perennial fear of becoming dumb pipes for an off-deck media world keeps carriers in a standoff with Web brands. "I think the carriers have another year," says Gauntt. Pretty soon they have to decide where the revenue really lies - in broadening their Web partnerships or extending white-label solutions onto the larger mobile Web. If they don't act at some point (probably sooner rather than later) then consumers, media and advertisers may just circumvent the deck altogether and carriers could find themselves outside of a very thick flow of revenue. There is a difference between being a dumb pipe and being a downright stupid pipe.