Google, Yahoo Find Mobile Ad Business A Whole New World

BY PETE BARLAS


When Glu Mobile launched an ad campaign in February to sell its wireless games, the company at first ran ads on five mobile Internet networks, including those managed by Google (GOOG) and Yahoo (YHOO).

After just one day, Glu decided the program needed tweaking, says Rick Armstrong, Glu's senior digital marketing manager.

"Three we kept going and two we turned off, and the two we turned off were Yahoo and Google because they were at the bottom in effectiveness," he said.

Internet kingpins Google and Yahoo have scrambled to bring their Internet services to the mobile platform, striking deals with wireless carriers worldwide to reach the growing millions of consumers who access the Internet on mobile devices.

Along with the services, of course, they also want to bring along their moneymaking ads.

But attacking the mobile market is no slam dunk. They compete with a growing number of companies that operate solely in the mobile space.

The mobile ad market is the Internet ad market of 10 years ago, says Greg Sterling, principal at Sterling Market Intelligence.

A 'Wild West' Period

"It's the Wild West period for the mobile Internet," he said. "It's like the early days of the Internet where everybody is scrambling for scale and share. It's still very much in development."

For Glu, Google and Yahoo took a back seat to three little-known companies: Jumptap, AdMob and Millennial Media. They all operate their own ad networks — broker and place ads — on mobile devices.

Companies that focus exclusively on the mobile ad market have an edge over their Web rivals, says Brennan Hayden, vice president of WDA, which helps companies bring their online content such as games and ring tones to mobile devices.

"Over time there will probably be some equalization, but for now it's a classic case of the specialized firms getting better results," Hayden said.

The mobile ad market works much the same as the conventional Internet ad market. Advertisers bid on search keywords or phrases, getting better placement the more they bid. The ads appear when users search for a product, service or anything using those keywords. The advertiser pays only when a consumer clicks on the ad.

But the mobile market presents hurdles.

One issue, say analysts, is adapting search ads to fit the small screens of mobile devices.

People used to seeing search ads on the top or to the right of search results on a PC are in for a surprise when they use a mobile device, Armstrong says.

"Some of the ads show up at the top, and others at the bottom of search results pages — you might see one or two on each end," he said.

And the small screen means less space for ads. So the challenge is to better match an ad to a user's search, Hayden says.

"In mobile, you can't count on a big screen with a lot of potential options," he said. "It either gives you what you are looking for or you move on."

Jumptap, which rolled out its mobile ad service last month after doing beta tests, claims it has the right formula for making ads work on mobile devices. Its search ads — it also brokers display ads — are sold against its own search service adapted for mobile devices.

Jumptap has developed better software than either Google or Yahoo for serving up ads that more closely match what a consumer is searching for on a mobile device, says Lara Mehanny, a director of product management for Jumptap.

"Our motto is delivering the right ad at the right time in the right place to the right mobile consumer, and we can match these ads in a more targeted fashion than Google or Yahoo can," she said.

It'll have to get a lot of things right, however, to catch Yahoo or Google.

Yahoo's mobile ad service is available in more than 40 countries. It started selling mobile search and display ads two years ago, as did Google. Yahoo has contracts with more than 80 mobile carriers worldwide. Google has declined to disclose that information. Jumptap has contracts with 17 global wireless carriers, including AT&T (T) and Alltel.

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In February, Google began testing a mobile search-ad program that closely mirrors its PC-based service.

While Google and Yahoo don't say how many advertisers they have, it's certainly in the many thousands. Mehanny says Jumptap is working with "hundreds" of advertisers.

It's too early to say just who will win in the mobile ad game, says WDA's Hayden.

"It's a big world and I can't afford to leave a base uncovered, so we buy (ad space) from everybody we can find," he said.

By 2013, mobile ad spending in the U.S. will jump to $3.3 billion from just $648 million last year, says research firm eMarketer.

In this economy, analysts say advertisers will be cautious about jumping too fast into mobile.

Advertisers will be tempted to climb aboard the mobile market, but not until they see more consumers clicking on ads on mobile devices, says Neil Strother, an analyst at Forrester Research.

Most consumers are holding off on buying the highest-end smart phones and paying for the highest-end data plans, Strother says.

"It's still very early even for the marketers," he said. "It will take about two or three more years" before the mobile ad market develops.



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