Microsoft Sees Mobile Advertising Increasing in Next 5 Years

A Microsoft executive is predicting that mobile phone advertising space will grow significantly in coming years. However, past activity by certain watchdog groups suggests that a greater focus on advertising via smartphones and other devices could lead to increased pushback by public advocates.

"Five years from now, mobile will be 5 to 10 percent of media [spending], but it won't happen all at once, it will happen gradually," Scott Howe, corporate vice president of Microsoft's advertiser and publisher solutions group, reportedly told Reuters while attending the Cannes Lions international advertising festival.

"Mobile phone advertising is going to be one of the fastest-growing segments this year because it is growing out of a small base," Howe added. "The biggest bottleneck is going to be having enough case studies where major advertisers have done something really interesting in the mobile space."

However, groups including the Center for Digital Democracy and the USPIRG (U.S. Public Interest Research Group) have pushed back in the past against what they saw as advertisers using mobile devices to violate the privacy of consumers; those previous actions could be a taste of what's to come if major companies and advertisers move aggressively into the space.

A complaint lodged by the aforementioned groups in January alleged that mobile marketers were utilizing techniques such as behavioral targeting, user tracking and aggressive data mining to build profiles of 267 million mobile users in the United States, presumably planning to use that data to target them with ads.

Providers including Azuki Systems, Cellfire, Velti, ChaCha and Tanla Mobile were cited in that complaint, which also quoted Google Mobile Product Manager Sumit Agarwal as saying the mobile phone would double as "the ultimate ad vehicle."

Google responded to the report at the time through a spokesperson, who said, "Whether it's for a desktop or for a mobile platform or device, we design products that give users meaningful choices about how they use our services and what information they provide to us."

The Google Android operating system for smartphones will make its international debut in 2009, with Android mobile devices planned for release in Canada and China.

As companies figure out how to best develop—or exploit—ads for mobile devices, conflict between watchdog groups, the FTC and IT companies will likely increase.

In the meantime, Microsoft has been devoting its energies to earning more market share in another advertising-rich segment, search, through its new Bing search engine.

Bing, which combines traditional search, providing pages of hyperlinks, with specialized tabs such as "Shopping" and "Images," has gained strongly in the weeks since its June 1 release, according to analytics companies such as ComScore.

According to ComScore, Bing's daily penetration among U.S. searchers increased in the search engine's second week by 3 percentage points to 16.7 percent, while Microsoft's share of search result pages in the United States increased 12.1 percent, a rise of 3 percentage points from the week before Bing's release.

Echoing earlier comments from Microsoft CEO Steve Ballmer, who took a cautious but optimistic position on the search engine's initial success, Howe told Reuters regarding Bing that, "As long as we continue to make progress, we will get where we want to be."