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The booming mobile search advertising will grow 112 percent within five years, making it imperative for market leader Google to take steps to defend itself against a search-hungry Microsoft, according to an analyst from The Kelsey Group.
The slowdown in traditional search engine growth is one of the reasons mobile search advertising sales will balloon from $33.2 million this year to $1.4 billion by 2012, said analyst Matt Booth.
Booth said slower growth in traditional top-line sales will force Google, Microsoft and Yahoo to attack the mobile ad market to protect their valuations.
Moreover, Googles ad overhang, in which the search giant has billed advertisers for ads even when there isnt enough traffic to clear them all, is between $1 billion and $2 billion, he said. Google is likely looking to the mobile space to clean its ad plate, with rumors of a Google phone swirling and the companys pledge to bid $4.6 billion on 700 MHz wireless spectrum.
Read more here about rumors of a Google phone.
“If Google had a ton more traffic through mobile [devices], could it deploy paid links. All of a sudden, it would have a readily monetize-able platform and it could clear out some of that ad overhang,” Booth said.
Officials at Google, based in Mountain View, Calif., declined to comment, but the growth potential will put more pressure on Google to defend its turf from Microsoft and others looking to capture as much of this new Internet advertising frontier as possible.
Booth said Microsoft, of Redmond, Wash., will likely employ a “flanking strategy” using mobile to catch Google in the search market.
Likely moves include bundling assets from its purchase of VOIP (voice over Internet Protocol) provider Tellme Networks with MSN products and services, and deep partnerships with companies like AT&T and Verizon.
To read more about Microsoft bid to acquire Tellme Networks, click here.
Microsoft has also acquired ScreenTonic, which serves text and display ads to mobile phones and devices, and will likely make this a central piece of its platform.
Microsoft refused to detail its future moves, but spokesperson Whitney Burk told eWEEK, “We firmly believe that mobile advertising will be a strategic market opportunity in the coming months and years, and are therefore committed to furthering our investments in this space.”
Burk added that through ScreenTonic, Microsoft is currently serving ads for more than 200 mobile advertisers and has sold more than 1.5 billion mobile ad impressions.
Should Microsoft attain massive mobile share, it could gradually push deeper into search, Booth said, noting that as Googles search share in Europe has grown, so has its mobile market share.
Next page: Mobile Search Ad Growth Stokes Google-Microsoft Fires
Mobile Search Ad
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But one vendor that shouldnt get lost in the sauce is Yahoo, of Sunnyvale, Calif., which was quick to pull the trigger on mobile search advertising in 2004.
Michael Bayle, general manager for mobile monetization at Yahoo, told eWEEK that Yahoo was the first to launch mobile-sponsored listings in Japan through Yahoo Japan and MSN Japan.
“The entire monetization from MSN in Japan for mobile comes from Yahoo,” Bayle said. In 2005, Yahoo partnered with Orange to introduce sponsored listings in the U.K. market-place.
Finally, Yahoo last fall introduced paid listings for mobile search in the United States on its oneSearch product, and is targeting more countries for mobile listings. Bayle also said Yahoo is currently adapting its new Panama search platform for mobile ads.
Bayle declined to list mobile ad impression figures, but when told of Microsofts $1.5 billion mobile ad impressions through ScreenTonic, he said Yahoos numbers were “significantly higher than that.”
One could argue that Yahoo is the vendor to beat with regard to mobile search advertising.
How Will the Vendors Render Mobile Search Ads?
Search vendors will be able to target three segments of mobile search sales, Booth said.
One is the market for “search-and-display” mobile Internet ads, where consumers using SMS (Short Message Service), WAP (Wireless Application Protocol) and other technologies to browse the Internet for information are presented with online ads.
Booth expects Apples iPhone to really push the envelope for online ads. For example, a user who browses Google Maps through an iPhone might see an ad and click on it, which would count as an impression for the advertiser.
Click here to read more about Apple iPhone sales topping $1 million.
Another mobile search segment is ad-sponsored directory assistance (Free DA) such as Googles 1-800-GOOG411, Microsofts Tellme, and Jingle Networks, where consumers dial for free directory assistance via a cell phone and get pitched along with the content theyre looking for.
The last segment comprises multimodal applications, which are software programs downloaded on a mobile device that allow consumers to speak into the phone and get some sort of text return, such as a search result. Companies who do this include Microsofts Tellme and V-Enable.
“We believe that a lot of carriers and directory assistance providers, rather than have their markets completely cannibalized by the Internet and by ad-sponsored directory assistance, will move to an all-you-can-eat directory assistance platform that includes maps and directions and a handful of other things,” Booth said.
He said the multimodal segment is important because carriers that enjoy a 90 percent margin on their directory assistance business can use such applications on handsets to retain that margin because most of the multimodal apps are automated.
“The economics are so compelling,” Booth said.
Moreover, when the devices and data plans come together, he expects a boom in mobile Internet users from 37.9 million today to 91.7 million in 2012.
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