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    Google Mobile Ad Sales See $2.5B Run Rate

    Written by

    Clint Boulton
    Published October 18, 2011
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      One of Google’s (NASDAQ:GOOG) big future bets is paying off well in the present, as the search engine’s mobile ad revenues are tracking to bank $2.5 billion in 2011, Google CEO Larry Page revealed on the company’s third quarter earnings call Oct. 13.

      That’s more than double the $1 billion run-rate then Google Senior Vice President Jonathan Rosenberg claimed the search engine provider was enjoying from searches made on Android, iPhones and other smartphones in 2010.

      The new data point was largely glossed over in the glow of Google’s revenue approaching $10 billion and the factoid that Google+ has racked up 40 million-plus users since June.

      Indeed, the $2.5 billion figure may seem like peanuts for a company set to make $30 billion-plus this year, mostly from desktop-driven search ads. But if Google can keep on doubling its mobile ad run-rate each year, it will soon be enjoying revenues in the double digit billions.

      Devil’s advocates believe this is untenable. As Stifel Nicolaus analyst Jordan Rohan told The New York Times: “Overall search activity is shifting toward mobile devices, but the preponderance of search activity on mobile devices is not monetizable. I am worried that Google doesn’t have the same strategic position in an untethered world that it does in a world dominated by desktops and laptops.”

      One of the problems with duplicating the desktop search experience to mobile lies in the fact that when people tend to search for information from their mobile device, they tend to want to find something specific and then cease searching when they find it. By contrast, desktop searchers may be drawn to make other, more exploratory searches. People don’t want to do this on a display whose dimensions measure less than 5 inches.

      Then again, no other company makes $2.5 billion in mobile ads either. Show us another company making $2.5 billion a year from mobile advertising and we’ll show you where Jimmy Hoffa is buried.

      That’s not to say Google doesn’t face threats to its mobile software kingdom.

      Google has to confront a new threat to its mobile search business from Apple in the form of Siri, the virtual personal assistant application many of the 4 million-plus iPhone 4S owners are enjoying to execute searches by speaking into their phones.

      Unlike Google’s own Voice Search and Actions software, Siri derives value from context. You can ask both Siri and Google Voice Actions what the local weather is, but Siri will let you know if you need an umbrella if the forecast calls for rain. Moreover, Siri allows for follow-up queries based on the context users provided from previous queries.

      As Jon Pielak, the former developer for Siri’s iPhone application noted: “Tell another system to ‘Book at table at Il Fornaio at 7:00 with my mom;’ the system can no doubt create a calendar entry at 7:00 and might even know who your mom is. It might even be possible for that device to figure out the closest Il Fornaio restaurant. What differentiates the NLP [natural language processing] logic in Siri is that it will maintain context so you could say: ‘Also send her an email reminder.’ Siri will understand ‘her’ and compose the email accordingly.”

      That’s capability Google can only aspire to at this point. But perhaps not for long. Google and Samsung Oct. 19 will introduce the Samsung Galaxy Nexus smartphone in Hong Kong. This will be the first handset based on Google’s Android 4.0 “Ice Cream Sandwich” platform, which blends holographic user interface capabilities to smartphones.

      Don’t be surprised if Google also unveils some new natural language processing capabilities at the event in China tomorrow.

      The company is widely known to be working on those capabilities, and if it has any semblance of an app that it can release, even in raw beta, you can bet it will leverage this for a public relations coup versus Apple and Siri.

      Clint Boulton
      Clint Boulton

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