Today’s news that Apple has agreed to purchase mobile advertising company Quattro Wireless for a reported $250+ million follows Google’s acquisition of AdMob in November 2009.

The space has been heating up, notwithstanding attempts to manage expectations.

In announcing its decision to purchase AdMob, Google tried to deflect attention from itself by noting that the entire mobile ad market generated only $416 million in 2009, or about 2 percent of the total for online advertising.

“An interesting point to make, when it just spent three-quarters of a billion dollars on it,” noted Business Week Tech Beat editor Rob Hof, in a deft note on the deal. The bottom line: Interest in mobile advertising is rising.

Great promise, multiple obstacles

“The promise is highly personal access to smart phones and other mobile devices. It’s real, but challenging. Advertisers, publishers and carriers have been chasing that promise,” Patrick Hayes, VP of Cambridge Strategic Management Group (CSMG) said.

The medium has great potential, with the ability to reach a huge audience with targeted, location-based, quick-response video ads.

“There’s more traffic and more data plans with more mobile awareness. It’s now a more measurable medium so we’re seeing growth in advertiser spend,” said Eswar Priyadarshan, CTO of Quattro Wireless.

Mobile advertising has its speed bumps, however, most notably the large number of disparate mobile devices, and a lack of standardization.

“There are 150,000 types of device profiles on mobile devices and lots of carriers and countries. And browsers are more difficult on mobile. But high expectations of mobile translate to higher ad spends for click-through video,” Priyadarshan said.

Other players in this space are also cautiously optimistic.

“The story is the explosion of consumer usage of mobile Internet devices such as Palm Pre, iPhone and mobile Internet Web surfing with Kindle. Now, there’s an audience of scale, and it’s attracting advertisers,” said Marcus Startzel, SVP of sales for Millenialmedia.

Initial technical challenges such as serving an ad to thousands of different devices have been solved, Startzel said. “Now, we need to do a great job of educating advertisers about the value of mobile advertising.”

The task of standardizing all of these devices tops the list, Paran Johar, CMO of Jumptap said. “Post-click tracking is an example. On the Internet, it’s standardized, but it doesn’t exist in mobile today,” he said.

Graphics are also crucial. “Creative and context need to work together, with a strong call-to-action and strong relevant context a growing segment of the mobile ad space,” he said.

Nevertheless, Johar is bullish on mobility: “It’s the Internet on steroids.”

Canoe, business deals

Cable’s future in mobile advertising could get a boost through CableLabs’ advanced advertising initiative and Canoe.

“The mobile advertising initiatives aren’t there yet, and the technical issues haven’t been defined, but the Canoe venture’s long-term plans include partnering with companies that have different platforms,” Don Dulchinos, SVP for CableLabs’ advertising and interactive services, said.

Data being collected across MSOs through the Measurement Service Interface could serve as “a building block to mobile advertising,” he said.

Building a presence in the mobile ad space is also on the radar screens of companies such as SeaChange International, whose recent acquisition of Mobix Interactive moves it beyond VOD core competency and into the mobile advertising space.

“VOD is a stepping stone to mobile advertising. It’s penetrated, has scale, is accepted and dynamic ad insertion is becoming a reality. Mobix can now create campaigns for mobile video offerings,” Yossi Weihs, director of advertising products for SeaChange, said.

What’s the hold-up?

As often happens, challenges notwithstanding, technology may be several steps ahead of the business.

“All of the technology has reached the inflexion point where it’s good enough” Weihs said. “Now it’s about what sort of business arrangement there is between the device manufacturer and the network. For example, Apple owns iPhone and iTunes. It should get interesting.”

Getting people to watch and respond to tiny screen video ads on mobile devices is also a tricky proposition, admitted Boaz Zilberman, co-founder and chief architect for fring, a mobile app provider that recently announced the first video calls on iPhone.

Here are several challenges: complications related to voice insertion; consumer discomfort with ads on mobile devices; difficulty of replicating the PC experience; lack of information regarding consumer face time. “The industry needs some case studies of successes,” Zilberman added.

CSMG’s Hayes believes those successes aren’t far off. “You can leverage and aggregate unique information to 110 million households and 250 million handsets, with most being mobile ad enabled. That’s about as good as it gets.”

–Craig Kuhl

The Daily

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