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Wednesday, April 30, 2008
Google's New Mobile Search Ads Offer Image, Scale and Uniformity


On April 23rd, Google introduced new brand-image mobile search ads, a move that further extends the Internet giant's reach into the mobile Internet advertising bazaar.

Google's new brand-image ads are scaled to fit the smaller screens of mobile devices. Google says the new mobile ads must link to Web sites optimized for mobile Internet use and that there is a limit of one display ad per page. The new mobile ads will be targeted to the mobile user's keyword search and will be offered as a cost-per-click to advertisers in 13 countries.

The new mobile ads allow Google to further evolve its mobile search ad offerings and stake a claim in the race to lead the very nascent mobile search advertising market. Google has been offering mobile search text ads for the last eight months with its Adsense for Mobile program. Now Google is offering what is essentially mobile display ads. Display ads are often worth more than text ads because advertisers often deem them more effective at capturing viewers' attention.

Display ads viewed on the mobile Internet are worth even more to advertisers who understand that their personalization, immediacy, and interactivity may encourage higher response rates for consumers on the go. Combine a more effective advertising format with a more effective ad platform, and voila! - a golden opportunity to capitalize with advertisers looking for improved click-through rates. Another important aspect of this offering for advertisers is that Google, the champion of U.S. Internet search advertising, is further expanding its search advertising "scale" (which is audience reach) to include mobile. Google is also providing this offering in 13 countries simultaneously. Google is moving to standardize an industry often fragmented by country-specific start-ups. The Internet advertising market, in general, is also very fragmented, hampering transactions between agencies and content providers.

Google's efforts to standardize and unify the process across the Internet and now the mobile platform on a global scale will make it all the more attractive to advertisers. Most mobile Internet content requires funding from advertising, mainly because consumers are so used to downloading Internet content for free or at least inexpensively, a key motivating factor for consumers to consume content over the Internet.

Delivering content through the mobile Internet is even more expensive and complex than delivering it through the PC. This is because mobile networks are slow, it can be challenging to find and use content with a mobile device, and the mobile ecosystem is incredibly fragmented. Mobile end users are increasingly unwilling to bear all mobile content costs, so at least some of the costs must shift, and the logical place is to advertisers.

The good news is that mobile is particularly well suited for advertising (notwithstanding initial end-user resistance) because it can reach individuals with customized messages and information that are particularly compelling to mobile users. For instance, mobile searches are closely linked with an action that a mobile user is likely to take imminently, which means that the information is highly valued by the user. Add capabilities like geo-targeting, and the potential is clear for an entirely new class of advertising. IDC surveys also indicate that consumers are willing to view advertising when they understand that it allows them to access content for free.

Mobile devices enable the consumer to search for information while on-the-go. Right now, more than 70 million Americans are using their mobile phone to access the Internet. We know that 256 million own a wireless device, so there is huge growth potential already within the installed base of today. While mobile phones remain an additional (not primary) means of accessing the Internet today, we expect this will change dramatically over the next 5-7 years.

If Google can do for mobile Internet search advertising what it has done for PC-based Internet search advertising, Google will definitely be a leader of the pack when it comes to mobile Web portals. While Google is not the first to offer search and display advertising solutions (Sprint Nextel was the first U.S. carrier to do so followed by AT&T with Yahoo!),

Google enjoys the brand recognition and successful monetization of Internet search that no other company has come close to achieving. Google.com enjoys 80% share of U.S. Internet users (25% of U.S. mobile Internet users). The move to expand mobile Internet advertising formats is great for a time when keyword search ads are 40% of the overall Internet advertising market. However, any kind of market disruptor could easily reverse Google's success because of the company's total dependency on search advertising revenue (95%). Additionally, Google's new display ads will not be a market changer from a technical perspective. On balance, it is really the larger companies with deep IT and technical know-how to integrate these capabilities that are likely to provide an offering that impacts the advertising market at large.


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