In just eight weeks, Apple's infant mobile advertising effort has emerged as a serious contender to challenge Google Inc for the crown in the fast-growing new ad market. The two tech titans are increasingly clashing in areas such as smartphones and PC operating systems. The details Jobs provided about Apple's mobile ad service at the company's developers' conference on Monday hinted at a growing threat to one of Google's key business opportunities, analysts said. “You've got a company that executes, that knows how to deliver value and is now firmly in the space,” said BGC Financial analyst Colin Gillis said on Tuesday.

In its first eight weeks of selling iAds, Apple garnered $60 million worth of commitments for mobile ads to run in 2010's second half, from 17 blue-chip brands including Unilever, General Electric and Citigroup. That's chump change compared with Google's roughly $23.7 billion in annual revenue, almost all from online ads. But Apple's success out of the gate in selling iAds to household names is telling, analysts said. At stake is a market that some say could eventually account for the lion's share of Internet advertising. Gillis said he believes mobile ads represent an important new revenue stream for Apple, which could potentially account for close to 10 percent of the company's revenue by 2012. The company reported revenue of $36.54 billion in 2009.

Google does not disclose the size of its mobile advertising business, although analysts believe annual revenue is well under $500 million and primarily generated from mobile search ads. For Google, which has dominated Internet ads for years via its ubiquitous search engine and the lucrative search ads it displays alongside search results, adapting its business to the new breed of mobile, Web-connected gadgets is critical. As consumers increasingly turn away from their PCs and use smartphones to access the Internet, Google has developed a smartphone operating system, Android, that is now offered on devices made by 21 different hardware vendors. “They need to make sure that when people are looking for information, no matter what device it is, that they use Google,” Broadpoint Amtech analyst Benjamin Schachter said. FACE-OFF Android was the fourth-ranked smartphone operating system worldwide in the first quarter, with a 9.6 percent market share according to industry research firm Gartner, while Apple's iPhone was No.3 with 15.4 percent.

Nokia's Symbian and BlackBerry-makers Research in Motion were No. 1 and No. 2, respectively. Youssef Squali, an analyst with Jefferies & Co, said whoever controls the operating system, rules the market. It determines “who is ultimately going to be able to have the direct relationship with advertisers,” he said. While Google is gaining ground with Android, the company's ability to sell mobile search ads is still partly reliant on Apple, which could decide to lock Google's search engine out of its popular iPhone anytime. The market for mobile advertising is still “very much up for grabs,” Squali said. “But I would say the company with the best assets right now is undoubtedly Apple.”

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