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Apple Buys Quattro Wireless, Gets into the Ad Sales Business

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Apple Buys Quattro Wireless, Gets into the Ad Sales Business
January 05, 2010
By Gary Kim, Contributing Editor

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Apple (News - Alert) Inc. is set to announce it has acquired mobile advertising company Quattro Wireless for $275 million, The Times of India reports. In some ways the acquisition will mark a turning point for Apple, which now will become a player in the mobile advertising sales business.

 
Quattro Wireless (News - Alert) is a Massachusetts-based startup that offers companies and publishers advertising services across the mobile web, application and video platforms, and has been employed by companies such as Disney, Ford, NetFlix, the NFL, P&G, Time Inc. and Visa.
 
Separately, Google (News - Alert) bought AdMob, a large mobile advertising network. Why?
 
There are reasons large and small, but mostly large. Both Google and Apple, at the most-strategic level, know of the history of technology leadership in the computing industry. Basically, the rule is that no company that led the industry in one phase retained that leadership in the next phase. IBM (News - Alert) was dominant in the era of the mainframe, but Digital Equipment led the minicomputer era, only to be supplanted by PCs more recently.
 
Like most others, Apple and Google see the era of mobile Internet computing coming next. And each knows how difficult it will be to maintain leadership in the next phase. To maintain their relevance, both companies must be leaders in mobile Internet computing. Mobile advertising might be a key contributor to the ultimate business model, as it has proven instrumental for the PC-based Internet.
 
There are 'smaller' reasons for the move as well. Advertising has not to this point been a huge factor in the mobile ecosystem. But it might be central for some portions of the mobile ecosystem, especially any key applications featuring content or entertainment. It is likely that mobile Internet use will feature a different usage profile, and the gaming and entertainment profile likely will be higher. As with all content and media businesses, advertising is a key part of the revenue mix.
 
The other angle is simply that mobile advertising is a business early in its development, with lots of growth ahead. Morgan Stanley notes that while advertising accounts for 40 percent of revenue on the desktop Internet, it accounts for just five percent of revenue on the mobile Internet, at least for the moment.
 
That could change, if and when more personalized advertising technologies gain traction. Both ad company acquisitions are seen as hedges on a future that could be shaped and enabled in many ways by specialized forms of mobile advertising.
 
Also, there is some speculation about the future role of search engines, something central to Google's entire business model. To wit, observers speculate about whether mobile applications will give users direct access to sites they now find using search engines.
 
The issue is partly the different usage mode on PCs and mobile devices. Some of Google's most lucrative ads show up during intensive online research tasks that are unlikely to be undertaken on a mobile device.
 
The other issue is simply user resistance or acceptance of mobile advertising, which is seen as a more-personal device, and also a device with limited visual real estate. Both of those issues will shape the ways mobile advertising can be conducted.
 
The other angle is user behavior. Few users buy micro applications on PCs. Lots of people buy them for their smartphones. To the extent that advertising 'pays' for content, direct purchasing behavior will reduce the role for mobile advertising.
 
Quattro is a competitor to AdMob, which Google Inc acquired in November 2009 for $750 million, but which is awaiting final anti-trust clearance.

Craig Walker, Group Product Manager, Real Time Communications Group, Google Voice, will be presenting a keynote at 3:30 p.m., Wednesday, Jan. 20, during the 4GWE Summit, an event collocated with ITEXPO East 2010, to be held Jan. 20 to 22 in Miami. This is the event you need to attend if you want to understand the role that IP communications technologies will play in the blossoming 4G wireless market. Register now.
 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Patrick Barnard

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