Apple Moves into the Mobile Ad Business

Apple (AAPL) is about to announce that it will buy mobile ad company Quattro Wireless for $275 million, according to an exclusive report by AllThingsD. Quattro is in a business very similar to AdMob, a small firm that Google (GOOG) recently purchased. Both companies sell and place advertising on mobile phones.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% Apple and Google are competing for what many analysts believe is the next big frontier of online ad sales. The pace of growth of Internet ad revenue has slowed as the recession -- and perhaps market saturation -- has hurt ad sales on Websites that get most of their clicks from PC users.

Smartphones, which act as mini-PCs for many people, are the fastest growing part of the wireless hand-held market, which produces total global sales of almost one billion units per year. Research firm Gartner said that the number of people with handsets rose to 2.6 billion last year.

The risk that both Apple and Google are taking is that people will react to advertising on their handsets in much the same way that they have reacted to PC-based online ads. It may be that people who pay to subscribe to wireless services will create a backlash against handset-based marketing when they realize that they are being forced to view advertising, as well as pay a monthly fee for their service.

The outcome of the wireless advertising war will determine, to a large extent, the growth rate of Internet advertising over the next several years. From that standpoint, Apple and Google are making relatively risk-free bets on the market, given their sizes and cash resources.

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