Will Mobile Ads Work?

Advertising might be the salvation of content creators on the web, but will it translate to the small screen? That was the big question on everyone’s mind at CTIA last week. The optimists (read start ups) hoped that ads could catalyze the mobile content market, by offering consumers free stuff. And we all love free.

At the show Sprint Nextel said that it would start offering a banner ad service on its deck powered by mobile startup Enpocket. And MVNO Amp’d Mobile said that it will offer ad breaks in its video channels sponsored by Procter & Gamble. While mobile ads might have been a well-worn topic at CTIA, the market for mobile content and mobile ads is pretty nascent, giving startups like Enpocket hope that they can create decent businesses off of cell phone ads.

One of those hopefuls is San Francisco-based Mobileplay, and we met with the company at CTIA. The 20-person company’s service aggregates mobile media content, like news sites and weather reports, into an ad-supported free service that can be downloaded and accessed from a variety of smart phones.

Mobileplay CEO James Ryan is a former journalist and mobile media exec at AvantGo, an early mobile ad company, and said that the company is now working on raising a Series B that it’s looking to close over the next few months. The company previously raised a $2 million Series A funding last year from Rustic Canyon Partners.

Mobileplay’s service is pretty limited for now, with only around 35 content partners and a downloadable application offered via mostly Blackberrys’ and Treos’. But the idea is a good one. Help content companies mobilize and get a revenue share from advertising while the carriers are mostly sitting on their hands.

Other mobile ad companies like Third Screen Media, and Enpocket are building businesses off of helping content companies serve up banner ads mostly within their own mobile WAP sites. Think Double Click for mobile. AdMob, is a Sequoia Capital-backed startup that is creating an adwords type model for mobile, replicating Google’s web advertising model. mFoundry is another startup that has a mobile ad platform for content companies looking to offer ad-based mobile content without a subscription. mFoundry CEO Drew Sievers says that mobile ads even have the potential to significantly boost wireless data usage.

Of course he admits he’s drinking his own kool aid, but the conversation about mobile ads has come a long way over the past few years. Several years ago companies were clamoring about SMS-based advertising, which always seemed like a really bad idea. (That’s a pure ad in a text message form, not necessarily SMS-marketing, which has some interesting applications, especially when combined with print and TV ad campaigns). But with the mobile web experience getting a little closer to PC-based Internet browsing, the mobile ad market can now take a cue from Internet ad models—less intrusive ads for free service.

No doubt there are still major differences to consider between ads on the deskstop versus the cell phone. During a panel discussion at CTIA, Verizon Wireless COO Lowell McAdam said, “More than the PC the cell phone is a personal space. If customers get an ad they don’t like, we are going to hear about it. We are moving slowly on this.”

Verizon Wireless’ claims that it’s slow on ads out of customer concern, which, strikes us as a little ridiculous. It’s likely more about having control of the revenue from the ads, than any thing else.

Slow moving carriers might be the best thing right now for the mobile ad startups, though eventually some will end up making deals with major carriers. There was a lot of rumors at the show that Verizon would start an ad service similar to Sprint’s in the coming weeks. As for the startups, there will likely be considerable consolidation, and could even end up being interesting acquisition targets by Internet ad companies looking to offer a mobile component.

The question remains though, will an ad-based subscription-free content model become popular on cell phones to the extent that it has on the Internet? Or will subscription-based mobile content always rule on cell phones?

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